The Prior Art

Congress to fix problem with patent judge appointments

The sky is officially not falling. The administrative law judges who decide patent appeals got a lot of attention in May, a few weeks after an Oregon chipmaker, Translogic Technology, had challenged the constitutionality of their appointments.

Translogic wants to rescue its $86 million patent infringement verdict, which was overturned when a patent appeals board found its patent invalid for obviousness. The company petitioned the Supreme Court, waving a paper by noted patent scholar John Duffy that raised the constitutional question.

But the folks I talked to about the issue didn't seem to think it was potentially "cataclysmic," as the New York Times reported in May; I wrote a story saying as much in our last issue, quoting a couple of patent litigators who said that Duffy's discovery, while a real problem, was a technicality that should be easily fixed.

Sure enough, a legislative fix is now on the way, in the form of H.R. 6362, sponsored by the chairman of the House IP committee, Howard Berman, D-CA. The bill will require the Secretary of Commerce to make these appointments in the future, together with the Director of the USPTO. It also creates a retroactive defense to any challenges of the 40-odd judges who were appointed "illegally," IPO Daily News reported on Friday.

Looks like this one can be filed under "no big deal."

 

Monday Morning Trademark Notes

Playing catch-up a bit after spending Thursday & Friday at the Federal Circuit Bench & Bar. 

It's been a tough month for shoes:

• Collective Brands, the company that owns PayLess ShoeSource and Stride-Rite, has settled a trademark infringement case brought by K-Swiss by paying $30 million; that comes on the heels of its massive loss last month.

People are talking trademarks-in-cyberspace after the ICANN decision in Paris. Internet regulators at ICANN vowed to free up more virtual real estate, and are immediately hacked by Turks, who announce "Everybody Knows Wrong." (isn't that always how these things go?)

Reaction to ICANN decision:

• CNET worries about "domain chaos."
• Trademark lawyers will stay busy, but dot-com owners "have nothing to worry about," writes Domain Name Wire.
• The LA Times quotes one consultant saying that ICANN has been "hijacked" by the "domainers" who buy & sell web real estate.
• LAT also has my vote for cleverest headline: ".sky is the .limit." Much better than the newspapers that disappointed with headlines like "dot-personaltouch."
• IP Watch has some on-the-ground reportage from Paris.

 

Patently Fictional

The patent world's blogger-in-chief Dennis Crouch has the happiest post of the month: his wife just gave birth to a baby boy. In the meantime, guests are filling in; first up is SMU Law Professor Shubha Ghosh, who has reviewed a new book in a little-known genre: patent fiction!

Yes, it does exist. And "A Patent Lie," by Stanford Law Professor Paul Goldstein, is pretty darn good, Ghosh says: "A real treat for those who like intellectual property (despite the anti-patent message of the book)," and would be interesting even for a generalist reader who just likes legal thrillers.

Goldstein's book was also reviewed recently in The Recorder (free registration required), along with a lot more new legal fiction and non-fiction.

Google and the patent pile-on of 2007

The official count of patent lawsuits barely ticked upwards in 2007; but interviews I've done recently make it clear that the number of defendants has jumped significantly as plaintiffs rushed to beat patent reform, many by filing suit in East Texas late last year. (More on that when our patent litigation survey is published next week in IPLB's July issue.) Not long before it went down, the now-defunct Troll Tracker blog counted up numbers from the biggest districts to estimate a big increase in patent defendants.

Today at the FCBA Bench & Bar Conference, Michelle Lee, patent chief at Google Inc., threw out some numbers that make the trend clear. When she started at Google four years ago, the company was contending with just one patent lawsuit, she said.

Since then: 

Year two—two patent lawsuits.
Year three—two (additional) patent lawsuits.
Year four—last year—17 new patent lawsuits.

Twelve of the 17 suits were filed in the Eastern District of Texas.

“What we’re facing is an increasing number of patent lawsuits brought by entities with no other business other than monetization of patent assets,” said Lee, adding that those patents are often “of dubious quality.”

“There’s a huge cost to us in defending these cases. The discovery burdens are disproportionately on the defendant.” Defendant companies tend to want to compromise, especially companies that don’t have Google-like resources, she said.

“These patent asserters are often very sophisticated," Lee continued. "They know exactly how much it costs you to defend this litigation… for a modest case, it’s $4-5 million. So they come in with a settlement offer at five, or maybe even four."

With Lee on the panel were Celera founder Michael Hunkapiller, Segway inventor Dean Kamen, and Katharine Ku, Stanford University's director of licensing.

That's all from Monterey.

Notes from the Federal Circuit Bench & Bar

Ed Reines was out on the hotel deck looking like a proud father Friday afternoon as the guests mingled at the first-ever Federal Circuit Bar Association Bench & Bar Conference focused on Silicon Valley. We're in Monterey, about an hour away from the valley, and close enough to the fires in Big Sur that a faint smell of smoke hangs in the air.

On the star-heavy guest list were several district judges who handle lots of patent cases, chief patent lawyers from valley heavyweights like Apple, Google, and Cisco, and several Federal Circuit judges, including Chief Judge Paul Michel.

"A lot of conferences are pulp, but we strive to make this a conference for the sophisticated,” said Reines, a Weil, Gotshal patent litigator and current FCBA president. The conference represented a “coming of age of the IP bar nationally."

The Federal Circuit and the Patent Bar

Maybe lawyers were intimidated by the presence of so many judges, but the Thursday morning panels struck me as a bit quiescent, though there was a brief back-and-forth about software patents that I noted to my colleague at The Recorder.

But today, three Federal Circuit judges—Chief Judge Paul Michel, Judge Randall Rader and Judge Richard Linn—were provocative, engaging and at times funny as they spoke to an audience of more than 100 patent lawyers.

Sitting on the nation’s top patent court sounds a bit like reading a series of never-ending homework assignments that are… well, let’s say not always that fun. But in some ways, we learned, it’s a life of excess. Here are a few notes on what the appellate judges had to say that practitioners should find interesting.

Too Many Words

“We have so much to read,” said Chief Judge Paul Michel. Not that he’s complaining; every day at the Federal Circuit is “fun, interesting and worthwhile.” But oh, those appeal briefs… often, they’re “full of obscure, super-complicated arguments that aren’t necessary… I’m aghast at how totally unreadable 80 percent of it is. If you gave it to a high school English teacher they would just mark it up with a red pen.”

Judge Richard Linn agreed; the briefs are long. “Time and time again we get to the end of briefs and we see the word count and it’s 13,964.” (Briefs at the Federal Circuit have a limit of 14,000 words, so that old college trick of changing your spacing doesn't work.)

Too Many Arguments

“To win you only have to find one reversible error,” pointed out Judge Randall Rader. “If you have 10 reversible errors [in your brief], maybe you’re not that confident in one. You’re betraying some lack of confidence… you have to think of how your own actions betray the weakness of your positions.”

Too Much Claim Construction

Judges who resist construing massive numbers of claims should be reassured that the Federal Circuit seemed ready to support them if they impose limitations. (Northern California has new patent rules that urge the parties to agree on the 10 most important claims at issue in a case.)

"The idea that plain and simple English words routinely need restatement in [claim] construction” isn't accurate, said Chief Judge Michel. Often the claims construed don’t end up being that important in deciding the case. ("not case dispositive," as the lawyers say.)

Too Much Spin

“Overstatement and spin in my book are not the hallmark of good advocacy,” said Chief Judge Michel. When he reads a brief, he sometimes wonders, “Is this really what the expert witness said, or is this a spin version of what the expert witness said?”

He continued: “It’s the plague of our circumstance that most briefs are not really trustworthy. And they could be and they should be. I can't emphasize enough the importance of candor. We have to be fair and you have to be accurate... Fear is what’s poisoning the well. Fear that if I’m not super-aggressive, the client will go to a firm that is super-aggressive… But fear is something we all have to live with.”

He concluded that the patent bar should “resist the fear factor, and express yourself with complete candor and accuracy.”

Too Much... Wikipedia?

There was some discussion about the use of outside technical experts, sometimes used by trial courts in patent cases. Both Chief Judge Michel and Judge Linn said they don’t rely on such experts when deciding cases.

“In terms of going beyond the record, I just don’t do it,” said Chief Judge Michel. “I just don’t depend on anything beyond what lawyers say and what trial court has to say… I don’t go on the Internet to learn about the technology. I just read the briefs.”

“That’s reassuring,” said moderator Joseph Re, a partner at Knobbe Martens in Orange County. “When I was a law clerk there were no computers. It made it a lot easier to not go on the Internet.” [crowd laughs]

“Did you have hair then?” joked Judge Rader.

“This is what patent law does!” said Re, stroking his head.

“Well, I’m an English major,” said Judge Rader, running his hand through his own (movie-star-quality) hair.

“If you’re an English major,  don’t you get tempted by Wikipedia?” asked Re.

“Yes, I do,” said Judge Rader with a smile. 

Next up: Google patent counsel Michelle Lee on last year's explosion in litigation.

Lessig and Obama

Last week, Barack Obama did a take-back on his pledge to accept public financing. That will have a big effect on the presidential campaign, of course, but Lawrence Lessig points out that it also will have an effect on the Congressional level, where politicians can't raise scads of small-donor Internet money, as Obama has been able to do on an unprecedented level. "I am worried about a decision that makes public funding for them less likely," he writes. "I wish he had decided differently."

Obama's announcement isn't good news for the new group Lessig is involved in, Change Congress, which wants to diminish the influence of money in politics; one of its central goals is to push politicians to support public financing. (The group works with both political parties.)

Getting pols to take that pledge will surely get tougher, for the time being, but Lessig urges supporters to take a longer view: "This is a hugely complex chess game."

Lessig is a professor at Stanford Law School who has moved his focus away from copyright issues to focus on Change Congress and political reform. But his new book, "Remix," is all about copyright law and culture. It's slated to be published in October but the AP v. blogosphere scandal inspired me to jump the gun by quoting Lessig on the importance of quotations. Quote-on-quote action, we call that.

Monday Patent Notes: "Patent Elves," Naked Cowboys, and a big Microsoft verdict

• Did you know patent litigation actually increases competition? (Also, night is day, black is white, and 2+2=5, all to be addressed in future posts.) Who thinks more lawsuits are good for the economy? File that under "not surprising": Two consultants from litigation-support company LECG, joined by a partner from Howrey LLP. (Wait, isn't that the "no trolls" law firm? Hmm...) Read their new paper, which seems to suggest that so-called "patent trolls" should be renamed "patent elves." Reported Friday by IPlaw360 (subscribers only). 


• File this under "even less surprising." Not reported by IPlaw360 is the company that paid for the discovery of this new math: Qualcomm, a big-time patent licensor. (The authors did the right thing by disclosing this fact in a front-page footnote.)

• Today, an April jury verdict for Alcatel-Lucent and against Microsoft was upped from $358 million to $512 million, the AP reports. That makes this the biggest patent award of 2008 so far, even bigger than both massive verdicts against Boston Scientific. Microsoft will appeal.

• The Naked Cowboy, a New Yorker who claims M&M/Mars stole his outfit idea for an advertisement, still has hope, reports the WSJ law blog. A judge threw out his privacy claim but his trademark infringement claim lives on...

 

Relentless

You can't keep Erich Spangenberg down. Setbacks are just opportunities to think of new company names, and if that doesn't work, heck, just use an old one. Just a month after the Wisconsin jury held him liable for breach of contract, Orion IP took on an alt-neu moniker, naming itself Clear With Computers, LLC on April 18, according to Texas corporate documents. 

Clear With Computers, Inc. was the Minnesota-based company founded by Jerome D. Johnson, who started filing patents in the early 1990s that are now alleged to cover selling stuff on the Internet. Johnson's patents were later bought by Spangenberg, who has licensed over 100 companies and had made, as of last October, at least $72 million.

Last month, the new and improved Clear With Computers filed suit in E.D. Texas against 47 more defendants. Lots of big retailers; partial list at right does not include Palm, Canon, Sprint, Uniden, or Motorola. All guilty of doing business over the Internet without paying the new economy's self-appointed tax collector, former Jones Day attorney Erich Spangenberg, who still wields U.S. Patents 5,615,342 and 5,367,627. 

Two days ago, Apple and Hewlett-Packard were sued on the same patents. Also, Spangenberg's lawyers have filed motions for a new trial and JMOL in the aftermath of the Wisconsin smackdown. One of their arguments is that when Spangenberg took $2.3 million from Chrysler to not be sued again, that agreement didn't include U.S. Patent No. 6,141,658, which had been "sold" to Caelum IP. "You see Your Honor, during the settlement negotiations they shook my right hand, but I had long ago moved this particular patent to my left hand..."

So Orion IP sold to Caelum IP, which became Constellation IP, which sold to Taurus IP, which filed suit against DaimlerChrysler et al., which my father bought for two zuzim...

ClearChannel will pay out $90 million in E.D. Tex patent loss

In April, ClearChannel lost $66 million when an E.D. Texas jury found it guilty of infringing a patent held by holding company Grantley Patent Holdings. Now, the judge in the case has tacked on $16.5 million and interest payments, for a total of almost $90 million.

There have been five big plaintiffs' victories in East Texas already this year; the smallest one was $21 million. My colleague Nate Raymond at The American Lawyer has a good roundup of those decisions here.

The trial was with Judge Clark in the Lufkin division. Grantley Patent Holdings was represented by Minneapolis-based Robins, Kaplan, Miller & Ciresi LLP, led by partner Ron Schutz (pictured). ClearChannel was represented by Andrews Kurth. Notably, ClearChannel doesn't appear to have hired any Eastern District counsel. (Grantley had help from Beaumont-based Germer Getz.) This appears to be the only patent case Grantley has filed, so far.

Via Patently-O.

Schutz tells me that the inventors are the plaintiffs in interest; Billy Shane Fox and a business partner own Grantley Patent Holdings, and they control the company that supports their MaxaGrid product. The company is in decline now with two employees, but once had a contract with Clear Channel, which used many of its products for scheduling radio advertisements.

During closing arguments, Clear Channel's counsel, had the hometown advantage, noting that he was born & raised in nearby Marshall, according to Schutz; but that didn't overcome Schutz, who had his own story to tell about being born on a farm in Minnesota and how he was the first person in his family to get a college degree.

On the way out, "A guy comes up to me and says, well, Mr. Schutz, I think you out humbled them," says the lawyer. Schutz is featured in this week's National Law Journal "Winning" supplement: Mom's Advice Wins.

Grantley Patent Holding Ltd. v. Clear Channel Communications, Inc. 06-cv-00259-RC, E.D. Texas.

Well, you can always get work in patent litigation...

Giant multi-defendant patent lawsuits, especially ones where plaintiffs claim to have patent rights over an industry standard, can really be a lawyer-full-employment act. There are limits to how much defendants can cooperate, especially when they're tough competitors outside the courtroom.

DataTreasury's patent war against the banking industry is already keeping dozens of lawyers busy, not to mention many lobbyists and politicians. Now the case has brought on board a prominent, but formerly unemployable, attorney—Alberto Gonzales. Story on Bloomberg via TPM.

 

Spangenberg must pay $3.8 million in legal fees

Earlier this month I wrote about how Erich Spangenberg could be on the hook for $4 million in attorneys' fees to car companies that he repeatedly sued for patent infringement. He will indeed have to pay. There's a story on Law.com today.

We learn that Orion IP—perhaps the most active of Spangenberg's many patent-holding companies—has raked in $72.3 million over a few years, forcing about 100 companies into settlements by claiming various aspects of their websites infringe the handful of software patents he bought.

Judge Barbara Crabb's order will surely put a chill on patent-holders who thought that the Western District of Wisconsin might become the new E.D. Texas. The lawyers that took down Spangenberg's empire are from Kilpatrick Stockton; this is a huge victory for them.

I have more to add on this case, which reveals some of the inner workings of this mysterious business.

But first, and I'm speaking solely on my own behalf here, it's incredibly dismaying that Judge Crabb has allowed nearly every document filed in the case since trial to be filed under seal. This lawsuit is, in one sense, about online shopping technology. That affects everyone in this country. For three months now Crabb has operated a secret, closed court; I've read through hundreds of patent dockets and I've never seen anything like it. This should stop. I don't know if it's legal, but I know it ain't right.

 

Blood in the water: Acacia sues Boston Scientific and Medtronic

Boston Scientific has taken two big hits already this year, both in E.D. Texas; most recently, a jury ordered it to pay $250 million to its rival Medtronic, the third largest patent verdict this year, according to Bloomberg News. In February, it was ordered to pay an eye-popping $500 million to an inventor. (That would be #1.)

Those giant payouts for medical-device lawsuits have left blood in the water. Just two weeks after the $250 million verdict, patent-holding company Acacia Research has launched a lawsuit against Boston Scientific,  Medtronic, and Johnson & Johnson, accusing the three companies of infringing patent no. 5,254,097, related to catheters. Acacia set up a Texas-based company, Cardio Access, LLC to pursue this lawsuit, filed two weeks ago. Cardio Access LLC v. Boston Scientific Corporation et al, 08-cv-231, E.D. Texas.

Boston Scientific, Medtronic, and Johnson & Johnson have been waging patent litigation battles around the country over various patents on stent and catheter technology. (So you can file this one under "living by the sword.")

This patent was originally held by a smaller medical company, New Jersey-based Datascope Corp., and was sold to Acacia in January, according to PTO records. Acacia typically uses a model of splitting licensing revenue with inventors, so Datascope likely has some skin in this game. (But to be clear, I don't know that.)

Datascope lost a patent infringement lawsuit brought by Johns Hopkins University and Arrow International, Inc. in June, which resulted in a injunction against a product it sells; then was hit with another suit in December, according to SEC records. So perhaps they'd like to be on the other end of one of these high-value suits. Two days after the Cardio Access lawsuit was filed, the company announced it's acquiring an Italian stent business that includes a patent portfolio.

UPDATE: In the original post I did not mention that Johnson & Johnson was also named as a defendant, along with its subsidiary Cordis. Post updated on 6/30.

Johnson & Johnson v. American Red Cross: it's over.

Last month, a federal judge killed off most of Johnson & Johnson's trademark infringement claims against the American Red Cross. This morning, the New York Times reports the case has settled. Terms are confidential but both companies can continue to use the cross symbol.

Bloggers mock AP's "Quotation Licenses"

Cory Doctorow at BoingBoing has led an chorus of blogs in denouncing the AP's content licensing scheme, run by a company called iCopyright, which asks for payment for text snippets as short as five words, includes toughly worded copyright warnings, and has Terms of Use that seem to ban any criticism.

"Welcome to a world in which you won’t be able to effectively criticize the press, because you’ll be required to pay to quote as few as five words from what they publish," writes Doctorow.

I sympathize with these critics. Such restrictions, if enforced, would be intolerable. 

The price structure and terms of use was chosen by AP, while the "Honor Copyright" page (source of image at right) was authored by iCopyright, a copyright licensing company. It's not unusual for media companies to outsource the reprint side of their business; they're just not equipped to deal with it.

The AP's problem is that sometimes the headline is the whole story; the AP pays a lot of money to have a network of reporters so that someone is there when the bombs go off. It's looking for ways to get paid for that network in a declining market.

Sending takedown notices to bloggers who post 50-word quotes is not the right way to do that; the right to quote is a fundamental freedom, as I quoted Lawrence Lessig saying yesterday. But I can relate to the ambivalence of NYT Bits blogger Saul Hansell on this issue; like him, I'm both a reporter and a blogger. Like him, I'm concerned about the level of vitriol in the blogosphere about this issue, and I hope cooler heads prevail and seek a negotiated solution.

UPDATED: Post was updated to reflect some clarifications brought by an iCopyright employee (comment below). I speculated that iCopyright could have authored the Terms of Use, but those were chosen by AP. The publishers who work with iCopyright choose pricing, word intervals, terms of use, and other licensing options. Of the material I referenced, only the "Honor Copyright" page is authored by iCopyright.

 

The Associated Press v. The Quote

Last week, my former employer, The Associated Press, tried to erase seven quotations from the Internet, using copyright law. The noise since then has been remarkable.

The AP has acknowledged that its demand to remove seven short (33 to 79 words) quotes from The Drudge Retort blog was an overreach. But the news agency is standing by its basic argument, that copying of those lead sentences (or ledes as journalists sometimes write) is illegal and not fair use.

“Cutting and pasting a lot of content into a blog is not what we want to see,” Jim Kennedy, vice president of the AP and the blogosphere's new #1 enemy, told the New York Times. “It is more consistent with the spirit of the Internet to link to content so people can read the whole thing in context.”

Coincidentally, I spent all day on a plane today, and am now about halfway through Lawrence Lessig’s new book, "Remix." (I'm writing a review, to be published in a few months.) The book doesn't come out until October, but Lessig has a few passages on the freedom to quote that I think are apt here.

He writes:

Writing, in the traditional sense of words placed on paper, is the ultimate form of democratic activity, where, again, “democratic” doesn’t mean people vote, but instead means that everyone within a society has access to the means to write. We teach everyone to write—in theory, if not in practice. We understand quoting is an essential part of that writing. It would be impossible to construct and support that practice if permission were required every time a quote was made. The freedom to quote, and to build upon, the words of others is taken for granted by everyone who writes.

So what is the role of a quote in a world of hyperlinks? Quotes still matter because writing still matters; they are still fundamental to art, to journalism, and to freedom. To link is to point; to quote is to build an almost tangible connection between another’s ideas and your own. As the world’s largest news organization, the AP is essential to our democratic conversation. I am proud to have been an AP reporter, albeit for a short time, and I have many friends who work there, good reporters all. The organization’s recent skirmish with digital-age quotation is misguided; here's hoping it ends shortly and is not repeated.