In Chapter 3 of the book "Rembrandts in the Attic: Unlocking the Hidden Value of Patents," authors Kevin Rivette and David Kline referred to Xerox's "high profile campaign against infringers that has already seen the company initiate several patent infringement lawsuits against major competitors such as Hewlett-Packard." In March, 2000, Hewlett-Packard and Xerox resolved pending lawsuits against one another. In June, 2000, Xerox lost an infringement suit, on summary judgment, over handwriting recognition software used in devices such as the Palm hand-held computing devices. In Chapter 7 of the book, the authors criticized [patent] lawyers at Amazon.com: "One has to wonder what Amazon's lawyers were thinking when they recommended filing for these patents. What was the business purpose here? Amazon's commercial fortunes would have been far better served had it patented technologies truly strategic to its business, such as the one-click ordering system that the company pioneered and that is used widely by on-line retailers today. That was a real business choke point that Amazon could have controlled to no small advantage. But as it is, without that proprietary advantage and with its brand strength eroding, companies like Virgin Records and PetSmart are unafraid to compete directly against the giant on-line retailer. Don't be surprised if Amazon's stock market fortunes head south when investors realize this fact."
Of course, unknown to the authors, U.S. Patent No. 5,960,411 issued on September 28, 1999 to Amazon.com with claims pertaining to one-click purchasing. On October 21, 1999 Amazon.com sued its competitor Barnesandnoble.com and on December 1, 1999 Amazon.com obtained an injunction against Barnesandnoble.com, just in time for the holiday season.
Although the authors of "Rembrandts" didn't see the '411 coming, they were right about the consequences. Others, with the '411 in hand, saw certain doom for the internet patent in view of allegedly poor prior art searching done by Amazon and by the Patent Office. Yet, within the confines of a federal district court, in the face of a defendant with resources, the demise did not materialize. The judge described the testimony of a defense expert on one piece of prior art as "confusing" and further stated "the witness appeared not to understand how the system described would function." n2 As to an issue of obviousness, the same expert admitted it never occurred to him to modify his own program to enable single action ordering, digging a hole for the defense to establish the element of motivation. It is true that odd things can happen in court. However, for a case for the defense that some analogized to hanging a curveball to Mark McGwire, the outcome of this initial phase was surprising.
But what's a CEO or senior manager to do? Vigorously enforcing issued patents isn't such a good idea if your competitors easily evade your patents to win summary judgments of noninfringement, or, worse, invalidate your patents. Chuckling over your competitor's failure to obtain a key patent isn't so enjoyable when you find out that he actually has one, by virtue of reading about his lawsuit against you in a press release on the internet.
Having a vigorous strategy for intellectual property is certainly in keeping with the times. Both offense (as to where your business is going) and defense (as to where your competitors are going) are needed. However, solid tactics are needed also. On offense, the claims have to be drafted to cover real commercially worthwhile items, with levels of claiming to cover uncertainty in direction. There's too much tendency to skimp on prosecution efforts. The first question is inevitably "how much will it cost?" rather than "how much can I cover?" Poor claiming can be detected to the disadvantage of the patentee. n3 Prior art has to be realistically searched if you expect to enforce the patent; if you don't do it on the front end, your competitor will do it on the back end. One species disclosed in the Proceedings of the Argentinian Dental Society can invalidate a genus in the U.S. patent. If litigation comes, take a hard look at those claims, not only from your perspective but also from the defendant's perspective. The "ships passing in the night" approach is hazardous. Sometimes there is little tendency to optimize litigation costs. n4 Middle managers may have a career stake in a desired outcome that is not truly aligned with the corporation's interests. The formula of Learned Hand teaches that the optimum amount to spend should involve the potential gain (loss) weighted by the probability of the outcome, but the consequences of failure may be higher for the manager than for the company, with a commensurate misallocation of resources.
Even with care, trash and treasure can be hard to distinguish. For example, a big stakes case n5, Union Oil v. Atlantic Richfield, 54 USPQ2d 1227 (CAFC 2000), concerning a patent which would cover gasoline used in California, turned on an issue of written description requirement. The dissent in the case, aligned with the defendants, saw the patent as separately disclosing elements A, B, and C in the specification, but never teaching A + B + C as a combination as was claimed. Succinctly put, the dissent said: "No matter how an invention is claimed, it must be described in the specification. The claimed compositions were not so described. . . These are general descriptions of how to make fuel compositions, not descriptions of the claimed compositions. They may also constitute descriptions of processes for obtaining various characteristics of fuel compositions, but it is specific compositions that are claimed here, not processes. . . . There surely is a description of most of the particular claim limitations of the various claims, but that is not the same as a description of a specific composition described by a particular selection of those characteristics." A different aspect of the written description requirement was at issue in the "David and Goliath" case of Martin Reiffen v. Microsoft, wherein a summary judgment action adverse to Reiffen was reversed by the CAFC. n6
IN PASSING
Relevant to past comments on the story of soot which underlies the Shelby amendment to FOIA, the U.S. Supreme Court is reviewing the decision of the Court of Appeals for the DC Circuit in Browner v. ATA pertaining to the nondelegation doctrine, which decision found that the EPA had interpreted the Clean Air Act too loosely. Cost/benefit issues are briefed. One wonders if the doctrine might ever be applied to the PTO in such a way?
One speculates how the following remarks from a law review article n8 on Hopwood v. Texas might play out in a patent context: "Frye's 'general acceptance' standard would deem the Daubert testimony inadmissible because only a minority of scientists held this view. . . Consequently, one could argue that the Frye rule functioned to preserve the scientific status quo, or that the Daubert standard is less restrictive than the Frye standard as to the admissibility of novel evidence. This argument is persuasive insofar as scientists engaged in peer review, the gatekeepers to admissibility under the Frye standard would tend less often to accept as 'good science' innovative, minority viewpoints than would the judges who are the final arbiters of admissibility under Daubert. The reality that judges are lay persons in terms of scientific knowledge probably predisposes them to acceptance of novel scientific results." The last nominally sounds good for patent applicants. n9 However, in terms of evidentiary issues, the story of DNA profiling, one of the last arenas of pre-Daubert debate on Frye in federal courts, is quite to the contrary. DNA profiling was first tested in court in 1988, and was pretty much accepted in courts by 1993, a remarkably quick time to overturn the status quo. Most scientists in the pertinent field didn't take a strong stand, with the proponents and the critics both arguably minorities sitting at opposite poles between a largely indifferent majority. Although not without difficulty, the peer review process allowed both sides to speak. The critic minority, as embodied by Dr. Richard Lewontin, used Frye not to defeat DNA profiling, but to refine its use, and, in the end, the public obtained a test which is accepted as commonplace.
ENDNOTES
n2 Amazon.com Inc. v. BarnesandNoble.com Inc., 53 LSPQ2d 1115, 1120 (WD Wash 1999).
n3 In Exxon Research & Engineering v. U.S., 54 USPQ2d 1519 (Ct. Cl. 2000), the court found, among other things, that the word "fluidization" had been defined inconsistently within one claim.
n4 Some people may use the costs themselves as a weapon to inflict a pyrrhic victory.
n5 Unocal's victory could be worth hundreds of millions of dollars. (Gary Gentile, AP, 5/22/00). A Supreme Court appeal may be filed. The royalty is 5.75 cents per gallon. (Reuters, 5/25/00). Lee Raymond of Exxon said the patent could cause supplies to tighten and gas prices to rise. (David Koenig, AP, 5/31/00).
n6 Fed. Cir. 98-1502 (June 5, 2000); similar to the Amazon case, this might be viewed as another (supposed) hanging curve that, so far, hasn't been bit.
n8 Tomiko Brown-Nagin, 16 Law & Iueq. 359 (1998). The article, in part, concerns the validity and reliability of the LSAT. While at the University of Chicago, I wrote an article for the Phoenix noting that the correlation of LSAT scores with first year grades for a recent class showed an R2 of only 0.4, hardly a correlation at all. I further commented on the problematic nature of force-fitting a Caussian grade distribution on a population of students whose skills distribution was non-Caussian.
n9 See Lawrence M. Sung, 48 Am. U.L. Rev. 1233 (Aug. 1999) which purportedly "addresses the difficulty at times in finding justice in the patent law decisions of the Federal Circuit in the face of apparent misapplications, or seemingly intentional ignorance, of otherwise accepted scientific or engineering principles."
ENDNOTES
7. For background: William J. Madia, A Call for More Science in EPA Regulations, 282 Science 45 (Oct. 2, 1998) (expressing the concern over the perceived lack of credible scientific basis for environmental regulations). Separately, recall the refusal to turn over data which was the motivating factor for the Shelby amendment and issues with the identity of sool (L. B. Ebert, IPT, pp. 44-45, Feb. 2000; IPT, pp. 24-26, March 2000). Separately, see Cass R. Sunstein, 98 Mich. Law Rev. 303 (1999) and 103 Harv. Law Rev. 405 (1989).