Category: Newsletter Vol 7, Issue 1

Recent Patents | Newsletter Vol 7, Issue 1

Posted on by Kinney & Lange, P.A.

Kinney & Lange P.A. files hundreds of new patent applications each year in a wide variety of technology areas. Below are a few recently issued U.S. patents for which the firm is listed as the legal representative.

 

8,856,708 “Multi-tier Field-Programmable Gate Array Hardware Requirements Assessment and Verification for Airborne Electronic Systems”

8,852,233 “Apparatus for the Correction of Skeletal Deformities”

8,812,253 “Fluid Flow Measurement with Phase-based Diagnostics”

8,884,606 “Inverted Magnetic Isolator”

8,843,348 “Engine Noise Monitoring as Engine Health Management Tool”

8,872,522 “Frequency Based Fault Detection”

SEMINAR RECAP | Newsletter Vol 7, Issue 1

Posted on by Kinney & Lange, P.A.

Kinney & Lange held its annual Seminar on June 13, 2014 in Minneapolis, entitled “Intellectual Property: Advanced Topics for Businesses in a Changing Legal Landscape”. The Seminar covered a wide range of topics, including various intellectual property law developments at the U.S. Supreme Court, a contemporary discussion of patent trolls, and a guest panel discussion on the topics of post grant proceedings in the U.S. and opposition proceedings in Europe. A special thank you to our in-house counsel panel, pictured above from left to right, Carolyn Eckart, IP Counsel at St. Jude Medical; Andrew DeMaster, IP Counsel at The Valspar Corporation; and Alana Bergman, Associate General Counsel of IP at Covidien. We also thank Kendra Hogan and Richelle Martin from the University of Wisconsin, who spoke on “Industry-Sponsored Research and Intellectual Property in the University Setting,” and Jason Campbell who spoke on IP landscaping and business strategy.

■ Edited by attorney Austen Zuege. This newsletter contains material that may be considered advertising in some jurisdictions under the applicable law and ethical rules. This material is for informational purposes only and does not constitute legal advice. The determination of the need for legal services and the choice of a lawyer are extremely important decisions and should not be based solely upon advertisements or self-proclaimed expertise. ©2014 Kinney & Lange, P.A.

FTC REACHES SETTLEMENT WITH MPHJ

Posted on by Kinney & Lange, P.A.

■ Nicholas J. Peterka

On November 6, the Federal Trade Commission and MPHJ Technology Investments LLC agreed to settle FTC charges alleging MPHJ used deceptive practices and phony legal threats. The settlement prevents MPHJ and its law firm, Farney Daniels, P.C., from making deceptive representations when asserting its patent rights, with further deceptive conduct bringing with it a penalty of up to $16,000 per misrepresentation.

The settlement comes on the heels of a September ruling by the U.S. District Court for the Eastern District of Texas to dismiss a suit filed by MPHJ against the FTC. The suit, which was filed in January 2014, was an attempt to stop the FTC’s investigation into MPHJ for allegedly sending deceptive demand letters to potential infringers.

The FTC is investigating deceptive representations from patent assertion

MPHJ owns at least five patents related to networked computer scanning programs, also known as “scan-to-email” programs, which it acquired in 2012. Since then, MPHJ has sent at least 16,000 demand letters to potential infringers, mostly small businesses, threatening litigation if the potential infringers did not sign license agreements and pay licensing fees. This caused several state attorneys general to investigate and file actions against MPHJ under their consumer protection laws, alleging that statements made by MPHJ in the demand letters were false.

The FTC, the agency tasked with investigating and policing unfair or deceptive acts or practices affecting interstate commerce, began its own investigation into MPHJ last year. The FTC alleged that the demand letters sent by MPHJ stated that MPHJ would take imminent patent infringement litigation against any potential infringer when MPHJ did not intend to take action and did not take such action. Further, the FTC alleged that MPHJ falsely represented that substantial numbers of businesses have responded to MPHJ’s demand letters by purchasing licenses when, at the time of at least some of the representations, MPHJ had not sold any licenses to potential infringers. As part of this investigation, the FTC sent MPHJ a draft complaint it intended to file if a settlement between the FTC and MPHJ was not reached, but the FTC had not initiated any legal action at the time MPHJ filed suit.

In its suit, MPHJ asserted that the FTC investigation was in violation of MPHJ’s First Amendment rights. The suit alleged that the FTC unlawfully interfered with MPHJ’s lawful, proper, and constitutionally protected efforts to identify and seek redress for infringement of its patents. MPHJ asserted that the FTC violated MPHJ’s First Amendment right to petition the government for redress under the Noerr-Pennington doctrine and its First Amendment right to free speech. In dismissing the case, District Judge Walter Smith found that MPHJ’s suit lacked subject matter jurisdiction and was an attempt by MPHJ to derail the not-yet-completed FTC administrative process.

This settlement is the first time the FTC has taken action under its consumer protection authority against an alleged “patent troll”.

 

TURTLES MAKE SIRIUS WAVES

Posted on by Kinney & Lange, P.A.

■ Wendy M. Bratten

In a September decision out of the U.S. District Court for the Central District of California in Los Angeles, music group The Turtles triumphed over Sirius XM Radio, Inc., the largest radio broadcaster in America. Flo & Eddie, Inc., owned by founding members of The Turtles, filed a class action suit against Sirius alleging $100 million dollars in unpaid royalties for performance of pre-1972 recordings, including The Turtles’ chart-topping song “Happy Together.” At issue in the case was whether ownership of pre-1972 sound recordings includes the exclusive right to publicly perform the recording. The court granted Flo & Eddie’s motion for summary judgment, ruling that Sirius infringed the band members’ copyrights under California law and creating “a legal earthquake in the music industry,” according to The Hollywood Reporter.

While the decision raised more questions than it provided answers, on October 15, Sirius was dealt an even bigger blow in a similar California case brought by the Recording Industry Association of America (RIAA), which controls recordings by such iconic artists as The Beatles, The Rolling Stones, and Bob Dylan, among others. Together, the two cases are generating a lot of buzz about a sea change on the horizon that could lead to a major overhaul in the way music is licensed and support for proposed legislation establishing performance royalties for recordings made before 1972.

When Congress passed the Federal Copyright Act in 1976, it expressly stated that song recordings fixed before February 15, 1972, were unaffected. As a result of this carve-out from preemption by federal law, public performance of songs recorded before 1972 is not protected by federal copyright law, and the only element of a pre-1972 sound recording offered federal protection was the underlying composition. This loophole in federal copyright protection created a patchwork of state common law doctrines designed to prevent creation of pirated copies of recordings.

In its case against Sirius, Flo & Eddy argued that California’s Civil Code provides for “exclusive ownership” to the author of sound recordings fixed prior to February 15, 1972, and that ownership right includes the exclusive right to public performance. While Sirius argued this statutory interpretation was too broad and in opposition with legislative intent because public performance is not expressly mentioned in the Civil Code, the court found that a plain reading of the text supports that sound recording ownership is inclusive of all ownership rights that can attach to intellectual property, including the right of public performance. The court agreed in RIAA’s case against Sirius, further emphasizing the legislature specifically adopted only one exception to the exclusive ownership of recordings, namely the recording of “cover” songs, and no such exception was adopted for public performance.

Sirius stated it would be happy to pay older artists, but that the change in the law should be coming from the legislature and not from the bench. The satellite radio giant may just get its wish if the RESPECT Act (H.R.4772) is passed. The bill introduced earlier this year would require digital radio services to pay royalties to classic artists, and has generated widespread support from recording legends through the Project 72 movement. With the pending bill, imminent appeals from Sirius in both recent California cases, and multiple cases pending against Pandora Internet Radio, it could be some time before the recording industry and digital radio are happy together.

 

Thomson-Reuters just released the 2014-2015 editions of Kinney & Lange’s Intellectual Property Law for Business Lawyers and Intellectual Property Laws and Regulations books.

PATENT ELIGIBILITY UNDER ALICE

Posted on by Kinney & Lange, P.A.

■ Thea E. Reilkoff

On June 19, 2014, the Supreme Court issued a unanimous decision in Alice Corporation v. CLS Bank International, No. 13-2988 (U.S., June 19, 2014), holding all claims in patents for a computer-implemented scheme for mitigating settlement risk invalid as drawn to an abstract idea, ineligible for patent protection under 35 U.S.C. §101. The Court revisited prior case law to reaffirm that a generic computer and generic instructions are insufficient to transform an abstract idea into a patent eligible invention, but declined to further define the contours of what constitutes an abstract idea. Notably, the Court solidified its previous guidance for analyzing claims for subject matter eligibility. According to the Court, the two-part framework set forth in Mayo Collaborative Services v. Prometheus Laboratories, Inc. 556 U.S. ____, 132 S. Ct. 1289 (2012) for analyzing claims directed to patent ineligible laws of nature and natural phenomena is to be applied to all judicial exceptions, including abstract ideas, and all categories of claims (e.g., product and process). Under this framework, the Court first determines if the claims are directed to a patent-ineligible concept and, if so, then determines if the additional elements transform the patent-ineligible concept into a patent-eligible application—a step the Court describes as a search for an “inventive concept.” How this guidance will be practically implemented by the United States Patent and Trademark Office (USPTO), as particularly applied to business methods and software, is yet to be seen, but a closer look at the Alice opinion, the Preliminary Examination Instructions issued by the USPTO and related public comments may shed some light on what to expect.

35 U.S.C. §101 sets forth the subject matter eligible for patent protection: “[w]hoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.” But the Court has long held that §101 “contains an important and implicit exception: Laws of nature, natural phenomena, and abstract ideas are not patentable.” These are the “basic tools of scientific and technological work” and “building blocks of human ingenuity,” and granting a monopoly over such, says the Court, may “tend to impede innovation more than it would tend to promote it.” At the same time, the Court recognizes that “[a]t some level, ‘all inventions . . . embody, use, reflect, rest upon, or apply laws of nature, natural phenomena, or abstract ideas.’” Thus the struggle has ensued to distinguish those inventions that claim the basic tools and building blocks of human ingenuity from those that “integrate the building blocks into something more.”

The patents at issue in Alice claimed a method for exchanging financial obligations between two parties, a computer-based system for carrying out the method, and a computer-readable medium containing program code to enable a computer to perform the method. The concept, as articulated by the court, is intermediated settlement—a process that involves a third party (computer) to mitigate the risk that only one party will satisfy their financial obligation in an agreed-upon exchange with another party. In other words, Alice Corp. claimed a computer-based escrow arrangement. Respondents CLS Bank International et al., who facilitate currency transactions across a global network, filed suit seeking declaratory judgment that the claims were invalid, unenforceable, or not infringed. Alice Corporation filed a counterclaim alleging infringement. The District Court held all claims ineligible for patent protection under §101 as directed to an abstract idea. A divided en banc Federal Circuit affirmed, but failed to agree on the appropriate test to adopt and whether nuances existed depending on whether the invention claims a method, system, or article.

Alice analogized to Bilski regarding “fundamental economic practices”

In a unanimous decision, the Supreme Court affirmed, applying the two-part framework of Mayo to all claims. The difficulty lies primarily in the first part of the analysis, although both parts present challenges. In the past, the Court has provided sparse and at times broad guidance on what constitutes a patent-ineligible concept, and in particular, an abstract idea. The court has rejected as patentable “an idea of itself” and “a principle, in the abstract” or a “fundamental truth,” including mathematical formulas, that “exis[t] in principle apart from any human action.”

In Bilski v. Kappos, 561 U.S. 593 (2010), the Court expanded this category to include “a fundamental economic practice long prevalent in our system of commerce,” holding the concept of risk hedging unpatentable. In Alice, the Court distinguished such longstanding commercial practice from a fundamental truth that has always existed. The former is “a method of organizing human activity,” not a principle that exists apart from human action. This was the extent of the Court’s guidance, however. Satisfied in finding that “there is no meaningful distinction” between the concept of intermediary settlement at issue in Alice and risk hedging at issue in Bilski, but to the chagrin of many observers, the Court found no need to “labor to delimit the precise contours of the “abstract ideas” category in this case.” Thus, the category remains limited to those few examples that have been tested.

In analyzing the second step, the Court found that the computer components of the method, individually and as a combination, were insufficient to transform the ineligible concept into a patent-eligible invention. Applying past precedent, the Court stated, “each step does no more than require a generic computer to perform generic computer functions” (“‘well-understood, routine, conventional activit[ies]’ previously known in industry”) The Court added that the method claims “do not . . . purport to improve the functioning of the computer itself . . . [n]or do they effect an improvement in any other technology or technical field.” The Court made the same argument for the system and computer-readable medium claims, concluding that absent such limitations, the addition of a generic computer with generic instructions is insufficient to satisfy the second step of the Mayo framework.

Less than a week after the decision, the USPTO issued its Preliminary Examination Instructions in view of Alice. Following the Court’s guidance, the USPTO established that the two-part framework of Mayo—originally applied only to claims involving laws of nature and natural phenomena—should be extended to abstract ideas and both process and product claims. This, the instructions note, is a change from, and supersedes, prior USPTO guidance, including that applied after Bilski, which states that a claim may be patenable if it is limited to a particular practical application (how it is applied in the real world) and not merely the result achieved, and provides separate detailed guidance and factors to be considered for analyzing products and methods claims (MPEP 2106(II)(A) and (B), respectively).

Unlike past USPTO guidance, the two-part analysis set forth in the preliminary instructions provides little more than the examples of abstract ideas and limitations referenced in Alice. Part 1 of the analysis states that claims including abstract ideas such as “[f]undamental economic practices,” “[c]ertain methods of organizing human activities,” “an idea of itself,” and “[m]athematical relationships/formulas,” should be examined under Part 2. Part 2 instructs examiners to determine whether any element, or combination thereof, is sufficient “to ensure that the claim amounts to significantly more than the abstract idea itself.” In providing examples of what may qualify, Part 2 references improvements to the functioning of the computer itself or to another technology or technical field and other “[m]eaningful limitations beyond generally linking the use of an abstract idea to a particular technological environment.” Part 2 further notes that simply adding the words “apply it” or mere instructions to apply an abstract idea on a computer, or requiring no more than a generic computer to perform well-known generic functions are insufficient to qualify as adding “significantly more.”

Public comments to the preliminary instructions note an insufficiency in guidance for identifying an abstract concept in Part 1. For instance, the USPTO does not provide definitions for the examples they recite, or even the Court’s own limiting language (e.g., language limiting “fundamental economic practices” to those that are “long prevalent in our system of commerce” or “taught in any introductory finance class”). The USPTO includes “[c]ertain methods of organizing human activities,” but fails to note that the Court used this to describe a longstanding commercial practice, not as a separate and additional example of an abstract idea. Others note with concern the oversimplification of the two-part framework and ask that the USPTO recognize that prior guidance of Bilski remains viable.

The USPTO has released two-part preliminary guidance under Alice

In principle, Alice added very little to the substantive law. It confirmed that fundamental economic practices are unpatentable abstract ideas absent elements that transform them into significantly more; that generic computers, instructions, and functions are insufficient for this purpose; and that improvements to the computer itself, another technology, or technical field may be required. According to the USPTO, Alice “neither creates a per se excluded category of subject matter, such as software or business methods, nor imposes any special requirements for eligibility of software or business methods.” Memo from Andrew H. Hirshfeld, Dep’y Comm. for Patent Examination Policy, USPTO, “Preliminary Examination Instructions in view of the Supreme Court Decisions in Alice Corp. v. CLS Bank Int.,” June 25, 2014. Yet, since Alice, there has been a surge in invalidations under §101. Even though Alice added little to the substantive law, practitioners should expect a change in the patent evaluation process, as well as an emboldened court and USPTO.