From:
[email protected] (Gregory Aharonian)
Subject: Patent Office Reform Panel Final Report PART2a
Message-ID: <
[email protected]>
Organization: The World Public Access UNIX, Brookline, MA
Date: Thu, 4 Feb 1993 14:31:55 GMT
Lines: 1814
Last year, the Patent Office sponsored a committee to review current
patent practices in the United States. Last fall they issued their final
report, which contains many interesting suggestions, including first to
file, software patents, excessive secrecy orders, international harmonization,
challenging patents, reexamination, excessive legal costs and other issues.
In particular, I know that a few Congressmen are introducing legislation
this spring to switch the U.S. from first-to-invent to first-to-file.
Also, it seems that the Patent Office library does not have any IEEE or
ACM publications, as incredible as that might seem (nor have they deemed to
buy a copy of my directory of much of the government's software, a great
prior art source).
What follows is the text to their final report, split into five files.
A paper version of this text can be obtained from the Patent Office. I
would like to thank Noah Friedman, Toni Emerson, Keith Berrier, Glenn Tenney,
Rahul Dhesi and Jude Wilkinson for all contributing ten dollars to help me
defray the cost of acquiring a $1.50 diskette from the Patent Office with
these files.
Gregory Aharonian
Source Translation & Optimization
==============================================================================
VI. GROUNDS FOR HOLDING PATENTS UNENFORCEABLE
A. Introduction and Overview
In the United States, a defendant to an infringement action can raise an
equitable defense of unenforceability in response to a charge of patent
infringement if misconduct on the part of the patentee can be established.
This defense is often justified through reference to the "unclean hands"
doctrine. In other words, a court sitting in equity should prevent a "bad
actor" from gaining the benefit of its "bad conduct". If the defense is
sustained, all claims in the patent will be held unenforceable, irrespective
of the substantive merit of these claims (e.g., whether or not the patent
itself is valid). The types of activities which justify this judicially
imposed equitable penalty include inequitable conduct and patent misuse.
Judicial interpretation of inequitable conduct focuses upon the two elements
of intent and materiality to judge whether an inventor's, assignee's, or
attorney's conduct before the USPTO warrants holding the patent unenforceable.
As the Federal Circuit has stated,
[i]nequitable conduct resides in failure to disclose material
information, or submission of false material infor)mation, with
an intent to deceive, and those two elements, materiality and intent,
must be proven by clear and convincing evidence [83].
As contrasted with earlier positions, courts have found that information
withheld by an applicant is material if a "reasonable examiner" would have
considered it important during the determination of patentability of the
invention. At one extreme, this standard could include prior art known to
the applicant that would not in fact preclude grant of the patent. As to
intent, the courts have emphasized that a specific intent to mislead is
required, rather than gross negligence standing alone.
Patent misuse focuses on actions taken by the patentee following the grant
of patent rights. Generally, use of patent rights in an attempt to expand the
enforceable scope of protection defined by the patent may serve as a basis for
a finding of patent misuse. Examples of patent misuse include situations such
as a patentee demanding that royalty payments extend beyond the term of the
patent, or requiring the license or purchase of unwanted products as a
condition to the license of a patented invention. Actions such as these are
used as a basis for finding antitrust violations. The conditional sale example
mentioned above, for instance, has been classified as a per se illegal "tying
arrangement". Legislative reform of the antitrust provisions has been debated
for several years, with the object being a clarification of the significance
of possession of patent rights as a measure of market power. Finally, patent
misuse, unlike inequitable conduct, is purgeable through appropriate actions
of the patentee.
The Commission, as well as a substantial number of the public respondents,
supports the defense of unenforceability where a patentee engaged in
inappropriate conduct during the procurement of the patent. Although the
defense has the potential to increase both the cost and complexity of patent
litigation, many respondents believe that the cost is justified to discourage
inappropriate conduct, and to ensure open and fair dealing during the ex parte
prosecution of patent applications before the Patent and Trademark Office. The
Commission also recognizes the necessity of some mechanism to induce patent
applicants to provide the Patent and Trademark Office with clearly relevant
prior art known to the applicant during examination of the patent application.
Finally, although the penalty of unenforceability is considered by some to be
harsh, many believe it to be the most appropriate, and most direct manner of
sanctioning a party which engages in improper conduct.
Although there is support for the continued availability of the defense of
unenforceability, this support is conditioned upon a clarification of the
appropriate standard of conduct necessary to justify application of the
defense. Both the Commission and some sectors of the patent user community
agree that, as interpreted by the Federal Circuit, the current standards for
interpreting inequitable conduct are inappropriate in assessing the nature of
conduct which will result in the sanction of unenforceability. Specifically,
the Commission believes that the "reasonable examiner" standard for assessing
the materiality of information withheld during prosecution, as interpreted
in recent holdings, does not accurately reflect the appropriate level of
materiality of information which can be used to support the sanction of
unenforceability.
Some members of the patent user community advocate adoption of an objective
"but for" standard for assessing the significance of information known to the
applicant but intentionally withheld during prosecution. This standard
would not provide a defendant with access to the equitable defense of
unenforceability unless the intentionally withheld information would in fact
have rendered the claimed invention unpatentable if it had been presented[84].
In the Commission, and in the public comments, many have argued that this is
the only appropriate standard for assessing the significance of information
which is withheld during prosecution of a patent application.
Recently, the Patent and Trademark Office has sought to respond to the
concern over the question of the appropriate standard for measuring
inequitable conduct by changing the rules which govern the disclosure
obligations of patent applicants. The USPTO has thus amended 37 CFR 1.56
to replace the former "reasonable examiner" standard for measuring the
materiality of information withheld with a more easily quantifiable
standard [85]. The new standard holds that information is material if it
creates a prima facie case of unpatentability of any claim, either by itself
or in combination with other information. The prima facie standard is
satisfied if the information compels a conclusion that a pending claim is
unpatentable, using a preponderance of the evidence standard, as applied to
the broadest reasonable interpretation of the claims in question, and before
any rebuttal evidence is considered. This new standard thus seeks to base
the question of materiality on familiar evidentiary and claim construction
standards. Importantly, the new rule also clarifies that disclosure
requirements are satisfied if the material information reaches the examiner
through any means, which relieves the patent applicant of supplying additional
information which is only cumulative to the information before the examiner,
and construes disclosure requirements in the context of pending claims only.
B. Summary of Public Comment
The public response received on patent unenforceability defense generally
agreed that the defense was appropriate for a clear case of patentee
misconduct. Many referred to the desirability of using the defense to reduce
the possibility of invalid patents issuing due to a failure of the USPTO to
discover the most relevant prior art. Others stressed its necessity to prevent
fraud on the USPTO, by providing an incentive for patent applicants and their
representatives to deal fairly with the USPTO, and to force parties to take
their duty of disclosure seriously. Irrespective of their beliefs regarding
the application of the defense, many comments recognized the need for some
means for encouraging voluntary citation of prior art by the patent applicant.
Despite the general belief expressed in the comments that the defense is
necessary, many expressed their opinion that problems exist in the application
of the inequitable conduct doctrine. The most commonly cited drawbacks focused
upon the application of the inequitable conduct doctrine. Some comments
suggested that the availability of the defense unnecessarily adds to the
complexity and cost of patent litigation. Others urged that the present
remedy of unenforceability is too harsh, especially since there are no
provisions which allow "purging" of the conduct as there is for patent misuse.
Much concern was expressed that the inequitable conduct defense is often
abused by parties, and does not accurately reflect truly fraudulent activity.
The comments suggested that these problems cause the unenforceability defense
to undermine the purpose of the patent system, decrease the prestige of
patents, and sometimes unfairly punish inventors for the actions of their
representatives.
Many comments urged replacement of the inequitable conduct doctrine with
a more objective standard for assessing materiality of information withheld,
specifically, an objective "but for" standard. Such a standard would only
find conduct to be actionable if, "but for" the conduct, the USPTO would not
have issued the patents. Comments often pointed out that the "but for"
standard is fairer to the patentee and his representatives, because it only
punishes conduct which omits clearly pertinent art citations. Some parties
suggested a new Federal Rule of Civil Procedure which would permit the award
of costs and attorneys fees for charges of inequitable conduct that are not
borne out at trial. Others urged that the "fraud on the Office" defense
should be construed according to true fraud standards (e.g., plead with
particularity).
The responses arguing against the continued applicability of the
unenforcability defense included numerous suggestions regarding alternative
sanctions. These included:
- discipline the lawyer who partakes in conduct which would amount
to inequitable conduct, but do not hold the patent to be
unenforceable;
- restrain the party found to be guilty of inequitable conduct from
enforcing the patent against the accused infringer, but do not
hold the patent to be unenforceable against all later parties;
- restrict the scope of the unenforceability sanction to be
commensurate with the nature of the conduct; specifically, allow
the patentee to enforce claims which would be patentable
irrespective of the withheld prior art, but not those which would
be unpatentable over such art -- such a standard would properly
distinguish the degree of culpability of the patentee and also
would diminish the tendency of those charged with infringement
to relentlessly pursue evidence to support an inequitable
conduct claim;
- require forfeiture of damages awarded to the patentee, with the
amount to be transferred to the Patent and Trademark Office,
and include a preclusion against awarding plaintiff fees or
costs; and
- provide an opportunity for a special reexamination proceeding
to enable a party to purge misconduct in the form of withheld
prior art.
These suggestions for reform show that the unenforceability defense
retains its desirability as a means of preventing improper conduct on the
part of the patent owner, particularly during the patent prosecution.
C. Recommendations and Discussion
Recommendation VI-A
Clarify the nature of conduct by a patent rights holder that
justifies the use by a defendant to a patent infringement action
of the equitable defense of unenforceability consistent with
the following guidelines:
(i) continue to hold unenforceable patents in which the
applicant, its attorney or its representative during
the prosecution of the application for that patent
before the Patent and Trademark Office failed to meet
the appropriate requirements for disclosure of
information within their knowledge having to do with
the allowability of presented claims;
(ii) implement a more objective standard for materiality of
information than one based upon the perspective of a
"reasonable examiner", and
(iii) create a presumption that the standard of disclosure
is satisfied if required information is before the
examiner in a timely manner, regardless of how that
information came to the attention of the examiner.
The debate over the appropriate materiality standard has divided the
patent community. Within the Commission, there are factions which favor and
oppose the objective "but for" standard for materiality, as well as the new
"prima facie" standard of the recently amended Rule 56. Despite the difference
in opinion as to the precise standard for materiality, the Commission
recognizes the desirability of addressing the broader goal of implementing
a materiality standard which is more objective than the "reasonable examiner"
standard. The Commission also recognizes the need to ensure that changes in
standards used during prosecution of patent applications before the Patent
and Trademark Office remain consistent with the interpretation of those
standards in the Federal courts, particularly by the Court of Appeals for
the Federal Circuit. Thus, the Commission focused its recommendations on
the broader goals of ensuring a more objective standard for interpreting the
materiality of withheld information. The Commission's recommendation accounts
for the need to provide an unenforceability defense where a party has withheld
information, while at the same time not penalizing parties for not providing
cumulative information.
The first element of this recommendation is based upon the Commission's
belief that the unenforceability defense is a necessary one and should be
available to parties charged with infringement in appropriate circumstances.
Some mechanism to ensure fair dealing between the patentee, the public and the
Federal Government has been part of the patent system for over 200 years [86].
In its modern form, the unenforceability defense provides a necessary
incentive for patent applicants to engage in fair and open dealing with
the Patent and Trademark Office during the ex parte prosecution of patent
applicants, by imposing the penalty of forfeiture of patent rights for
failure to so deal. The defense is also considered to be an essential
safeguard against truly fraudulent conduct before the Patent and Trademark
Office. Finally, the defense provides a means for encouraging complete
disclosure of information relevant to a particular patent application. This
strengthens the presumption of validity of issued patents. Thus, from a
policy perspective, the defense of unenforceability based upon inequitable
conduct is desirable and should be retained.
The second component of the recommendation embodies the belief of the
Commission that a more objective standard for measuring the materiality of
information is necessary to justify the unenforceability sanction. A
significant amount of anecdotal evidence from the public comments suggests
that claims of inequitable conduct based upon questionable grounds are
becoming more prevalent. Indeed, without the imposition of a strong burden
of proof, one would expect that claims of inequitable conduct, which can
negate infringement of all claims of a patent, would be routinely made as
part of the defensive strategy of the accused infringer. Grounding the
inequitable conduct defense on a more objective basis will deter these
frivolous or questionable claims of inequitable conduct. It will also clarify
the standards for conduct for patent applicants and their representatives.
This will enable these parties to guide their future conduct during
prosecution of patent applications. In this regard, the new formulation
of Rule 56 will provide some measure of improvement, as it provides a more
easily quantifiable standard to be used by the patent applicant in assessing
whether information is material.
Finally, the Commission recognizes that information not supplied by a
patent applicant, but nevertheless fully considered by the patent examiner
prior to the grant of the patent, should not serve as the basis for upholding
a claim of inequitable conduct. This may occur where information withheld by
the patent applicant is merely cumulative to that already considered, or where
information is withheld by the applicant but is independently discovered and
considered by the patent examiner. Under old Rule 56, in both of these
situations the failure of applicant to provide the information can render
the patent unenforceable, even though the information was fully considered
by the patent examiner.
To effectuate this element of the proposal, the Commission believes that
the courts should not hold the patent unenforceable where the information
withheld was actually considered by the patent examiner. The inequitable
conduct defense would remain available to alleged infringers where the
examiner did not consider the withheld information. Thus, the inequitable
conduct defense would still deter frivolous or poorly supported claims of
inequitable conduct early in the proceeding. This, in turn, can be expected
to reduce discovery burdens and unnecessary litigation expense. The
Commission's proposal here is presently incorporated into amended Rule 56.
Recommendation VI-B
Changes to the standards for judging inequitable conduct before
the United States Patent and Trademark Office should not prejudice
the rights of patent rights holders, so that in any action to
enforce a patent which was granted prior to the effective date
of such changes, the patent rights holder should be given the
choice of being judged by either the standard used before, or the
standard employed after the amendment.
The Commission is concerned that unwarranted and undesirable effects of
the recent change in the standard of materiality will adversely affect parties
which prosecuted patent applications under one standard for duty of
disclosure, and subsequently face a different standard during litigation.
Accordingly, the Commission recommends that parties enforcing patent rights
should be given the choice of defining the standard under which their conduct
before the USPTO will be measured.
Certain baseline considerations must be articulated. First, parties who
receive a patent grant after the effective date of the new rules shall be
governed by the new standard. Second, litigation which was already in
progress at the time of the enactment of the new rules should continue to
be governed by the "reasonable examiner" standard. Finally, for all other
instances, namely patent grant prior to the date of enactment and no pending
litigation, the patentee should be given the choice of defining the standard
of materiality, in the form of a non-reversible election prior to commencement
of discovery. This flexibility will ensure that patent rights are not
adversely affected simply because of a rule change in the USPTO.
Recommendation VI-C
Enact legislation which establishes that possession of intellectual
property rights should not give rise to a per se presumption of
market power, in the context of an antitrust proceeding.
The Commission is concerned about the effect of several decisions which
permit a presumption that possession of intellectual property rights confers
market power upon the holder of those rights [87]. This presumption shifts
the burden of proof to the antitrust defendant, and has the effect of
encouraging litigation related to and counterclaims during enforcement of
intellectual property rights.
The Commission believes this presumption and its effects are both
inappropriate and undesirable. This presumption ignores the distinction
between possession of intellectual property rights and the economic element
of market power. For example, a patented article may have numerous economic
substitutes which preclude the patent holder from asserting market power.
Possession of patent rights in such a situation does not establish that the
patent owner has obtained market power. Many commentators share the
Commission's view that permitting parties to rely upon a per se presumption
of market power presents a serious threat to the effective incentive that
the patent law is intended to provide to inventors [88]. Finally, the
Commission believes that this perception of intellectual property rights
plainly ignores the pro*competitive function of patents in stimulating
further innovation and competition.
Accordingly, the Commission advocates a legislative remedy which would
prevent courts from presuming the existence of market power from the
possession of intellectual property rights. Specifically, the Commission
advocates revival of recent legislative efforts which would provide this
remedy [89].
VII. REEXAMINATION
A. Introduction and Overview
The genesis of the present reexamination system is the 1966 recommendation
of the President's Commission on the Patent System. That recommendation
sought an ex parte administrative procedure as a faster and less costly
alternative to a validity challenge in court. While largely successful in
providing patent owners an efficient means for confirming the patentability
of issued patents and thereby reducing the likelihood of a validity challenge,
the substantially ex-parte character of the present system may discourage its
use by many third parties as an alternative to validity challenges in court.
Under the present system, a third party seeking reexamination has an
initial opportunity in his request to present arguments for unpatentability
of issued claims in view of newly-discovered documentary prior art. If he
is unsuccessful in convincing the examiner that "a substantial new question
of patentability" exists, the third party's sole remedy is a petition for
de novo review by the Group Director. A USPTO decision refusing reexamination
is final and not appealable. If the examiner orders reexamination, the
third party may have a second and final opportunity to present arguments of
unpatentability, but only if a statement is filed by the patent owner
responding to the decision ordering reexamination. Thereafter, reexamination
is completely ex parte; the third party having no opportunity to address
issues raised during the reexamination. While the patent owner may appeal
any adverse decision, the third party cannot appeal a decision to grant a
reexamination certificate. A third party may be granted an opportunity to
intervene in a patent owner's appeal to the Federal Circuit or in a de novo
review in the district court, although he is not able to participate in an
appeal to the USPTO Board of Patent Appeals and Interferences.
Since 1981, over half of all reexamination requests have been filed by
third parties [90]. Notwithstanding such third party participation, because
reexamination is essentially ex parte, reexamination is limited to
consideration of patentability issues solely arising from documentary prior
art [91]. Since the USPTO's reexamination decision is likely to be given
great weight by a court in considering validity of the reexamined patent,
a third party's burden of proving invalidity will be more difficult to
sustain. The third party's validity challenge in court may also be weakened
if the USPTO refuses a third party's request for reexamination. Thus, many
third parties do not perceive the reexamination system as a fair alternative
to challenging validity in court [92] and are less likely to request
reexamination as an alternative to litigation because of the perceived
unfairness of the system. If the reexamination system discourages its use
by third parties as an alternative to litigation, the system is failing one
of its primary purposes -- to provide an expert forum as a faster, less
expensive alternative to litigation of patent validity.
Initially, the Commission's views differed on the preferable scope of
third party participation in reexamination. There was strong support for a
full inter partes proceeding, with certain restrictions designed to avoid
abuse and to limit the scope of evidence upon which a third party can rely.
For example, those supporting full inter partes reexamination would limit
USPTO consideration to documentary prior art and would preclude discovery
or reliance on testimonial evidence such as depositions taken in related
judicial proceedings. Other Commission members were concerned that a full
inter partes proceeding, even with certain restrictions, would lead to
abuses of the process much as occurred in the reissue protests under the
Dann amendments.
As presently constituted, the USPTO is not an appropriate forum for an
inter partes adversarial proceeding addressing all potential issues of
validity. Even if the USPTO were to develop the capability to handle full
adversarial proceedings, such a procedure would not be an alternative to
litigation but rather litigation in an administrative forum. Providing for
third party participation at every stage of reexamination would unduly
complicate the proceeding, adding undue cost to the parties and the USPTO and
requiring excessive time before a decision could be reached. Broadening the
scope of reexamination to consider all issues material to validity and
infringement would impose on the USPTO examiners evidentiary burdens beyond
their primary expertise.
Any modification of the present reexamination system must be a compromise.
Consistent with its intended purpose of providing a desirable alternative to
validity litigation, the reexamination system should be modified to provide
third parties with a greater opportunity to participate. Any modifications,
however, must not result in harassment of patent owners, or unreasonably
increase the cost or duration of the proceedings, or impose unreasonable
burdens on the USPTO. The Commission believes that its recommendations
satisfy all these criteria.
B. Summary of Public Comments
Many of the public comments on the reexamination system focused on
expanding the scope of third party participation in reexamination proceedings.
These comments included creating a tribunal within the USPTO for full
examination of all validity and infringement issues, establishing a post-grant
opposition procedure similar to those in European systems for consideration of
all validity issues, and permitting third party participation at all stages of
reexamination, including interviews with the examiner. Other public comments,
however, supported the reexamination system as it presently operates.
Several of the public comments summarily proposed that reexamination be
permitted for all issues affecting validity, thus implicitly proposing that
Section 112, among other issues, be the basis for and within the scope of
reexamination. The majority of comments which specifically addressed section
112 and the scope of reexamination either did not address Section 112 as a
basis for ordering reexamination or specifically excluded it as a basis for
reexamination without explanation.
The public comments addressing application of a uniform claim construction
standard in USPTO reexamination and the courts were generally split, with some
in favor of a uniform standard and some opposed. Several public comments
suggested assigning reexamination cases to special reexamination examiners, to
a panel of examiners, or to an examiner who did not issue the patent. Others
suggested that reexamination should be permitted only for a limited period
after issuance of the patent.
It was also suggested that third parties be forced to use reexamination,
or be prevented from relying upon any prior art not considered by the USPTO
in the original examination or during reexamination or reissue proceedings.
This, however, was perceived by many commentators as depriving such third
parties of meaningful access to the courts.
C. Recommendations and Discussion
Recommendation VII-A
The basis for and scope of reexamination should include
compliance with all aspects of 35 U.S.C. @@112 except
for best mode.
Since one purpose of reexamination is to correct an administrative error
of the USPTO [93], it is appropriate for the USPTO to examine patent claims
for compliance with section 112. The recommendation provides that failure
to comply with section 112 by itself may be a basis for ordering reexamination
and that the scope of reexamination (of original as well as new and amended
claims) should include section 112 issues, except for best mode issues [94].
To the extent section 112 issues are amenable to documentary presentation
and are of the type ordinarily considered by examiners (i.e., written
description, enablement, claim definiteness), it should be a basis for
ordering reexamination. A "substantial new issue of patentability" should
be found where the requester establishes in the request a prima facie
violation of section 112 which was not considered previously on the record.
While this may present certain evidentiary issues where affidavits are
involved, this is no more than examiners face in examination of original
applications. Limiting the basis for reexamination to documentary prior art
precludes administrative determination of substantial issues of patentability
well within the ambit of the USPTO's expertise and, indeed, well within what
the USPTO should have considered in the initial examination.
Entirely separate from permitting section 112 to form the basis for
reexamination, once reexamination is ordered, section 112 should be within
the scope of examination, even of the original claims. Since new and amended
claims submitted during reexamination are examined for compliance with
section 112 [95], there is no reason not to reexamine the original claims
for such compliance. Examining all claims for section 112 compliance would
not significantly increase the examiner's burden and would avoid the difficult
task of examining amended claim language for section 112 compliance without
examining the unamended portion of the claim.
Since best mode issues generally involve disputed factual evidence not
normally considered by examiners, exclusion of this issue from the basis for
and the scope of reexamination keeps the examination within the primary
expertise of the USPTO. Other issues traditionally outside the normal
practice of examiners because of the evidentiary issues, i.e., public use or
on sale bars, inequitable conduct, etc., should not be a basis for or within
the scope of reexamination.
Although litigation validity decisions are rarely predicated solely on
section 112 issues, permitting such issues to be the basis for and within
the scope of reexamination will provide a more complete alternative to
litigation.
Recommendation VII-B
The order for reexamination and the first Office action should
be consolidated and any third party requester should be permitted,
within strict time deadlines, to submit written comments on the
patent owner's response to the first office action. The third
party's comments should be limited to issues covered by the
examiner's office action and the patent owner's response.
Under current practice, a third party requester may only comment on the
patent owner's statement in response to the decision ordering reexamination.
In order to deprive the third party of this opportunity, many patent owners
do not file a statement, waiting instead for the first Office action. This
recommendation, therefore, ensures the third party requester an opportunity
to comment while shortening the duration of many reexamination proceedings.
The recommendation also will shorten the necessary time to conduct a
reexamination requested by the patent owner. Since the examiner's first
Office action may introduce prior art and patentability issues not addressed
in the third party's request, the third party's comments after the first
office action may aid in focusing the issues early in the reexamination
proceedings. Also, it may avoid the need to reopen reexamination after
the close of prosecution as a result of the third party's comments at that
stage.
The recommendation is not intended to change the standard used in
determining whether to order reexamination. The examiner would first consider
whether a request raises a substantial new question of patentability. If
the request does not meet the standard, the examiner would issue a notice to
that effect. If, however, reexamination is deemed appropriate, the examiner
would then consider whether a prima facie case of unpatentability exists. The
first communication from the examiner in this instance would issue as an
Office action addressing the question of whether there is a substantial new
question of patentability, and then any applicable grounds for rejection.
In this and other recommendations regarding reexamination, the third party
requesters must have access to all communications between the patent owner and
the USPTO. Accordingly, the patent owner should be required to serve copies
of such communications on the third party requester.
Recommendation VII-C
A third party requester should have the right to participate in
any examiner interview initiated by the patent owner or by the
examiner. Such an interview should be conducted under controlled
conditions before the examiner and a senior USPTO representative.
The third party should not be permitted to initiate interviews.
While not unanimous, several Commission members urged either that third
parties be given the right to participate in examiner interviews or that
interviews in reexaminations be banned altogether. Their position is that
interviews present an opportunity for mischief since the record rarely
reflects all that transpired. In their view, where a reexamination is
requested by a third party, neither party should have the opportunity for
ex-parte contact with the examiner. This could be achieved either by banning
interviews or permitting inter partes interviews. In lieu of banning
interviews, which would deprive the USPTO of a proven and effective means
of communication, inter partes interviews have been recommended. The
recommendation is limited to interviews initiated by the patent owner or
the examiner.
There was opposition to the recommendation by those Commission members
who feel the changes to the reexamination system should preserve as much as
possible its present ex parte nature while providing third parties with
greater opportunity to participate. The reexamination process is intended
to make use of the normal examination procedures, including interviews.
It presumes that examiners will comply with the examination requirements,
including that of a detailed interview summary. Giving third parties the
opportunity to participate in interviews will come close to transforming the
reexamination process into a full adversarial process with the attendant
delays and costs and may burden the USPTO with adversarial hearings before
examiners untrained to deal with such proceedings.
As an alternative to inter partes interviews, a transcript of ex parte
interviews could be provided to third party requesters. This was deemed less
acceptable by those promoting inter partes interviews. Moreover, there was
no agreement as to who should bear the cost involved.
Recommendation VII-D
A third party requester should have the right to submit
written comments at the close of prosecution of a patent under
reexamination. Such comments, which should be limited to issues
raised during ex parte reexamination, should be considered by
the examiner before any appeal by the patent owner of an adverse
decision and before issuance of a Notice of Intent to Issue a
Reexamination Certificate. If the third party's comments cause
the examiner to change his decision, the examiner should be
permitted to reopen prosecution to the extent of issuing a
supplemental final action to which the patent owner should be
entitled a single response under 37 C.F.R. 1.116. If, in the
single response, the patent owner makes any claim amendment, the
third party should be permitted to submit comments limited to
the claim amendments. Thereafter no further comments should be
received from either the patent owner or a third party. The third
party comments should be a part of the record considered on any
appeal by the patent owner or the third party.
Allowing the third party requester to comment on the outcome of prosecution
in which he could not participate will enhance reexamination as an alternative
to litigation without unduly complicating the process or burdening the USPTO.
To minimize the burden on the reexamination process, the third party will only
be able to submit comments after the close of prosecution and to only those
issues raised during ex parte prosecution. The content of any comments may
be a composite of previously offered comments and any additional comments,
provided the composite remains restricted to the issues raised during the
reexamination prosecution.
While in a few cases the third party's comments may result in a supplemental
final Office action, the additional admin)istrative burden and concomitant
delay in the process should be acceptable if it reduces litigation on the
validity of the patent by encouraging greater third party use of the
reexamination system.
This recommendation presents a concept which may require new rules to
ensure procedural control over the process. Once the concept is accepted,
it is within the ambit of the USPTO to implement it procedurally.
Recommendation VII-E
A third party who requested and participated in a reexamination
should be permitted to appeal any adverse decision of the Examiner
to the Board of Patent Appeals and Interferences and to the Federal
Circuit. The third party and the patent owner should be permitted
to participate in any appeal by the other. The third party's appeal
to the Board and the Federal Circuit should be limited, respectively,
to issues raised in the third party's comments after close of
prosecution and to issues dealt with by the Board. A third party's
right to appeal should be conditioned upon filing of a written waiver
by the third party of any right to assert, in any forum, the
invalidity of any claim determined to be patentable on appeal on any
ground which the third party raised or could have raised during the
reexamination.
The Commission is unanimous that, at a minimum, third party participation
in patent owner appeals of reexamination decisions would be necessary to make
reexamination a meaningful alternative to validity litigation. Given the
increased burden of subsequently proving invalidity of a reexamined claim,
many third parties would be reluctant to use reexamination without an
opportunity to at least participate in judicial review of the USPTO's
decision. Although third party participation in patent owner appeals will
increase the burden on the USPTO and delay the reexamination process, any
such increased burden and delay would likely be minimal and an appropriate
trade-off for increased third party use of the reexamination system.
The Commission, by a slim majority, also recommends that a third party
who participates in a reexamination should be given the opportunity to appeal
any decision adverse to the third party, but the Commission believes that
right should be conditioned upon the third party's waiver of any right
subsequently to litigate the same issues. Several members opposed such a
condition, arguing that, contrary to the purpose of the recommendation, the
waiver requirement would discourage third party use of reexamination as an
alternative to litigation. Those favoring the condition believe that, without
the proposed waiver, there would be no finality to reexamination proceedings,
thus permitting a third party to burden a patent owner and the courts with
subsequent litigation over the same issues.
Several members believe that the third party should not be specifically
given the right to participate in appeals beyond the Board. They note
that under existing precedent a third party would likely be permitted to
participate as an intervener in appeals from decisions of the Board to the
Court of Appeals for the Federal Circuit and in de novo review actions under
35 U.S.C. 145.
The Commission believes that third party appeals from decisions of the
Board should be limited to the Court of Appeals for the Federal Circuit, and
should not include de novo review actions under 35 U.S.C. 145. Section 145
review would merely add an additional layer of review to the process and is
considered undesirable. Since under current law the patent owner is permitted
the section 145 option, consideration should be given to eliminating the
option as to the patent owner as well. If it is not eliminated, it would be
necessary to take steps to preclude the possibility of court review of the
USPTO decision in different courts, in those situations where both the patent
owner and the third party are dissatisfied with the USPTO decision.
Recommendation VII-F
A reexamination should not be initiated or continued on any
patent claim held valid in an entered judgment, or its equivalent,
of a district court in an action in which the requesting party
or its privies raised or could have raised the same issues.
By this recommendation, a third party (and its privies) would be precluded
from pursuing reexamination of any claim in which the validity was determined
adversely to the third party by a court in a judgment or dismissal with
prejudice. This avoids the potential for inconsistent treatment by the USPTO
after completion of a judicial determination of validity of the patent. The
prohibition would be effective unless the judgment were reversed or unless
the right to reexamination was specifically preserved in a consent judgment
or dismissal. The prohibition would not apply to reexamination on issues of
patentability which the requesting party did not raise and could not have
raised in court. Under this standard, a party would not be able to request
a reexamination based upon any prior art actually known to the litigators in
the prior court proceeding, but would be able to do so if the request was
based upon prior art discovered after termination of that earlier proceeding.
D. Other Considerations
1. Use of Different Standards of Claim Construction in the USPTO and
in the Courts
Under prevailing Federal Circuit law, the USPTO in a reexamination
proceeding construes the claims as broadly as is reasonably possible while
according the reexamined patent no presumption of validity. On the other
hand, that same patent being litigated in a district court would normally
not have its claims construed as broadly as reasonably possible but in a
manner to save their validity based on a presumption of validity.
These different approaches to claim evaluation provide an opportunity for
considerable mischief. A claim saved from invalidity by a district court
through a narrow reading which avoids the prior art may nevertheless be held
to be infringed, either literally or through the doctrine of equivalents,
without raising any issues of intervening rights. That same claim presented
to the USPTO in a reexamination proceeding, however, may be required to be
amended to avoid the prior art, creating the possibility of intervening
rights. Where the patent owner himself/ herself elects to have his patent
reexamined, there is no reason for concern, since the patent owner controls
the process and accordingly can elect the procedure which best suits his/her
needs. The patent owner, however, suffers a disadvantage where a third party
forces a reexamination, due to the potential for intervening rights as
aforenoted.
While this problem is in need of rectification, the potential solutions
to the problem each have their own set of attendant problems. For example,
requiring reexamination examiners to construe claims narrowly to sustain
validity while granting the claims a presumption of validity would require
the examiners to apply standards outside the ambit of their normal experience
and might well serve to discourage third party participation in reexamination
proceedings. Alternatively, requiring courts to construe claims as broadly
as the USPTO does in ordinary prosecution would place patent owners at a
severe disadvantage since the claims could not be amended in court, and
requiring the patent owner to go back to the USPTO for reexamination or
reissue would subject him to the intervening rights problem noted above. One
possible solution that should be explored is an appropriate amendment to
35 U.S.C. 307(b). This amendment would require equitable treatment of any
claim by a third party of intervening rights arising from a reexamination
requested by that third party and preclude application of the first sentence
of the second paragraph of 35 U.S.C. 252 in that situation.
Given the foregoing, and since the public comments addressing application
of a uniform standard in the USPTO and the courts were generally split, no
specific recommendation is made on this issue, though it is worthy of further
consideration.
2. Reexamination by Different Examiners
Several public comments sought to direct assignment of reexamination to
special reexamination examiners, to a panel of examiners, or to an examiner
who did not issue the patent. These suggestions apparently were based on
perceptions that regular examiners were insufficiently skilled to handle
reexaminations or that the original examiner would be biased in favor of his
original examination and allowance. There is no evidence of the former,
particularly since the scope of reexamination is limited to areas within
the skill of ordinary examiners. The USPTO's experience belies the latter
since original and different examiners have nearly identical records in
treatment of claims on reexamination [96]. The impact on the USPTO's costs
and efficiency in handling reexaminations if special or different examiners
were required is much greater than the limited benefit, if any, of such
procedures.
3. Limited Time for Filing Reexamination Requests
Another public suggestion concerned permitting reexamination only for a
limited period after issuance of the patent. One suggestion recommended that
the limited period not exceed nine months after issuance. While this could
limit reexamination requests, many patents do not achieve a value worthy of
validity litigation until many years after issuance [97]. If reexamination
were limited to relatively new patents, the process would not act as an
alternative to validity litigation for those patents which mature in value
later in life.
4. Forcing an Accused Infringer Into Reexamination
The suggestion that accused infringers in a court proceeding be prevented
from relying upon any prior art not considered by the USPTO in the original
examination or during reexamination or reissue proceedings was perceived by
many commentators as depriving third parties of meaningful access to the
courts. Given the weight courts apply to USPTO consideration of prior art,
requiring all prior art to be considered by the USPTO is consistent with the
ultimate purpose of the reexamination process to reduce litigation. Forcing
a third party to use reexamination without the benefit of full inter partes
participation, however, would unduly favor the patent owner and might
overwhelm the USPTO. Moreover, it would, provide a built-in delay factor
to most patent infringement suits.
VIII. LICENSEE CHALLENGES TO PATENT VALIDITY
A. Introduction and Overview
For many years, the licensee of a patent was estopped from challenging the
validity of that patent by the judicial doctrine of "licensee estoppel". The
rationale for this doctrine was that by taking a license, the licensee in
effect admitted the validity of the licensed patent. The courts felt that
it would be inequitable to allow the licensee to challenge the validity of
the licensed patent, while the licensee was immune from suit for patent
infringement by virtue of his license. In 1969, however, the U.S. Supreme
Court abrogated the doctrine of licensee estoppel in the case of Lear versus
Adkins, Inc [98]. Relying on the "important public interest in permitting
full and free competition in the use of ideas which are in reality a part of
the public domain", the Supreme Court held that a licensee cannot be estopped,
by agreement or otherwise, from contesting the validity of any patent for
which he has obtained a license.
The 'Lear' policy permitting licensees to challenge patent validity is not
without limits. In defining these limits in subsequent cases, courts have
disagreed upon specific practices that are permissible and those which violate
public policy. In the years since the Lear decision, courts have differed on
the rights of the parties with respect to termination of a license and payment
of royalties where the licensee challenges the validity of the licensed
patent.
While some of the confusion has been dissipated by decisions of the Court
of Appeals for the Federal Circuit, certain areas of disagreement remain to be
resolved. For example, a licensee who continues to use the licensed patent
while challenging its validity is shielded from a claim of patent infringement
only if the licensing agreement remains in force. When licensees stop making
royalty payments, or make royalty payments into escrow, some courts allow
patent owners to terminate the license agreement and sue for patent
infringement [99]. By continuing to pay royalties under the licensing
agreement, licensees are able to maintain their agreements in force while
challenging validity.
Confusion also exists as to whether a patent license agreement may provide
for termination of the agreement by the licensor if the licensee asserts the
invalidity of the licensed patent. Courts have been reluctant to enforce
license provisions permitting the patentee to cancel the license solely upon
the licensee's challenge of the validity of the licensed patent. Courts also
disagree on when a licensee can cancel a licensing agreement by asserting
invalidity of the licensed patent without being held in breach of the
agreement.
B. Summary of Public Comment
A number of parties responding to this issue stated that although
clarification of the doctrine is desirable, adequate legislation would be
difficult to draft, and there is not a sufficient demand for such legislation.
Other responses, however, indicated that legislation is necessary because it
represents the only means available to clarify the rights of both parties to
a patent license agreement. While the number of responses addressing this
issue was rather small, the comments were extremely well thought out and
stressed the need for some degree of reform.
Many helpful comments were offered as to the nature of the reform needed.
For example, several comments suggested that unless otherwise specified by
the license agreement, the licensee would be required to either expressly
terminate the license or continue to pay the full royalty rate until the
patent is found to be invalid. This was the most frequently cited suggestion
in the comments. Other comments suggested generally that provisions are needed
which would equalize the bargaining power of the parties to a patent license
agreement, and that there is a need to address the handling of settlements in
pending actions. Specific provisions were offered for legislative reform,
including provisions which would:
- enable both the licensor and the licensee to have the right to
cancel the license agreement, should the licensee challenge the
patent;
- allow statutory or treble damages for disadvantaged parties;
- preclude restrictions on the ability of a patent licensee to
challenge the validity of the licensed patent, so that agreements
to the contrary would be unenforceable;
- permit the licensor to require the licensee to continue to pay
royalty obligations until the right to terminate is exercised,
a final determination of validity is reached, or royalty payments
are paid into escrow during the patent challenge if the license
agreement gives the licensee the right to terminate the license;
- restrict the bases for challenging patents to those available
for challenging a contract provision (e.g., fraud);
- preclude the right of patentees to retain royalties collected
during the period of challenge of the patent license, in the
event that the patent is held invalid; and
- apply any provisions relating to licensee estoppel to assignors
where the assignor is also a licensee.
Of the comments addressing this issue, a majority indicated that basic
contract law, as interpreted and applied through the courts, should be the
primary framework through which patent license challenges should be addressed.
C. Recommendation and Discussion
Recommendation VIII-A
Enact legislation to improve the balance between the right of a
licensee to challenge the validity of a licensed patent, in
accordance with the holding in Lear v. Adkins, and the right of
the patent owner to enforce the licensed patent by:
(i) Permitting the parties to agree that either party may
terminate the agreement if the licensee has asserted
in a court action that the patent is invalid; and
(ii) Permitting the parties to agree that the licensee will be
required to continue performance in accordance with the
agreement until either the agreement is terminated or a
final determination has been made that the claims practiced
by the licensee are invalid.
The Commission recognizes, and endorses, the basic policy determination
that the right of a licensee to challenge the validity of the underlying
patent should outweigh contract provisions which act to preclude this right
under any circumstances. As reflected in the holding of the Supreme Court in
Lear v. Adkins, the "important public interest in permitting full and free
competition in the use of ideas which are in reality a part of the public
domain" outweighs the right of parties to freely contract license provisions
which preclude this right, per se. To effectuate this policy objective,
license provisions which prevent the licensee from challenging the validity
of a patent under any circumstances should continue to be viewed as
unenforceable contract provisions.
Although the policy of allowing licensees to challenge the validity of
a licensed patent is considered desirable, many believe that the effect of
post-Lear judicial interpretations unfairly shift the balance of rights in
favor of the patent licensee. The Commission believes that the freedom of
both the patent owner and the licensee to create enforceable contract
provisions through a patent license agreement should be preserved to the
extent that such rights do not conflict with the basic policy objectives
articulated in Lear v. Adkins. In particular, the Commission believes that
contract provisions which permit either the licensee or the patent owner to
terminate the license agreement upon challenge of the validity of the licensed
patent should be binding and enforceable. In addition, the Commission
considers the right of the patent owner to collect royalties under a license
agreement up until the point where the license is terminated or the patent
is finally adjudged to be invalid or unenforceable to be an important
corollary to the right of the licensee to challenge the validity of the
licensed patent.
The Commission believes that the patent owner, as well as a licensee,
should be able to reserve a right of termination of the license agreement
should the underlying patent be challenged through a court action by the
licensee. Such a right does not impede the ability of the licensee to
challenge the validity of the patent; instead, it places the patent owner on
equal footing with the patent licensee when a dispute related to the validity
of the licensed patent arises. Allowing the licensee to elect to terminate
the license counterbalances this right of the patent owner. Of course, if
the licensee does elect to terminate the license agreement, and the patent
validity challenge fails, the former licensee will be liable as an infringer.
Providing the termination right to the patentee will in certain instances
cause a patent licensee to forego a patent validity challenge. This, however,
is not viewed as an undue burden for the licensee. By providing the patent
owner with the ability to include an enforceable termination clause, the
prospective licensee will be required to carefully assess the validity of the
patent at the time the license is taken, as well as when subsequent factual
situations arise which cause the licensee to contemplate a formal challenge
to the validity of the patent. This in turn will lead to a strengthening of
the value of patent rights generally, and serve as a deterrent to frivolous
or questionable challenges by the licensee. Furthermore, providing this right
to the patent owner may lead a licensee to consider use of steps short of a
formal, judicial challenge to the patent validity to resolve a dispute related
to the license agreement or the validity of the licensed patent. For example,
a current or prospective licensee may elect to use a reexamination proceeding
to assist in evaluation of the validity of the licensed patent instead of
mounting a formal judicial challenge to the patent validity [100].
The Commission also believes that the licensee should remain liable
for stated royalty obligations of a license agreement until the license
agreement is either terminated or the underlying patent is held invalid or
unenforceable. Presently, a licensee contemplating a challenge to patent
validity faces essentially no risk. If the patent is upheld after the judicial
challenge, the liability to the patent owner will be limited to the license
agreement. If the patent is held invalid, the licensee has no liability. If
the licensee is an exclusive licensee, the patent owner will be deprived of
the sole source of revenue from the patent during the entire duration of the
judicial action, despite having the statutory presumption of validity of the
underlying patent [101]. Allowing a licensee to challenge a patent, divert
royalty payments into escrow, and then recoup those payments in the event
the patent is declared invalid thus has the potential to provide a licensee
with a tremendous, and unnecessary advantage over the patent owner.
Requiring the licensee to honor the license agreement obligation during
the challenge to validity will not place an unforeseen financial burden on
the licensee. Instead it will merely require the licensee to continue to
abide by the terms of the original license, to which it voluntarily agreed.
Such a requirement will also not present an undue deterrent to bringing an
action to invalidate the patent. If the basis for challenging the patent
is sound, the licensee should prevail in its action to invalidate the patent.
To adequately remedy the current imbalance, the Commission advocates
a limited legislative clarification of the rights of patent owners and
licensees. Such legislation should be drafted narrowly, so as to define
only the minimum set of rights necessary to correct the current imbalance.
The general right of the parties to freely negotiate binding license
provisions should not be impeded, provided such terms do not conflict with
the basic rights of each party as articulated above. Finally, prior
legislative efforts to clarify the rights of parties to a patent license
agreement should be studied, and if found to be consistent with the
Commission's recommendation, should be revived and pursued [102].
IX. REISSUE
A. Introduction and Overview
Late in its tenure, the Commission was requested by a member of the public
to consider reformation of certain aspects of reissue practice. The Commission
found the proposals offered sufficiently important to justify their
consideration.
Three issues were raised: first, whether the right to a reissue should
require an "error" as stated in the statute (this issue is significant in
view of the confusion surrounding the meaning and scope of the statutory
term); second, whether a patent owner should be deprived of valid claim
coverage given up during the original prosecution through the court-made
doctrine of recapture; and finally, whether there should be any limit on
the period during which the patent owner may apply for a broadening reissue.
While cognizant of dissenting views, the Commission considered the public
right to certainty at least as important as a patent owner's right to amend
a patent to obtain a valid broadening of claim coverage within the scope of
the originally filed disclosure. It is believed appropriate, therefore, to
place limits on the right to reissue. The "error" requirement, the recapture
doctrine, and the time limit on broadening reissues all serve to limit the
patent owner's scope of reissue. Each of these restrictions, however, does
not provide the same benefit to the public as compared to the loss suffered
by patent owners due to their continuance.
B. Summary of Public Comment
The Advisory Commission began consideration of this topic after the
conclusion of its invitation for written public comments. However, the
public was given an opportunity to comment at the fourth Commission meeting.
The only comment from the public addressed the issue of intervening rights
as it related to reissue practice.
C. Recommendations and Discussion
Recommendation IX-A
The concept of "error" as a required condition for reissue
should be eliminated.
The statutory requirement of an "error" unduly limits the basis for
reissue and generates a great deal of confusion and uncertainty. The courts
have been inconsistent in their interpretation of "error" as it appears in
35 U.S.C. 251 [103]. What mistakes constitute error for purposes of reissue
are also subject to differing opinions [104]. The public's need for certainty
is not helped by the uncertain limits on the right to a reissue. There is no
public policy reason for limiting reissue to "errors" except in the case of
deceptive intent. Absent the latter, and subject to time limits on broader
claims, a patentee should be entitled to obtain by reissue any valid claim
to which he or she would have been entitled during the original prosecution.
Recommendation IX-B
The prohibition in reissue practice against "recapturing" subject
matter surrendered during the original prosecution should be
eliminated.
The judicially created doctrine of recapture is designed to allow the
public to rely upon actions and representations made during prosecution of
a patent. But, if a patentee can obtain claims by reissue which were not
given up during prosecution, why should a patentee arbitrarily be denied the
right to obtain valid claims given up during prosecution of the original
patent? The principal policy reason for holding a patentee to the mistakes
he or she made, without deceptive intent, during the original prosecution
is certainty for the public after a patent issues. If the public is willing
to suffer the uncertainty of broadening reissues for a limited time, it should
be willing to permit recapture, during that same limited period of time, of
broader claims canceled during prosecution.
The "error" requirement and the recapture doctrine unduly limit a patent
owner's rights without commensurate benefits to the public. In both cases,
the principal risk to the public is use of reissue to obtain broader claims
than originally issued. If this right is limited in time so the public, after
a date certain, can be assured that the broadest scope of the claims is known,
any limited risks imposed on the public may be remedied by intervening
rights.
Recommendation IX-C
The right to seek by reissue claims broader than originally
issued should be limited to one year following grant of the
original patent.
As to the time for filing for broadened reissues, there was limited support
in the Commission both for permitting broadened reissues at any time and for
eliminating altogether the right to obtain broader claims through reissue. It
was felt that eliminating altogether the right to broadened reissues was too
harsh since there are legitimate circumstances when, in fairness, a patentee
should be entitled to pursue broader protection. On the other hand, public
uncertainty for the entire term of the patent was considered a sound basis for
rejecting expansion of the right to broadened reissues. Although proponents
of an expanded right asserted that the public's interest was protected by
intervening rights, the Commission believes that intervening rights were
too uncertain to justify this degree of an increased right to obtain
broadened claims through reissue.
To provide still greater certainty for the public as to the scope of the
patent grant, a majority of the Commission felt further narrowing of the right
to file for broadened reissues was appropriate. There appears to be no
meaningful reason for the two-year period provided in 35 U.S.C. 251 for
broadened reissues. That period was selected to correspond to the two-year
grace period for filing which was in effect at the time the reissue right
was so limited. Since the grace period is now one year, the Commission
believes that a one-year period for filing a broadened reissue is adequate
to protect the interests of patentees.
X. FEDERAL PROTECTION FOR TRADE SECRETS
A. Introduction and Overview
Industries throughout the United States rely extensively on manufacturing
and business know-how to stay competitive. In some instances, trade secret
protection is the only means available to U.S. industry for protecting this
know-how. Misappropriation of these trade secrets is harmful to U.S. industry
especially if the trade secrets are being transferred to foreign competitors.
The misappropriation of trade secrets is closely tied to state causes
of actions in tort or contract. Contract issues often arise since the
misappropriation is often done by those having a contractual relationship
with the owner of the trade secret, i.e., employer/employee relationships,
principal/agent relationships, licensor/licensee relationships. Because of
this close tie to state causes of action, trade secret protection currently
is provided under state law.
Thirty-four states have enacted the Uniform Trade Secrets Act, which was
drafted by the National Conference of Commissioners on Uniform State Laws in
1979, and approved by the American Bar Association in 1980. The Uniform Act
provides civil remedies for misappropriation of trade secrets in those states
which have enacted it. Even in these states that have enacted the Uniform
Trade Secrets Act, the treatment of trade secrets may still vary since many
of the states enacted various modifications to the Uniform Trade Secrets Act.
Several other states, e.g., Massachusetts and North Carolina, have trade
secret statutes based on the Restatement of Torts, 2d (1978), or on common
law principles providing civil remedies for misappropriation or theft of trade
secrets. Other states impose criminal penalties for theft of trade secrets,
provide protection through administrative schemes, or rely on common law
principles.
The protection available for trade secrets under these various state laws
differs from state to state. The differences may pertain to court procedures,
the definition of a trade secret, the kind of trade secret that may be
protected, the requirements for making a prima facie case, time limitation
statutes governing when suit must be brought, what relief may be obtained, and
the remedies available. Under state trade secret laws, there may also be
varying difficulties in establishing jurisdiction over foreign parties.
Taking into consideration the current protection of trade secrets under
state law, the Commission set out to determine whether there was a need for
Federal statutory protection for trade secrets. If a need was identified,
the Commission was to determine how a Federal statutory scheme should relate
to state statutes.
B. Summary of the Public Comment
The public response to this issue noted some problems were caused by a lack
of a Federal law, and mentioned specific areas where a Federal statutory law
would be helpful. In general, however, the responses indicated that there
was not a compelling need for Federal statutory protection for trade secrets.
Some of the responses mentioned that a lack of uniformity among the states
increases the costs and difficulties for a company doing business in more than
one state. In addition, having varying trade secret laws throughout the United
States makes it more difficult for foreign corporations to do business in the
United States.
Other responses mentioned a variety of specific areas where a Federal
statutory law would be beneficial. For example, it was mentioned that a
Federal statutory law would be helpful in protecting commercial activity in
outer space. Another response noted that Federal protection would improve
protection of trade secrets embedded in software, and thereby reduce software
piracy. Another noted that a Federal statutory law would assist in clarifying
the treatment of Government contractors and reports submitted to Federal
agencies. It was also noted that information which would otherwise be trade
secret is now labeled "Limited Rights Data" which has a meaning unknown to
many Government employees, and, consequently, it is treated differently and
in different ways than a trade secret otherwise would be treated.
Other responses noted that a Federal statutory law would be helpful in
cases involving the interstate transport of stolen trade secrets; the
importation and exportation of stolen trade secrets; the use of interstate
commerce to unlawfully obtain trade secrets; and trade secret litigation
involving the U.S. Government or foreign companies.
It was further noted that a Federal statutory law would be helpful in
imposing consistent criminal sanctions for theft of trade secrets.
Other responses expressed the viewpoint that a Federal statute on trade
secrets would have the benefit of trade secret cases being brought before the
Federal courts. The comments suggested that Federal courts are a better forum
for litigating cases involving complex technical facts (which are common in
trade secret litigation) than state courts. A counterpoint was made that such
a Federal law would cause further congestion of already burdened Federal
district court dockets.
Another reason given for enacting Federal statutory protection is to help
persuade foreign governments to have trade secret protection in their own
countries. It was noted that it is more difficult to encourage other countries
to adopt trade secret protection when there is not a Federal statutory scheme
for protection in the United States. For example, during the negotiations
pertaining to the North American Free Trade Agreement, the Mexican delegation
proposed that the United States enact a uniform Federal trade secrets law.
A uniform Federal law may provide U.S. negotiators with a more persuasive
basis for convincing other nations to provide trade secret protection.
It should be noted, however, that based upon the standards defined in the
"Dunkel" text of the General Agreement on Tariffs and Trade (GATT), there is
significant likelihood that the United States will be able to fulfill treaty
obligations calling for protection of trade secret rights [105]. The rights
available through state law provide an adequate minimum level of protection.
Although a major group of responses recognized that a uniform trade secret
law was deemed to be important, this same group of responses also stated that
this did not necessarily require the enactment of a Federal law. It was stated
that adoption by all states of the Uniform Trade Secrets Act can result in a
greater uniformity of trade secret protection, thereby achieving at least part
of the goals of Federal trade secret protection.
The position was taken that if there was a need for a Federal law, the
Federal law should be based upon tort but not on contract law. Federal trade
secret protection should preempt state protection of secret information, but
should not preempt state law causes of action based upon contract. Others
stated that a Federal law should only be enacted in specific areas of trade
secrets that are not adequately protected by state law, i.e., employee rights
matters should be left to state jurisdiction. It was stated that a bifurcated
or dual system of state and Federal laws concerning trade secrets for domestic
activities would need to be carefully drawn to avoid confusing and conflicting
overlap and forum shopping. Others favored a Federal law that would preempt
state law and were opposed to a bifurcated system of state and Federal laws
concerning trade secrets.
All of the public submissions addressing this issue were taken into
consideration in formulating the following recommendation.
C. Recommendation and Discussion
Recommendation X-A
Protection of trade secrets is adequate under state laws.
Although uniformity in trade secret law is important, this does not
necessarily require the enactment of a Federal law. Forty states have
already adopted some form of trade secret protection, with thirty-four of
those states having adopted the Uniform Trade Secrets Act. While some
differences do exist between these state laws, overall there is substantial
consistency. The adoption by all states of the Uniform Trade Secrets Act
can result in greater uniformity of trade secret protection.
The state laws as they presently exist provide adequate protection against
the theft of trade secrets. The problems that have been identified under
state law protection of trade secrets do not warrant promulgation of an
entirely new Federal law. Due to the varying legal theories which States
use to provide rights under trade secrets, it is recognized that there would
be numerous practical difficulties in reconciling a single Federal law to
define the nature of trade secret rights.
Thus, the Commission believes that there is no compelling need that would
require the enactment of Federal statutory protection at this time.
NOTES FOR PART TWO
1 For example, the President's Council on Competitiveness recently reported
that the United States spends an estimated $300 billion annually in
direct and indirect costs of the civil justice system. See President's
Council on Competitiveness, Agenda for Civil Justice Reform (1991).
2 Estimates on the average cost of resolution of a patent dispute vary
widely. One commentator has cited an average cost of $350,000, noting
a range between $100,000 and $1,000,000. See Vandenburg, 73 J. Patent
and Trademark Off. Society 301 (1991).
3 The most celebrated patent damages award came in 1990, when Polaroid was
awarded damages of nearly a billion dollars from Kodak. See Polaroid
Corp. v. Eastman Kodak Co., 789 F.2d 1556, 229 U.S.P.Q. 561 (Fed. Cir.),
cert. denied sub nom, 479 U.S. 850 (1986); later proceeding, Polaroid
Corp. v. Eastman Kodak Co., 867 F.2d 1415, 9 U.S.P.Q.2d 1877 (Fed. Cir.
1989), cert. denied sub nom, 490 U.S. 1047 (1991).
4 In re Nelson, 126 U.S.P.Q. 242, 251 (1960).
5 These include the Civil Justice Reform Act of 1990, 28 U.S.C. 471 to 482
(1990); the Agenda for Civil Justice Reform in America, supra ; and the
Access to Justice Act, S. 2180, H.R. 4155, 102nd Cong., 2d Sess.
6 Id.
7 See Agenda, supra note 1.
8 S. 2180; H.R. 4155, Access to Justice Act of 1992.
9 Exec. Order No. 12,778 (1990).
10 Invitation for Public Comment, 56 Fed. Reg. 22,702 (1991).
11 Federal Courts Improvement Act of 1982, Pub. L. No. 97-164 (1982).
12 See L.G. Kastriner, The Revival of Confidence in the Patent System,
73 J. Pat. & Trademark Off. Society 5 (1991)("The CAFC has not only
succeeded in bringing about uniformity and certainty in interpretation
of the patent laws -- the express purpose for which it was established
-- but has also significantly enhanced the economic power of patents".).
13 Schwarzer Memo on Implementation of the Civil Justice Reform Act, p. 16
(Jan. 16, 1991) [hereinafter Schwarzer Memorandum]. This perspective on
discovery problems arose through a 1989 report on civil litigation by a
Task Force of the Brookings Institute, which reported that discovery was
"the most important cause of high transaction costs or delays that
increase these costs". id.; Justice for All: Reducing Costs and Delay
in Civil Litigation, A Study of the Brookings Task Force on Civil
Justice Reform (1980).
14 Myrick, Overview of Considerations and Approaches to Delay Reduction
and Cost Control in Intellectual Property Litigation, presented to
the ABA/PTC Law Section Annual Spring Educational Program, "Patent,
Trademark, and Copyright Law: Litigation and Corporate Practice",
(1991) [hereinafter Myrick Study].
15 Forstner, A Corporate Viewpoint on Controlling Cost and Reducing Delay
in Intellectual Property Litigation, presented at a meeting of the
ABA/PTC Law Section May 4)5, 1991, Arlington, Virginia [hereinafter
Forstner Study].
16 See infra a summary of the public comments received in response to the
invitation for public comments of the Commission.
17 Kieve, Discovery Reform, A.B.A.J. 79)81 (1991).
18 Id. at 80.
19 The Brookings Institute Report, "Justice for All", significantly
influenced Congress during the development and enactment of the Civil
Justice Reform Act of 1990.
20 56 Fed. Reg. 22,702 (May 16, 1991).
21 The Act requires courts to consider "systematic, differential treatment
of civil cases that tailors the level of individualized and case
specific management to such criteria as case complexity, the amount of
time needed to prepare the case for trial, and the judicial and other
resources required and available for the preparation and disposition
of the case".
22 Because these procedures can be adopted voluntarily in each district
court, action can be taken to implement an appropriate case management
prior to the statutory deadline for action mandated by the Civil Justice
Reform Act.
23 Fed. R. Civ. P. 16.
24 Fed. R. Civ. P. 52.
25 See recommendation 7, Quayle Report. In exceptional cases, the date
for trial could be scheduled to occur beyond the 18th month, but such
a case would require a showing of exceptional circumstances.
26 See Myrick Study, supra note 14 (advocating an upper limit of 18
months from filing of the action). Several responses to the invitation
for public comments advocated a 12 month after filing standard for
the trial date. Id.
27 See infra Recommendation III-D and discussion.
28 See 28 U.S.C. 473.
29 See Schwarzer Memorandum, supra note 13, para. 4, pp. 15)16; Agenda,
supra note 1, p. 18, recommendation 5.
30 See Agenda, supra note 1, recommendations.
31 Several of the public comments, as well as the A.I.P.L.A. studies,
reported on the adverse effect of unusually long delays between filing
and disposition of motions by the court.
32 For example, the Advisory Groups for three district courts have released
cost and delay reduction plans which call for mandated disclosure of
information which "reasonably is likely to bear substantially on any of
the claims or defenses in the action". See, e.g. proposed Rule 2.02,
Expense and Delay Reduction Plan of the United States District Court
for the District of Massachusetts.
33 See Agenda, supra note 1, p. 7.
34 As contemplated, a judge experienced in mediation of patent-related
disputes may be employed provided he is not the judge, magistrate or
master affiliated with the present dispute.
35 See Field, Prospects for ADR in Patent Disputes: An Empirical Assessment
of Attorneys Attitudes, -- IDEA -- (1992).
36 See Report of the Brookings Task Force on Civil Justice Reform Justice
for All, supra note 19, p. 28 [hereinafter Brookings Report].
37 See Hands-On Docket Management, Agenda supra note 1, p. 20.
38 Speedy Trial Act of 1974, 18 USCS 3161 (1992) 88 Stat. 2076, Aug. 2,
1979, Pub. L. No. 96)43, 93 Stat. 327 (1979).
39 Extra costs stem from the necessary preparation, retention, and use of
attorneys, witnesses, and experts. When a trial date is postponed to a
later date, each side must repeat efforts to familiarize themselves with
the issues, and to prepare for trial.
40 A minority view of the Commission is that the court should take a more
active role in controlling the use of expert witnesses. One view stated
that the court should appoint experts directly, and should indicate the
extent of the testimony deemed necessary. Another view was that the
court should require the parties to present a single, agreed-to joint
statement as to the subject matter of expert testimony, thereby
diminishing the direct impact of one party's expert witness.
41 See, Prospects for ADR in Patent Disputes, supra.
42 The survey data can be used in conjunction with the public comment to
provide at least one perspective on the extent of the use of alternative
dispute resolution procedures for resolving patent-related disputes.
43 See Wegner, Comparative Patent Law, 343.10 (1991).
44 Such courts are termed the Landgericht.
45 In re Gay, 309 F.2d 769, 135 U.S.P.Q. 311 at 315 (C.C.P.A. 1962). See
also In re Nelson, 126 U.S.P.Q. at 253 ("There always exists, on the
part of some people, a selfish desire to obtain patent protection
without making a full disclosure, which the law, in the public interest,
must guard against. Hence section 112 calls for description in "full,
clear, concise, and exact terms" and the "best mode" requirement does
not permit an inventor to disclose only what he knows to be his
second-best embodiment, retaining the best for himself".).
46 See Chemcast Corp. v. Arco Indus. 913 F.2d 923, 16 U.S.P.Q.2d 1033
(Fed. Cir. 1990) (stressing that the best mode inquiry focuses on the
inventor's state of mind at the time he filed his patent application,
and is a subjective, factual question). The Federal Circuit set forth
a two-step test for assessing whether the best mode requirement was
satisfied in Chemcast. First, courts must ascertain whether the inventor
contemplated a best mode at the time the patent application was filed.
If no best mode was contemplated, the inquiry ends, and there is no
basis for challenging the patent due to a failure to satisfy the best
mode requirement. If the inventor conceived of a best mode of
practicing the invention, then the court must apply the second element
of the test by determining whether or not the best mode was adequately
disclosed in the patent. Most of the uncertainty in the area of best
mode jurisprudence involves this second element, as it raises the
question of how much information must be disclosed to satisfy the
best mode requirement. Id.
47 See, e.g., Bradley, The Best Mode Requirement of Section 112 -- A
Veritable Minefield, 3 J. of Proprietary Rts. 6 (Jan. 1992); Adamo,
What's Better, What's Best --the Best Mode Requirement in U.S. Patent
Practice, 73 J. Pat. & Trademark Off. Society 811 (1991). Both of
these articles illustrate best mode challenges are of a fairly recent
vintage and confusion currently plagues the application of the
requirement.
48 An informal survey of reported district court cases raising best mode
challenges revealed no instances of a U.S. patent based upon a
foreign-originated application being held invalid for failing to satisfy
the best mode requirement. Also note that discovery as to the intent
of foreign inventors prior to filing becomes nearly impossible through
restrictions on discovery outside the borders of the United States.
49 Because claims are construed in light of the specification, it is
unlikely that a patentee will seek to intentionally withhold material
information regarding known or planned commercial embodiments of the
claimed invention. Such a concealment may result in a questionable
expansion of patent rights, and may result in a finding of a limited
form of estoppel through the reverse doctrine of equivalents.
50 Two directly detrimental effects from these factors bear mention. First,
where advances in technology outpace the examination period for patent
applications, we find ourselves in the peculiar position of requiring
disclosure of techniques which, by the time the patent has been granted,
will be objectively inferior to those developed after the patent filing.
Yet, failure to disclose these objectively inferior techniques or
embodiments can be used to render the patent invalid. Second, our best
mode requirement has turned our patent system into one which is
peculiarly biased against U.S. inventors, who, under the first-to-invent
system, commonly file patent applications at a stage of development
later than their foreign competitors. This phenomenon leads to greater
opportunities for U.S. inventors to develop and then fail to incorporate
a description of their best mode into the patent application.
51 Support was expressed for a less drastic change. Rather than wholesale
elimination of the best mode requirement from 35 U.S.C. 112, some
advocate a change in the nature of conduct which would result in a
finding that the best mode requirement had not been met, namely,
restriction of the best mode requirement only to cases where there has
been an intentional withholding of the best mode. This would preclude
the invalidation of patents where omission of the best mode stemmed from
an accidental omission. In response to this point, the Commission
points out that the inequitable conduct doctrine serves this role of
punishing intentional withholding of essential information from the
Patent and Trademark Office during prosecution of a patent application.
52 35 U.S.C. @@ 102:
"A person shall be entitled to a patent unless --
(b) the invention was patented or described in a printed publication
in this or a foreign country or in public use or on sale in this
country, more than one year prior to the date of the application
for patent[.]"
53 Metallizing Engineering Co. v. Kenyon Bearing & Auto Parts Co., 153 F.2d
516, 68 U.S.P.Q. 54 (2d Cir.), cert. denied, 382 U.S. 840, reh'g denied,
382 U.S. 881 (1946) (Judge Learned Hand).
54 General Electric Co. v. United States, 211 U.S.P.Q. 867, 873 (Ct. Cl.
1981) (identifying the four policies underlying the "on sale" bar as:
1) the policy against the removal of inventions from the public which
the public justifiably believes are freely available as a consequence
of prolonged sales activity; 2) the policy favoring widespread and
prompt disclosure of new inventions to the public; 3) a policy
preventing the inventor from commercially exploiting the patent
monopoly beyond the 17-year period; and 4) the policy of giving
inventors a grace period so that they may determine whether a patent
is a worthwhile investment).
55 Amphenol Corp. v. General Tire Corp., 158 U.S.P.Q. 113, 114 (7th Cir.
1968).
56 Wende v. Horine, 225 F. 501 (7th Cir. 1915).
57 See, e.g., Fulfoam Corp. v. Kroehler Mfg. Corp., 138 U.S.P.Q. 641, 644
(W.D.N.C. 1963); Emerson v. National Cylinder Gas Co., 111 U.S.P.Q. 305,
310 (D. Mass. 1956); Chromalloy American Corp. v. Alloy Surfaces Co.,
173 U.S.P.Q. 295, 301-02 (D. Del. 1972).
58 Chromalloy American, 173 U.S.P.Q. at 301-02.
59 See Wende v. Horine, 225 Fed. 501 (7th Cir. 1915) (holding that a mere
offer to sell may bar patenting of an invention where the offer is never
received by or accepted by the prospective purchaser); Union Carbide v.
Filtrol, 170 U.S.P.Q. 482 (concluding that shipment of a product from
one division to another in the same corporation does not put the item
"on sale").
60 William C. Rooklidge, Application of the On-Sale Bar to Activities
Performed Before Reduction to Practice, 72 J. Pat. & Trademark Off.
Society 543, 544 (1990).
61 Robert E. Garrett, Comment: Reduction to Practice and the On Sale Bar,
69 J. Pat. & Trademark Off. Society 581, 582 (1987).
62 Timely Products Corp. v. Arron, 187 U.S.P.Q. 257 (2d Cir. 1975).
63 The three-part Timely Products inquiry is:
(1) The invention claimed must have been embodied in or obvious in
view of the thing offered for sale.
(2) The invention must have been tested sufficiently to verify that
it is operable and commercially marketable. This is simply another
way of expressing the principle that an invention cannot be offered
for sale until it is completed, which requires not merely its
conception but its reduction to practice; and
(3) Finally, the sale must be primarily for profit rather than for
experimental purposes.
64 See Garrett, supra note 61, at 584.
65 The court specified that "reduction to practice" standard was not
rejected "as an important analytical tool in an on sale analysis".
Instead, the court specified that on sale analysis does not necessarily
turn on whether the claim invention was reduced to practice. UMC
Electronics v. United States, 816 F.2d 647, 2 U.S.P.Q.2d 1465
(Fed. Cir. 1987).
66 Id.
67 The scope of discovery is further increased by the uncertainty of the
"substantial embodiment" standard. It is commonly understood that the
more nebulous the standard applied, the more expensive and extensive
the discovery.
68 General Electric, 211 U.S.P.Q. 867 at 873.
69 35 U.S.C. 102(b).
70 See Robert A. Choate, "On Sale" Review and Circumspection, 47 J. Pat. &
Trademark Off. Society 906, 907 (1965).
71 See Interim Report of the Committee on Civility of the Seventh Federal
Judicial Circuit (available from the Federal Judicial Center).
72 Much of the material for this section derives from comments of Chief
Judge Nies which have been the subject of numerous lectures and
discussions around the country. See for example, Helen Nies, Rambo
Lawyering: the Need for Civility in Civil Litigation, 32 IDEA 1 (1991).
73 Examples of undesirable behavior cited by Judge Nies include the refusal
of counsel to cooperate during discovery, such as in the scheduling of
depositions or the date and place of document exchanges. See Nies,
supra note 72, at 3.
74 For example, appeals may be taken based upon alleged attorney
misconduct, rather than the substantive issues in dispute.
75 See Ropski, Constitutional and Procedural Aspects of The Use of Juries
in Patent Litigation, 58 J. Pat. & Trademark Off. Society 609, 609-11
(1976) (stating that from 1819 until the present almost all patent cases
heard in the Federal district courts were bench trials). As recently as
the 1970's the percentage of patent jury trials ranged from 4.2% to 6.8%.
76 Robinson & Abel, Patent Jury Trials -- Avoiding the Mistakes of Your
Predecessors, 4 J.Proprietary Rts. 29 (Jan. 1992).
77 See In re Japanese Elec. Prods. Antitrust Litigation, 631 F.2d 1069
(3d Cir. 1980); Bernstein v. Universal Pictures, Inc., 79 F.R.D. 59
(S.D.N.Y. 1978); ILC Peripherals Leasing Corp. v. IBM Corp., 458 F.
Supp. 423 (N.D. Ca. 1978), aff'd on other grounds sub nom., Memorex
Corp. v. IBM Corp., 636 F.2d 1188 (9th Cir. 1980); In re Boise Cascade
Securities Litigation, 420 F. Supp. 99 (W.D. Wash. 1976); Davis-Watkins
Co. v. Service Merchandise Co., 500 F. Supp. 1244 (M.D. Tenn. 1980),
aff'd, 686 F.2d 1190 (6th Cir. 1982).
78 Oakes, The Right to Strike the Jury Trial Demand in Complex Litigation,
34 U. Miami L. Rev. 243, 289 (1980); Note, The Right To An Incompetent
Jury: Protracted Civil Litigation and the Seventh Amendment, 10 Conn.
L. Rev. 775 (1978).
79 See, e.g., Arnold, A Historical Inquiry Into The Right To Trial By Jury
in Complex Civil Litigation, 128 U. Pa. L. Rev. 829 (1980). But see
Campbell and Le Poidevin, Complex Cases and Jury Trials: A Reply to
Professor Arnold, 128 U. Pa. L. Rev. 965 (1980); see also ILC
Peripherals, 458 F. Supp. at 447; Devlin, Jury Trial of Complex
Cases: English Practice at the Time of the Seventh Amendment, 80 Colum.
L. Rev. 43 (1980); Note, Complex Civil Litigation and the Seventh
Amendment Right to a Jury Trial, 51 U. Chi. L. Rev. 581 (1984).
80 Patlex Corporation v. Mossinghoff, 758 F.2d 594, 225 U.S.P.Q. 243 (Fed.
Cir. 1985).
81 H.H. Bownes, Should Trial by Jury be Eliminated In Complex Cases?,
RISK - Issues in Health and Safety 75, (Winter, 1990).
82 SRI Int'l v. Matsushita Electric Corp., 775 F.2d 1107, 227 U.S.P.Q. 577
(Fed. Cir., 1985). See also, Senmed, Inc. v. Richard-Allan Medical,
Inc., 888 F.2d 815, 12 U.S.P.Q.2d 1508 (Fed. Cir. 1989); Newell Co. v.
Kenney Mfg. Co., 864 F.2d 757, 9 U.S.P.Q.2d 1417 (Fed. Cir. 1988).
83 The inequitable conduct doctrine can be used as a defense to a charge
of patent infringement. If proven by clear and convincing evidence,
a court may hold the patent unenforceable because of the patentee's
conduct. To show inequitable conduct, the party must establish that
the patentee withheld material information, or submitted false
information, with an intent to deceive. The party raising the defense
must establish both of these elements by clear and convincing evidence.
See Kingsdown Medical Consultants, Ltd v. Hollister, Inc., 863 F.2d.
867,872 (Fed. Cir., 1988).
84 For a comprehensive overview of the "but for" standard of materiality,
see Goldstein, The Proper Standard of Materiality in Determining Fraud
or Inequitable Conduct in the Patent and Trademark Office, a paper
presented to the Annual Meeting of the ABA/PTC, August 12, 1991. A
copy of this paper was provided to the Advisory Commission during its
invitation for public comment.
85 See, 56 Fed. Reg. 37,321 (August 6, 1991).
86 The "whole truth" defense was implemented in the 1790 Patent Act as a
means to ensure that the patentee did not mislead the public by failing
to disclose essential information regarding their inventions. It worked
a forfeiture of the patent right if the patentee was found to have not
disclosed the "whole truth" regarding the patent, either through an
intentional misstatement or a material omission. Patent Act of 1790,
6, 1 Stat. 109 (1790).
87 Courts have allowed a presumption of market power to be based upon the
mere possession of intellectual property rights. This presumption
originated in the Supreme Court Decision in United States v. Loew's,
Inc., 371 U.S. 38 (1962), and has been expanded through subsequent
holdings. See, e.g., Jefferson Parish Hosp. v. Hyde, 466 U.S. 2 (1984);
Digidyne Corp. v. Data General Corp., 734 F.2d 1336 (9th Cir. 1984),
cert denied, 473 U.S. 908 (1985).
88 For example, one commentator has stated:
"Many patents confer absolutely no market power to their owners, and
often patented products are not even marketable at their cost of
production ... The economic case for "presuming" sufficient market
power to coerce consumer acceptance of an unwanted tied product
simply because the tying product is patented [or] copyrighted ... is
very weak".
See, Hovencamp, Economics and Federal Antitrust Law, 8.3, p. 219 (1985).
89 For example, the Senate has passed on more than one occasion a bill
which would preclude courts from presuming (per se) market power from
the grant of a patent or the registration of a copyright. For example,
S. 270, and its companion bill H.R. 469, were introduced in the 101st
Congress, passed in the Senate, but were not enacted.
90 USPTO statistics regarding reexamination from inception through March
31, 1991, are included in this Report as Appendix C. Those statistics
show that 56.3% of all reexamination requests were by third parties.
91 While issues under 35 U.S.C. 112 may be addressed in the examination of
claims amended or added during reexamination, 37 C.F.R. 1.552(b), this
is an exception to the basic rule limiting the proceeding to documentary
prior art.
92 See In re Opprecht, 868 F.2d 1264, 1265 (Fed. Cir. 1989); Custom
Accessories, Inc. v. Jeffrey-Allan Ind., Inc., 807 F.2d 955, 961 (Fed.
Cir. 1986); Patlex Corp. v. Mossinghoff, 758 F.2d 594, 603 (Fed. Cir.
1985).
93 See Patlex Corp. v. Mossinghoff, 758 F.2d 594 (Fed. Cir. 1985).
94 The Commission is recommending that the "best mode" requirement of 35
U.S.C. 112 be eliminated as a requirement for U.S. patent applications.
The best mode issue is addressed in full with respect to Issue III,
Cost and Complexity of Patent Enforcement.
95 "[A] claim which is amended or a new claim which is presented containing
a limitation not found in the original patent claim should be considered
for compliance under 35 U.S.C. 112 only with respect to that limitation.
To go further would be inconsistent with the statute to the extent that
35 U.S.C. 112 issues would be raised as to matter in the original patent
claim". M.P.E.P. 2258, p. 2200-39 (July 1989).
96 Reexamination was conducted by the original examiner in 52.5% of those
cases in which reexamination certificates issued. In reexaminations by
original examiners all claims were confirmed in 24% of the cases, all
claims were canceled in 11% of the cases, and some claims were changed
in 65% of the cases. Of the 47.5% of reexaminations by different
examiners, the results were virtually the same, 24% - all claims
confirmed, 14% - all claims canceled, and 62% - some claims changed.
See Appendix C.
97 The average age of patents at the time of reexamination has been 5.2
years, the newest being reexamined one day after issuance and the
oldest 22.6 years after issuance.
98 Lear v. Adkins, 395 U.S. 653, 162 U.S.P.Q. 1 (1969).
99 See Cordis Corporation v. Medtronic, Inc., 780 F.2d 991, 228 U.S.P.Q.
189 (Fed. Cir. 1985).
100 The reexamination proceeding was unavailable at the time of the Lear v.
Adkins decision.
101 Several commentators have labeled as inequitable the situation where a
licensee may benefit from a license under a patent while concurrently
challenging the validity of the underlying patent. See, e.g., McCarthey,
Unmuzzling the Patent Licensee: Chaos in the Wake of Lear v. Adkins,
59 J.Pat. Off. Soc. 475 (1977); Rooklidge, Legislative Update: Lear v.
Adkins, 6 A.I.P.L.A. Selected Legal Papers 116 (1988); Dreyfuss,
Dethroning Lear: Licensee Estoppel and the Incentive to Innovate,
72 VA. L. REV. 677 (1986).
102 See, e.g., S. Rep 100-83, Process Patent Amendments Act of 1987
(S.1200), pp. 68-72.
103 Compare, e.g., In re Byers, 230 F.2d 451, 454 (C.C.P.A. 1956), with In
re Wesseler, 367 F.2d 838, 849 (C.C.P.A. 1966), and with In re
Wadlinger, 496 F.2d 1200, 1207 (C.C.P.A. 1974).
104 Compare In re Wilder, 736 F.2d 1516, 1519 (Fed. Cir. 1984), and In re
Richman, 424 F.2d 1388, 1391-92 (C.C.P.A. 1970), with Hewlett-Packard
Co. v. Bausch & Lomb, Inc., 882 F.2d 1556, 1564-66 (Fed. Cir. 1989),
and In re Weiler, 790 F.2d 1576, 1582-83 (Fed. Cir. 1986).
105 The Dunkel text is the current text of the GATT being negotiated. It
was released in December 1991, by the GATT, as document MTN.TNC/W/FA.
The Trade Related Aspects of Intellectual Property Rights appears as
Annex III of the Document.
--
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Greg Aharonian
Source Translation & Optimiztion
P.O. Box 404, Belmont, MA 02178
