Ariad v. Lilly Comes Down (On Us) – Judge Lourie Rules!

Posted on March 23, 2010 by Warren Woessner

In a majority opinion authored by Judge Lourie for the Federal Circuit sitting en banc (Appeal No. 2008-1248 (Fed. Cir. March 22, 2010)) (a PDF of which is attached to the end of this post), the court held that there is indeed a written description requirement (WDR) in section 112 that is separate from the enablement requirement and that the claims-in-suit in U.S. Pat. No. 6,410,516, broadly directed to reducing NF-kB activity in cells, are invalid for failure to meet the written description requirement. This decision, though lengthy, amounted to an affirmance of the earlier panel’s decision and, of course, of the “possession” test first articulated (by Judge Lourie) in UC v. Lilly in 1996. Judge Lourie spends about 20 pages writing and re-writing his opinion in UC v. Lilly (which he essentially concedes would be decided differently today). The problem the majority feels they are addressing has not, however, changed in the almost 20 years since UC v. Lilly was decided. It is to reign in overly-broad claims based on discoveries that are not fully realized:

 “The problem is especially acute with genus claims that use functional language to define the boundaries of a claimed genus. In such a case, the functional claim may simply claim a desired result, and may do so without describing species that achieve that result. But the specification must demonstrate that the applicant has made a generic invention that achieves the claimed result and do so by showing that the applicant has invented species sufficient to support a claim to the functionally defined genus”

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Happy Belated Birthday to Patents4Life! We are One.

Posted on March 21, 2010 by Warren Woessner

Last Wednesday, Patents4Life forgot to celebrate its first anniversary. I have done a lot of writing, and recruiting of some writers (particular thanks to Paul Cole of Lucas & Co., UK, and Ronald J. Schutz of Robins Kaplan in Minneapolis for their posts on European law and practice and US litigation, respectively). I would also like to thank Mary Hirsch, the Marketing Director at SLW, for managing this site and getting it half-way organized. Of course I have a few thoughts, and will try to keep them short of a law review article.

Clearly, this is not the type of blog or tweeting thing whereby I share random thoughts on the state of IP today, in 165 characters or less. But neither is it exhaustive reporting and/or analysis of each and every decision, proposed rule, and bill relating to patent law and policy. (Even more clearly, I nearly flunked statistics in college, so no graphs for you!)

Patents4Life most closely resembles the now-defunct print newsletter, Patent Strategy and Management. The idea was to deliver short, timely, un-footnoted articles of interest to a wide range of technology acquisition and management professionals. It was a worthy concept, and I wrote for PSM for a number of years. But a good concept can be a bad idea, and print simply is not as timely as almost real-time reporters like PatentlyO, “Hal’s list”, Patent Baristas and now, Patents4Life.

I know sometimes “I do go on” (as my Alabama aunt might say) but I have been following some of these topics for years, e.g., ever since Chakrabarty was decided, Bayh-Dole was enacted and people started to try to patent the products of “genetic engineering” (not a term much in use today!). Yes, I can go on – and I hope to keep doing it for some years to come.

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Electronics vs. Biotech – Two Perspectives on “Patent Reform”

Posted on March 19, 2010 by Warren Woessner

The most interesting session I attended today at the AUTM Annual Meeting was one on patent reform. What was most interesting was not a recap of the aspects of S.515, which is the most up-to-date reform bill pending, but the summaries of the considerable differences between what the IT Industry and the biotech/pharma industry (and most universities) would like to see or not see in a final bill (if there ever is one).

David E Huizenga of Arnall Gordon Gregory LLP noted that all of the Supreme Court’s IP decisions over the last three years have weakened patents. The “biotech model” is roughly one product=one drug=one patent. Most pharmaceuticals are protected by a relatively small number of patents, and those patents are protecting the big returns needed to support development, often of a single compound, over several years. Therefore, certainty becomes important, and this leads to opposition to post-grant attacks on patents, or at least a desire to have a high evidentiary threshold for their initiation. At least the most recent versions of the Senate and House bills have relatively short time periods after issuance within which such “oppositions” can be initiated.

It is relatively easy for pharma to show big damages in terms of lost profits, so a move toward reasonable royalties as a preferred remedy is a no-go. On the other hand, biotech/pharma want a repeal of the inequitable conduct defense, which can gut a small patent portfolio on subjective evidence and would also support proceedings in the PTO designed to permit submitting art to moot a later charge of inequitable conduct. Biotech supports the repeal of the best mode defense. No surprise there.

Charley F. Brown of Ballard Spar presented the IT industry perspective and it couldn’t have been more different. The IT industry is focused on the threat of litigation by NPEs or “trolls.” He hastened to add that universities are not trolls since they contribute much more to society than bothersome patents. One electronic product may be covered by more than 1000 patents, giving NPEs lots of targets. Because the industry is standardized, there are also lots of defendants and they can be sued anywhere they have sales (like in the E.D. Tex.). The NPE can argue for a “reasonable royalty” on the entire device. This has led to at least five verdicts of over $500M each in the last seven years.

So the IT industry supports vigorous post-grant opposition proceedings and wants to be able to present evidence of public use and sale of the product in question. IT would support limits on forum-shopping and preliminary injunctions. Damages reform is also a big plus for any reform bill.

So this is a real yin/yang situation. University advocates like COGR generally support the current Senate bill, but I wonder if they are giving in too easily on first-to-file. Remember, the EP does not have ss.102(e)/103 “prior art” rejections. More on that later.

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Speed Licensing Lessons From “Shark Tank”

Posted on March 15, 2010 by Warren Woessner

This ABC semi-reality show broadcast its season closer a few weeks ago, but a recent note in the AARP magazine on one of the “Sharks,” Barbara Corcoran, a real estate mogul from NYC, got me thinking about the show again.  In the course of an hour, five Sharks, successful middle-aged entrepreneurs from businesses identified as software, TV infomercials, clothing, and the like, briefly interviewed a series of hopeful inventors and start-up founders (the “presenters”).  The presenters do a quick dog-and-pony show, often with props and the Sharks individually, and sometimes in groups of 1-3, decide if they will invest (“their own money,” we are told), and at what level.  Some of the newbie presenters go unfunded, but about half get counteroffers that they must accept or reject on the spot.  Counteroffers by the presenters are usually ignored.  Once in a while, two or more Sharks will get into a bidding war, but usually a presenter is lucky to get one counteroffer.  It dawned on me that this is “speed licensing,” the business equivalent of “speed dating.”  Without the restriction of having to actually arrive at a signed license with all of its definitions, schedules and qualifications, patterns started to emerge.  A university trying to license nascent technology has all of the SWOT issues that the individual presenters face, so after watching several episodes, here are some “lessons” that stood out:

1.         Look like you can run a business, or at least be an effective spokesperson.

The Sharks uniformly were impressed by upbeat, enthusiastic, articulate presenters.  Half the war is won by showing up well-dressed, sober, and on time.  This got the creators of a plus-size fashion line funded.  However, if the nascent business was overly personality driven, e.g., in-home designer, shoe parties, or modern ice-cream trucks, the Sharks wouldn’t bite.

2.         Sales, not commitment, are an indicator of potential.

The first question that the Sharks asked presenters 9/10 times was “What are your sales?” or “What was your net profit after costs?” or “How many orders do you have?” Often, the answer was unexpectedly (to me) small or nonexistent compared to the cleverness of the product and/or the size of the market (or the potential market).  Of course we have all heard a pitchman tell us how well we would do if he got only 5% of the huge and growing market for his/her product.  I was surprised that the Sharks put little value on how much the presenter, or his/her relatives, had put into the business.  Unless the Sharks felt that the idea had breakthrough potential, their interest faded.  An idea for a mail-order ink cartridge refill/resupply business was revealed to be just that – an idea.  Ding!  Even people with an established outlet were not funded to expand or sell franchises.  That’s what banks are for.

3.         Patents matter.

The Sharks were uniformly impressed when a presenter said he/she had filed for patent protection, or “had a patent,” even a provisional application.  I wonder how much “due diligence,” the Sharks got to see ahead of time.  If the presenter had IP, the Sharks would often try to buy the patents as part of any deal.  Even fairly edgy inventions – like putting bas-relief faces on motorcycle helmets – drew interest when the biker-entrepreneur said he had a patent.

4.         Minimize Up-Front Risk.

While a presenter would often open with something like, “I am asking $75,000 for a 25% stake in my business,” they often got a counteroffer involving a substantial investment that was, however, contingent on the Shark being able to license the patents to a major player.  One presenter had invented and prototyped a sort of Lego® that could build circular or spherical structures.  He got an offer contingent on the Sharks ability to get Hasbro or Mattel “interested.”  The Sharks were not interested in presenters who dreamed of owning assembly lines and warehouses.

5.         Identify the Competitive Space.

Cute bears, a gift shop for children, an entertainment center for children, and gift items with inspirational messages didn’t get funded.  These were considered crowded areas and/or with no barriers to competitors.  Maybe the Sharks don’t like kids.  I was surprised at how often specialty food items were funded, but they often had sales, and the Sharks may have had acquisitions in mind.

6.         Get Control.

If the Sharks made a counteroffer, it was almost always for 51% of the presenter’s business.  If the Sharks decided that the presenter was important to the business, e.g., to be a charismatic marketer, the Sharks would occasionally settle for 50%.

So it took me much longer to write this note than it did for one entrepreneur to get a $1M offer for his safety belt – car starter interlink (no belt on, car won’t start).  He turned it down, and is apparently having some success marketing his device as an after-market option to dealers one at a time.  The guy with the portable golf ball cleaner wasn’t so lucky.  I thought it was clever but, hey, it wasn’t my money he was after.

 AUTM National Meeting 2010

I will be part of a panel entitled “You Can’t Patent That!  Can You?” at the AUTM National Meeting in New Orleans on March 19, 2010.  The panelists will discuss developments in patentable subject matter, including new uses for old compounds, “business methods,” research tools, and mechanism claims.  My colleague, Monique Perdok, will speak on trademark basics on another panel.

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