IP Law Bulletin

In BMC Resources, Inc. v. Paymentech, L.P., 498 F.3d 1373, 1378-79 (Fed. Cir. 2007), the Federal Circuit held that direct infringement of a method claim requires a single party to perform every step of the claimed method. Where the actions of multiple parties combine to perform the steps of a claim, finding direct infringement can be more difficult. Specifically, as clarified by the court in BMC Resources, direct infringement exists in such cases only if one party exercised “control or direction” over the entire process such that every step is attributable to the controlling party.¹  Notably, the BMC Resources court acknowledged that this is an imperfect standard, as parties can conceivably enter into arms-length agreements, in which no direction or control exists, to avoid infringement. As explained below, steps can be taken at the claim drafting stage to help avoid this undesirable possibility.

In BMC Resources, the plaintiff BMC alleged that the defendant Paymentech infringed two of its patents directed to methods for processing debit transactions. BMC conceded that Paymentech did not by itself perform each and every step of the claimed method, but argued that they should nonetheless be liable for infringement since they had allegedly combined with other parties to do so. The court found for Paymentech, affirming the district court’s grant of summary judgment of non-infringement. The court explained that, even if Paymentech did combine with various financial institutions and debit networks to perform the claimed method, they had not exercised “control or direction” over these third parties and thus could not be held liable for direct infringement.

In the BMC Resources opinion, Judge Rader pointed out the fatal flaw in the claims-in-suit – they were drafted to effectively require at least four different entities to carry out the claimed method. For example, one claim recited in part:

A method of paying bills…the method comprising the steps of:

…

[prompting a caller for various information]

…

accessing a remote payment network associated with the entered payment number, the accessed remote payment network determining, during the session, whether sufficient available credit or funds exist in an account associated with the entered payment number to complete the payment transaction,

and upon a determination that sufficient available credit or funds exist in the associated account, charging the entered payment amount against the account associated with the entered payment number…²  

While not apparent from the claim’s plain language, infringement of this claim effectively requires action by as many as four autonomous parties. This is because of the way debit transactions are processed in the real-world. For example, the claimed steps of determining whether sufficient funds exist and charging an account would generally require both a debit network and an underlying card-issuing financial institution.  Neither of these entities would typically perform the various prompting steps recited in the claim, and thus, practically speaking, a payee’s agent is also required. Finally, depending on how the claim is construed, a caller may also be needed. Thus, the claimed method would almost never be performed in the real world without action by four parties: (1) a caller, (2) a payee’s agent (i.e., the party that does the prompting), (3) a remote payment network (i.e., the debit network that checks for sufficient funds and initiates an account charge), and (4) a financial institution (i.e., the bank that informs the debit network whether sufficient funds exist and settles the charge). It is highly unlikely that all four of these parties would ever be under common direction or control such that a single entity could be held liable for infringing the claim.

As Judge Rader suggests, had the claim instead been drafted to focus on a single entity, infringement by a single party would be more easily captured. For example, instead of reciting “the accessed remote payment network determining,” the applicant in BMC Resources could have drafted the claim to recite steps such as “sending account information to a remote network” and “receiving a response from a remote network indicating sufficiency of funds.” Such a claim would presumably have been infringed by the defendant and thus have been significantly more valuable to BMC.

A similar claim drafting miscue was highlighted in Muniauction, Inc. v. Thomson Corp., 532 F.3d 1318 (Fed. Cir. 2008). There, the patentee Muniauction, Inc. sued the defendant Thomson Corporation for infringement of its patent directed to methods for conducting bond auctions over the internet. Just like in BMC Resources, the plaintiff in Muniauction conceded that the defendant did not, by itself, perform each of the method steps.  Reinforcing its BMC Resources holding, the Federal Circuit reversed the lower court’s finding of infringement and instead held that the defendant lacked the requisite exercise of direction or control over the third parties with whom it combined to perform each step of the claim. In other words, while Thomson performed most of the “auction” steps recited in the claim, it did not infringe because the recited “inputting” steps were performed by individual bidders over whom Thomson had no control.

Like in BMC Resources, the patentee in Muniauction had drafted claims that would require at least two parties to infringe in most instances. For example, one claim-in-suit³ recited “inputting data associated with at least one bid” (a step typically performed by a bidder sitting at their computer) and various other steps such as computing an interest cost value, submitting the bid over an electronic network, and displaying the bid on an issuer’s computer (all steps typically performed by an online auction system). Muniauction may have prevailed had they simply drafted the claim with only the online auction system’s perspective in mind, i.e., by reciting receiving bid data instead of inputting bid data.

To summarize, for the claims at issue in both BMC Resources and Muniauction, it would be extremely rare for any one entity to perform the entire claim. Accordingly, the claims in those cases are effectively only enforceable in the limited situation where multiple parties acting under common direction or control combine to perform the claim. Unfortunately for the patentees, any such parties could simply enter into arms-length agreements to avoid infringement liability. Had BMC and Muniauction drafted their claims to focus on a single entity, this undesirable result could likely have been avoided. 

 ¹ BMC Resources, 498 F.3d at 1380-81; see also Muniauction, 532 F.3d at 1329.
 ² Claim 7 of U.S. Patent No. 5,870,456, combined here with the independent claim from which it depends and truncated for clarity.  (Emphasis added).
 ³ Claim 1 of U.S. Patent No. 6,161,099.

This advisory was prepared by Nutter's Intellectual Property practice. For more information, please contact your Nutter attorney at 617-439-2000.

Imagine a patent office reform that improves the quality of the examination process and shortens an application’s pendency period. The current reform efforts in the United States Patent and Trademark Office (USPTO) promises just that. On October 19, 2009, USPTO Director David Kappos announced an overhaul of the USPTO’s examiner performance metric system. The new count system gives examiners more time overall, including more time for initial examination and examiner-initiated interviews, while reducing the credits for requests for continued examinations (RCEs). In the long run, the new count system is intended to incentivize examiners to provide applicants with “compact prosecution" of their applications. For the near-term, however, applicants and their attorneys may need to be vigilant in monitoring the examination of their post-RCE applications.

Under the previous count system, examiners received one count for a first action (either initial or after RCE), and one count for a “disposal” either through allowance, abandonment, or appeal. An RCE also counted as a disposal and started a new round of examination. Each round of examination from first action to disposal received two counts total. Under time pressure to reach disposal, the system provided some incentive for the examiner to force a new round of examination after issuing a final Office action. This also led to aggressive restriction requirements that forced the applicant to divide a single application into multiple applications knowing that the resulting divisional applications would most likely be examined by the same examiner.

The new count system awards more counts for first round first office actions (1.25 count) than later round first office actions (1 count after first RCE and 0.75 thereafter). Along with more incentive to front-load examination, the examiners are granted more examination time for each round and additional “non-examining” time for examiner-initiated interviews. Previously, examiners only received additional time for applicant-initiated interviews.

The new system also treats RCEs as any other continuation or divisional application, by placing RCEs on the examiner’s Special New docket. Effectively, examiners are no longer required to take action on an RCE within 2 months. Examiners will now be required to work on the oldest new application every four weeks, or only one case each month from their Special New docket. For current applications in post-RCE examination, this could translate into significant delays. Over time, although additional time and incentives for “compact prosecution” should reduce the number of RCEs, it is apparent that the new system may require the applicant and their attorney to more aggressively pursue an earlier allowance.

This advisory was prepared by Nutter's Intellectual Property practice. For more information, please contact your Nutter attorney at 617-439-2000.

The European Patent Convention (“EPC 2000”) came into effect on December 13, 2007 and represents the most significant change in European patent law since the European Patent Convention was first introduced in 1977. Recently, significant changes were made to the fee structure within EPC 2000. These changes apply to applications filed after April 1, 2009 and International Applications (PCT) which enter the European regional phase after that date.  Applicants and practitioners should be aware of some of the important changes when considering their European filing strategy. A brief review of the changes to the fee structure is outlined below.

Excess Pages Fees

The excess pages fee is now due upon filing or upon entry into the European regional phase, instead of being payable as part of the grant fee. The new excess pages fee is €12 for each page of the specification (description, claims, abstract, and drawings) over 35 pages. For international applications, page count takes into account any changes made before European regional entry, but not any made subsequently.  

Excess Claims Fees

A new higher excess claims fee of €500 for each claim over 50 is now due. The previous fee of €200 for the 16th through 50th claim is still applicable.  

Designation Fees

Designation fees are payable when examination is requested, 6 months after publication of the European search report, or upon entry into the European regional phase. Previously, applicants paid a designation fee for each contracting state up to a maximum of seven, after which all states could be designated at no additional cost. For applications filed on or after April 1, 2009, a single designation fee of €500 is payable regardless of the number of contracting states.  

Renewal Fees

Renewal fees are now only payable up to 3 months before the due date. This means that it is no longer possible to pay the first renewal fee for an International application on entry to the European regional phase along with the other fees due at that time.  

This advisory was prepared by Nutter's Intellectual Property practice. For more information, please contact your Nutter attorney at 617-439-2000.

The U.S. Supreme Court has yet to issue any intellectual property (“IP”) related opinions since Justice Sotomayor joined the Court, but she will undoubtedly participate in a number of IP cases in the future. One case almost certainly familiar to patent practitioners, In re Bilski 545 F.3d 943 (Fed. Cir. 2008), was recently heard by the Court and will be decided later this Supreme Court term.

Justice Sotomayor has gathered experience in intellectual property issues throughout much of her legal career. After five years as an assistant district attorney in the New York County District Attorney’s Office, Justice Sotomayor joined Pavia & Harcourt in Manhattan. While there in private practice from 1984-1992, she handled a variety of cases in a variety of fields, including international law. Her focus, however, was on IP litigation, primarily related to trademarks and copyrights.

After her tenure in private practice, Justice Sotomayor served as a judge in the U.S. District Court for the Southern District of New York from 1992-1998. As is typical for a judge at the Federal District Court level, Justice Sotomayor heard a wide variety of cases, including a full range of IP issues involving patents, trademarks, and copyrights. She was involved as a District Court Judge with two patent cases that were heard on appeal by the U.S. Court of Appeals for the Federal Circuit. The Federal Circuit affirmed her decision in REFAC Intern., Ltd. v. Lotus Dev. Corp., 887 F.Supp. 539 (S.D.N.Y. 1995), aff’d, 81 F.3d 1576 (Fed. Cir. 1996) holding a patent unenforcable due to inequitable conduct related to affadavits submitted during prosecution to address 35 U.S.C. § 112 issues. Inequitable conduct in patent prosecution has become more of a hot button topic in the legislature and the judiciary in recent years, so it would not be unreasonable to suspect that Justice Sotomayor may revisit the issue as a judge on the nation’s highest court.

In another case at the District Court, Justice Sotomayor made a Markman claim construction ruling that was overturned by the Federal Circuit in Intellectual Property Dev., Inc. v. UA-Columbia Cablevision of Westchester, Inc., 336 F.3d 1308, 1317 (Fed. Cir. 2003) (initial claim construction ruling by J. Sotomayor, 1998 WL 142346 (S.D.N.Y. 1998), subsequent rulings after J. Sotomayor’s departure from the court, 2002 WL 10479 (S.D.N.Y. 2002)).

One of Justice Sotomayor’s most well known cases at the District Court involved a copyright issue. In Tasini v. New York Times Co., 981 F. Supp 841 (S.D.N.Y. 1997), the District Court ruled that the New York Times was permitted to include material in a LexisNexis database that was published by the newspaper but written by freelance journalists. This decision was reversed, however, by the Second Circuit in Tasini v. New York Times Co., Inc., 206 F.3d 161 (2000). The U.S. Supreme Court upheld the Second Circuit’s ruling in New York Times Co., Inc. v. Tasini, 121 S.Ct. 2381 (2001), deciding that the New York Times could not license the work of freelance journalists without the journalists receiving compensation. This case is the only District Court case of Justice Sotomayor’s that was ultimately heard by the U.S. Supreme Court. Copyright cases are not frequently heard at the U.S. Supreme Court, but should one arise during Justice Sotomayor’s tenure on the Court, this case could likely be revisited even if not directly on point with a case’s particular copyright issue.

In another copyright case decided by Justice Sotomayor as a District Court judge, she ruled and the Second Circuit affirmed that a trivia book regarding the television show Seinfeld was protectable expression under the Copyright Act. Castle Rock Entm’t Inc. v. Carol Publ’g Co., 955 F. Supp. 260 (S.D.N.Y. 1997); 150 F.3d 132 (2nd Cir. 1998). A nation rejoices, yada, yada, yada.

Justice Sotomayor also heard IP cases while seated at the Second Circuit from 1998 to immediately before her Supreme Court appointment. With patent cases typically being appealed to the Federal Circuit rather than one of the other appellate courts, Justice Sotomayor heard relatively few patent cases. Of note she was involved with Innomed Labs, LLC v. Alza Corp., 368 F.3d 148 (2nd Cir.2004) and In re Visa Check/MasterMoney Antitrust Litigation, 280 F.3d 124 (2nd Cir. 2001), both concerning patent issues in an antitrust context.

While it is uncertain how many IP-related cases Justice Sotomayor will hear while seated on the Supreme Court and how she will decide such cases, it should be beneficial to the IP community to have a Justice versed in IP cases as a lower court judge and, unique to the Court, as a practitioner.

This advisory was prepared by Nutter's Intellectual Property practice. For more information, please contact your Nutter attorney at 617-439-2000.

The United States Patent and Trademark Office recently announced that it is expanding the First Action Interview Pilot Program to additional art units. It will also be modifying the procedures under the program in an attempt to enhance efficiency and offer more options to participants. Under the program, participants receive a Pre-Interview Communication containing the results of a prior art search performed by the examiner. In response to this communication, applicants can conduct an interview with the examiner to discuss the results of the search and its impact on the claims. One important change in the so-called “enhanced” program will allow participants to waive the interview after receipt of the prior art search and receive a first Office action as under normal prosecution. In the original program, participants who failed to respond to the Pre-Interview Communication or failed to conduct the interview in a timely manner would risk abandonment of the application. Eligibility requirements for the enhanced and original programs are set forth below.

New utility nonprovisional applications that fall within one of the following groups may be eligible for the Enhanced First Action Interview Pilot Program:

1. Applications filed on or before November 1, 2006, and assigned to workgroup 1610 (art units 161X).
2. Applications filed on or before October 1, 2006, and assigned to art unit 1795.
3. Applications filed on or before February 1, 2008, and assigned to workgroups 2150 and 2160 (art units 215X and 216X).
4. Applications filed on or before July 1, 2008, and assigned to workgroups 2440 and 2450 (art units 244X and 245X).
5. Applications filed on or before June 1, 2007, and assigned to art unit 2617.
6. Applications filed on or before May 1, 2008, and assigned to art units 2811-2815, 2818, 2822-23, 2826, 2891-2895.
7. Applications filed on or before December 1, 2007, and assigned to art unit 3671.
8. Applications filed on or before January 1, 2008, and assigned to art unit 3672.
9. Applications filed on or before November 1, 2007, and assigned to art unit 3673.
10. Applications filed on or before February 1, 2008, and assigned to art unit 3676.
11. Applications filed on or before July 1, 2007, and assigned to art units 3677.
12. Applications filed on or before November 1, 2007, and assigned to art units 3679.
13. Applications filed on or before May 1, 2006, and assigned to art unit 3735.
14. Applications filed on or before April 1, 2007, and assigned to art unit 3736.
15. Applications filed on or before December 1, 2006, and assigned to art units 3737.
16. Applications filed on or before August 1, 2006, and assigned to art units 3768.
17. Applications filed on or before December 1, 2006, and assigned to art unit 3739.
18. Applications filed on or before September 1, 2007, and assigned to art units 3762 and 3766.
19. Applications filed on or before September 1, 2006, and assigned to art unit 3769.

Eligibility Requirements for Original First-Action Interview Pilot Program

Previously, new utility applications that fell within either Group I or Group II as outlined below were eligible for the original First Action Interview Pilot Program:

 Group I:

(1) Filed on or before September 1, 2005, and prior to a first action on the merits;
 
(2) Classified in Class 709 (Electrical Computers and Digital Processing Systems: Multi-Computer Data Transferring); and
(3) Assigned to an art unit in either working group 2140 (group art unit 214x) or 2150 (group art unit 215x).

 Group II:

(1) Filed on or before November 1, 2006, and prior to a first action on the merits;
 
(2) Classified in Class 707 (Data Processing:  Database and File Management or Data Structures); and
(3) Assigned to an art unit in working group 2160 (group art unit 216x).

This advisory was prepared by Nutter's Intellectual Property practice. For more information, please contact your Nutter attorney at 617-439-2000.

On August 19, 2009, the U.S. Court of Appeals for the Federal Circuit held in Cardiac Pacemakers Inc. v. St. Jude Medical Inc. (Nos. 07-1296 and 07-1347) that 35 U.S.C. §271(f), which concerns enforcement of patent rights against components originating in the U.S. and combined into the potentially infringing product outside the U.S., does not apply to method claims. Thus, U.S. patent applicants should carefully consider claim drafting strategies for method-base inventions to most effectively encompass infringing activity that may not occur entirely within the U.S. Businesses should also be cognizant of current and future business activities that may fall under §271(f) but may nevertheless be non-directly infringing of competitors’ method patent claims.

The U.S. Court of Appeals for the Federal Circuit held en banc on May 18, 2009 in Abbott Laboratories v. Sandoz, Inc., 566 F.3d 1282, that infringement of a product-by-process claim requires showing that an equivalent process was used in making the alleged infringer’s product. Accordingly, the Court rectified a 17 year conflict between its decisions in Atlantic Thermoplastics Co. (970 F.2d 834 (Fed. Cir. 1992) and Scripps Clinic & Research Foundation (927 F.2d 1565 (Fed. Cir. 1991). Writing for the majority, Judge Rader stated that process terms in product-by-process claims serve as limitations in determining infringement, expressly overruling Scripps. With respect to situations where a product whose structure is not fully known or too complex to analyze, the decision explained that “the inventor is absolutely free to use process steps to define this product . . . [and] will not be denied protection. Because the inventor chose to claim the product in terms of the process, however, that definition also governs enforcement of the bounds of the patent right. This court cannot simply ignore as verbiage the only definition supplied by the inventor.” Judge Newman’s dissent noted that “[f]or the first time, claims are construed differently for validity and for infringement,” i.e., product-by-process claims are product claims for validity interpretations but process claims for infringement interpretations.

In the recent case of Ropes & Gray v. Jalbert, No. SJC-10333 (July 28, 2009), the Supreme Judicial Court of Massachusetts held that attorneys’ liens for services rendered but not paid for in connection with the prosecution of patent applications can attach to the applications, letters patent issuing thereon, and their proceeds. This is not to say that patent applicants or patentees must pay their lawyers, but it is to point out that failure to do so can complicate their patent lives.

On August 24, 2009 the USPTO issued interim instructions to examiners for handling 35 U.S.C. §101 rejections. These instructions provide guidance to examiners while awaiting the U.S. Supreme Court’s 2009 / 2010 decision in In re Bilski, which, as patent practitioners are surely aware, concerns patentable subject matter under §101. In the meantime, these instructions can also provide practical guidance to applicants and patentees in claim drafting, amendments to and arguments regarding pending claims, and evaluation of issued patent claims. A copy of the interim guidelines can be found here at the USPTO’s website.

Some of our readers will remember the “Nigeria oil scam.”  An email came supposedly from a junior clerk in the Nigerian oil ministry who needed help in wiring $25 million in oil revenues out of the country to a U.S. bank. The email recipient would get 10 percent if he or she set up a joint bank account in the U.S. to receive the funds, but first the clerk needed $25,000 on her end in Lagos to set up her transferor account, pay fees, etc. The recipient would be asked to oblige with a $25,000 wire transfer to a specific individual in her country.

A similar scheme is now being attempted in the domain-name business in Shanghai, China.

It works this way:  the fraudster in China sees that someone owns a trademark registration (in China or elsewhere) and emails the owner that someone else is trying to register corresponding domain names or buy corresponding keywords in China. The unsolicited correspondent asks whether the owner of the overarching trademark wants to jump in ahead of the mysterious applicant and use his services. The trademark owner panics, and engages the correspondent to make pre-emptive purchases of . . . nothing. Victims of this scam send money and get domain name registrations they don’t need, or pay registration fees to someone who is not a registrar.

A better idea, if you get one of these emails from China, is to ignore it and not reply.

This advisory was prepared by Nutter's Intellectual Property practice. For more information, please contact your Nutter attorney at 617-439-2000.