Venable's IP News & Comment

Venable's IP News & Comment AUGUST 2006 Members of Venable's 80-plus Technology Division are pleased to present this edition of Venable's IP News & Comment, covering topics generating the greatest interest in the areas of patents, trademarks, copyrights, and IP litigation. We welcome your comments and look forward to being of service. Supreme Court to Review Obviousness Requirements...........1 Grant of Injunctive Relief for Patent Infringement Requires Consideration of Equitable Factors. 3 Trademark Prosecution - Procedures and Timing......4 Commerce Department Clarifies Export Control Obligations Associated with Foreign Filing Requirements for Patents.........5 Venable Opens California Office.6 Venable Adds Two Attorneys to its Intellectual Property Group....6 Supreme Court to Review Obviousness Requirements By Henry Daley, Ph.D. On June 26, 2006, the Supreme Court decided to review the U.S. Court of Appeals for the Federal Circuit s decision in KSR International Co. v. Teleflex Inc. regarding the legal standards of what constitutes subject matter that is not patentable for being obvious from the prior art. KSR International Co. v. Teleflex Inc. No. 04-1350. This case has the potential to be the most important patent case in decades. If the Supreme Court reverses the Federal Circuit, or even modifies the Federal Circuit s current standard, this will likely fundamentally change the way patent applications are prosecuted before the U.S. Patent and Trademark Office and could indicate that an untold number of patent claims are invalid. In October 2003, the Federal Trade Commission issued a report called To Promote Innovation: The Proper Balance of Competition and Patent Law and Policy. This report criticized many aspects of the current U.S. patent laws including a perceived problem of too many patents being issued with invalid claims. Since that time, the U.S. Congress has been working on legislation to make major reforms to U.S. patent laws. However, such major reforms to the patent laws are still a work in progress that could take quite a bit more time before becoming law. Consequently, the Supreme Court may be first to act in making significant changes to the current U.S. patent laws through clarifying the obviousness standards. The case under review involves an adjustable accelerator pedal for automobiles. Mechanical accelerator pedals that were adjustable to accommodate people of differing heights were known in the prior art. The patent claim at issue involves an electronically controlled rather than mechanically controlled adjustable accelerator pedal. Electronically controlled accelerator pedals were also known in the prior art. KSR International is alleged to have infringed a claim of the patent. The district court granted a motion for summary judgment by KSR International that the claim at issue was invalid as being obvious from the prior art. In particular, the district court determined that one reference disclosed all limitations of the subject claim except for one, and it further found that the missing limitation was taught by a number of secondary prior art references. The district court also argued that a person of ordinary skill in the art of pedal assemblies would have been motivated to combine the teachings of the secondary reference with the primary reference, thus satisfying all of the limitations of the subject claim. The Federal Circuit reversed on the grounds that there were no specific facts on the record concerning a motivation or suggestion to combine the teachings of the references. KSR

VENABLE'S IP NEWS & COMMENT 2 International then filed a petition to request the Supreme Court to hear the case. The Supreme Court granted the petition on June 26, 2006. An allowable or valid patent claim must cover novel, non-obvious and useful subject matter. 35 U.S.C. 101, 102 and 103. In regard to novelty, a patent claim is anticipated if each and every limitation of the claim is identically disclosed in a single prior art reference. If all claim limitations are not identically disclosed in a single prior art reference, the claim still may not be patentable or may be invalid as being obvious. The most common obviousness analysis involves combining one or more secondary references with the primary reference to make up for the one or more differences between the claimed subject matter and that disclosed in a primary prior art reference. In particular, Section 103(a) states that [a] patent may not be obtained though the invention is not identically disclosed or described if the differences between the subject matter sought to be patented and the prior art are such that the subject matter as a whole would have been obvious at the time the invention was made to a person having ordinary skill in the art to which said subject matter pertains. In 1966, the Supreme Court interpreted this to require that the party making the case for obviousness must determine the scope and content of the prior art, ascertain the differences between the prior art and the claims at issue, and resolve the level of ordinary skill in the pertinent art. Graham v. John Deere Co., 383 U.S. 1, 17 (1966). In addition, according to the Supreme Court, the party making the case for obviousness must establish that the subject matter would have been obvious to a person of ordinary skill in the art at the time of the invention. During examination of a patent application, for example, the examiner has the burden to first set forth a case that the above-noted Graham factors are satisfied. This is referred to as having to make a prima facie case for obviousness. An examiner will typically combine references to support an obviousness rejection. However, the examiner cannot use hindsight to combine the references. He must attempt to make such a determination as to a person of ordinary skill in the art at the time of the invention. In order to guard against improper hindsight, the Federal Circuit has for the past twenty years required an examiner to explain the motivation, suggestion or teaching as part of the burden to establish a prima facie case for obviousness. See In re Khan, 441 F.3d 977 (Fed. Cir. 2006). In Graham, the Supreme Court indicated that additional evidence of non-obviousness such as commercial success, long felt but unresolved needs, failure of others, etc. may be presented. These are referred to as secondary indicia of non-obviousness. To counter an examiner s rejection based on obviousness, an applicant may argue that the examiner failed to establish a sufficient prima facie case for obviousness, or the applicant may rebut the prima facie case by presenting evidence of non-obviousness based on secondary indicia of non-obviousness. In the former case the argument is that the examiner failed to meet his initial burden. In the latter case the argument is that even if the examiner has met his initial burden, there is evidence that overcomes such a first showing. The issue before the Supreme Court is whether the Federal Circuit s motivation-suggestion-teaching test must be satisfied to make a case for obviousness. Under current patent practice, for example during the examination of a patent application, it is perhaps most common to argue that the examiner failed to establish a prima facie case for obviousness by failing to articulate a motivation, suggestion or teaching to combine prior art references. It is far less common for the applicant to submit evidence of non-obviousness based on secondary indicia due to the time and cost to collect, compile and file such information with an affidavit. In a brief to the Supreme Court, the Solicitor General of the United States, joined by attorneys from the U.S. Patent and Trademark Office, argued in favor of the Supreme Court hearing this case. The Solicitor General argued that the current motivation-suggestion-teaching test places an extreme burden on the Patent Office to make a prima facie case for obviousness, resulting in a large number of invalid patents issuing. The Solicitor General also argued that Section 103(a) and prior Supreme Court cases intended for the obviousness analysis to be more flexible than the Federal Circuit s current requirements. The Solicitor General further argued that evidence of secondary indicia of non-obviousness is sufficient to guard against improper hindsight. Indeed, the Supreme Court in Graham indicated that the secondary indicia can guard against improper hindsight. On the other hand, the Federal Circuit s test provides clarity as to what is required for an examiner or somebody challenging the validity of a patent claim to make a proper initial showing of potential obviousness. It provides at least to some degree a bright line test to establish a prima facie case of obviousness.

VENABLE'S IP NEWS & COMMENT 3 Due to the current climate of concern about a perceived proliferation of overly broad and otherwise invalid patents issuing and being abused in a licensing and litigation context, it appears likely that the Supreme Court will at least modify the Federal Circuit s current motivation-suggestion-teaching requirement for a prima facie case for obviousness. There is even a real possibility that the Supreme Court could eliminate such a requirement altogether in favor of requiring the applicant to rebut the prima facie case of obviousness with evidence of non-obviousness. In either case, such a decision would fundamentally change the current approach to prosecuting U.S. patent applications. It would also substantially ease the burden of establishing a prima facie case of obviousness in litigation, making it more difficult to eliminate such a validity challenge on summary judgment. This could result in a need for applicants to submit affidavits in many more cases to present evidence of non-obviousness. Such a result would likely lead to a decrease in the number of overly broad patents issuing, but at a substantial cost and burden to the applicants. In that case, it may be prudent to present evidence of non-obviousness in essentially all cases prior to appeal to the Board. It now seems likely that it will be the Supreme Court and not Congress that will make the first major changes to current U.S. patent practice subsequent to the October 2003 FTC report. Henry Daley is a partner in Venable s Patent Group. Dr. Daley can be reached at 202.344.4362 or hjdaley@venable.com. Grant of Injunctive Relief for Patent Infringement Requires Consideration of Equitable Factors By Robert Babayi The Supreme Court has issued its decision in a closely watched patent infringement dispute involving business methods between MercExchange, a patent holding company, and ebay, the on-line auction powerhouse. The Supreme Court held that, when considering whether to grant permanent injunctive relief to patent owners, district courts should apply the traditional four-factor test applied by courts of equity, namely (1) the nature and extent of any irreparable injury that will result if an injunction is not issued, (2) whether remedies such as monetary damages are adequate, (3) the balance of hardships between the patent owner and infringer, and (4) whether a permanent injunction would disserve the public interest. In an unusually short opinion, the Court found error in the rulings of the district court and Federal Circuit for departing from application of the four-factor test. Two important concurring opinions in the case, however, pitted historical considerations for grant of injunctive relief in patent infringement cases against consideration of new circumstances that have arisen in recent times for exploitation of patent rights. According to one concurring opinion that supported historical considerations, "[w]hen it comes to discerning and applying [the four-part test], in this area as others, a page of history is worth a volume of logic." According to another concurring opinion that supported consideration of new circumstances, "history might not necessarily be instructive when new circumstances arise, such as the development of the patent licensing industry." The decision is considered a setback for patent-holding companies that do not exploit their patents commercially. The decision also indicates that it may be more difficult to obtain injunctive relief in the case of business-method patents characterized by "potential vagueness and suspect validity." The Supreme Court's MercExchange decision may potentially have a great impact in addressing diametrically opposed interests in the pharmaceutical and electronics industries. On the one hand, industries that spend huge sums of money and resources in product research and development, for example, new drugs, will be at a huge disadvantage if prevented from fully exploiting their rights to exclude under their patents through injunctive relief. For them, exempting patent infringers from permanent injunctions will be akin to forcing compulsory license grants under terms that may not justify their investments. On the other hand, readily granting permanent injunctions would put some industries, for example, software companies, at the mercy of patentees with patents that are not exploited commercially and cover very small and insignificant aspects of a much larger infringing system. One possible outcome of MercExchange is a delineation between patent cases where injunctive relief has been granted historically (for example, for drug-related patents), and cases that might be characterized as presenting new

VENABLE'S IP NEWS & COMMENT 4 circumstances outside of historical remedies (for example, patents belonging to patent holding companies that do not exploit them commercially). In new situations, the courts may deny injunctive relief and in effect require the patentee to license. Congress may have the last say in this matter and may enter the fray to create a balance that addresses opposing aspects of the injunctive relief debate. Robert Babayi is Of Counsel in Venable s Patent Prosecution Group. Mr. Babayi can be reached at 202.344.4045 or rsbabayi@venable.com. Trademark Prosecution - Procedures and Timing By Mark Harrison This article addresses the various steps taken in trademark prosecution, with the first step being the preparation and filing of a trademark application. There are several different bases for filing a trademark application in the United States. The appropriate basis depends upon the circumstances of the applicant. After filing, the application is reviewed by the USPTO to determine if it meets the minimum requirements for receiving a filing date. If the application meets the filing requirements, it is assigned a serial number, and an official filing receipt issues. If the minimum requirements are not met, the entire application, including the filing fee, is returned. Approximately five to eight months after filing, the application will be taken up for examination. The Examiner determines whether the mark may be registered. If the Examiner determines that the mark cannot be registered, a letter (i.e., Office Action) issues listing any grounds for refusal and any corrections required in the application. Common grounds for refusing registration include 1. A likelihood of confusion between the applicant s mark and a prior filed application or registered mark; 2. That the mark is merely descriptive of the goods or services listed in the application; 3. That the mark is a surname or a geographic term. A response to an Office Action must be filed within six months of the date of the action, or the application will become abandoned. If the response does not overcome the Examiner s objections, the Examiner will issue a final refusal of registration. Final refusals of registration may be appealed to the Trademark Trial and Appeal Board. If there are no objections, or if all objections and other issues are overcome, the mark is approved for publication in the Official Gazette. Any party who believes that it may be damaged by registration of the mark has 30 days from the date of publication to either file an opposition to registration of the mark or request an extension of time within which to oppose. If no oppositions or extension requests are filed, the application enters the next stage of the registration process. If the application was based upon the actual use of the mark, or if an Amendment to Allege Use of the mark was filed and approved prior to publication, or if the application was based upon a corresponding home country registration, a Certificate of Registration will issue approximately 12 weeks after publication. If the application was based upon the applicant s intent to use the mark in commerce, then a Notice of Allowance will issue approximately 12 weeks after publication. The applicant then has six months from the date of the Notice of Allowance within which to either make use of the mark and file a Statement of Use, or request an extension of time within which to file a Statement of Use. Five extensions of six months each are possible, to a total of three years from the date of the Notice of Allowance.

VENABLE'S IP NEWS & COMMENT 5 There is no set time from the date of filing within which to expect the Certificate of Registration to issue. The timeframe for prosecuting each application depends upon a variety of factors, including 1. The basis upon which the application was filed; 2. Whether there are any conflicting, prior filed applications that must be disposed of first; 3. Whether any oppositions or requests for extensions of time to oppose are filed; 4. Whether the file is misplaced by the Trademark Office. A U.S. trademark registration provides protection only in the United States and its territories. If protection for a trademark is desired in other countries, the owner must seek protection in each country separately under that country s relevant laws. The filing requirements, potential objections, length of time to examination and filing and prosecution costs vary from country to country. Mark Harrison is a partner in Venable's Trademark Group. He can be reached at 202.344.4019 or mbharrison@venable.com. Commerce Department Clarifies Export Control Obligations Associated with Foreign Filing Requirements for Patents By Thomas J. Cooper This is the second installment of an article examining a recent advisory opinion by the Department of Commerce in which it "clarified" the export control requirements associated with foreign filing requirements of the Patent and Trademark Office. The first installment addressed export control issues associated with PTO filing licenses. Part II addresses related issues that were addressed in the opinion concerning publicly available information and information resulting from fundamental research. Publicly available information, is generally not subject to the Commerce Export Administration Regulations. The definition of the term "publicly available" includes information that: Is already published or will be published; Arises during, or results from, fundamental research; Is educational, i.e., released by instruction in catalog courses and associated teaching laboratories of academic institutions; Is included in certain patent applications. However, software controlled, i.e., requiring an export license, for encryption reasons, as well as mass market encryption software with symmetric key lengths exceeding 64-bits, are within the scope of the Regulations and not eligible for the general public availability exclusion. Accordingly, when such information is contained in a patent application for which a USPTO foreign a filing license has been obtained, or in a patent or an open patent application, it remains within the scope of the Regulations and may require export licensing from Commerce. The opinion also addressed the issue of fundamental research. Information resulting from "fundamental research" may be excluded from the scope of the Regulations as publicly available information. The fundamental research exclusion as it relates to university based research is available only to "accredited institutions of higher education" in this country. Fundamental research includes: Basic, research, published and applied research in science and engineering, where the resulting information is ordinarily published and shared broadly within the scientific community. Such research can be distinguished from proprietary research and from industrial development, design, production and product utilization the results of which ordinarily are restricted for proprietary reasons or specific national security reasons

VENABLE'S IP NEWS & COMMENT 6 Fundamental research also includes "university based research conducted by scientists, engineers or students at a university." Qualification for this exclusion is subject to certain criteria which are beyond the scope of this article. The fundamental research exemption is available to certain research based at Federal agencies, Federally Funded Research and Development Centers, and business entities. Research conducted by scientists or engineers who do not work for any of the foregoing agencies is treated as if it was research conducted at a business entity. The opinion noted that the critical issue in these questions is "the type of research, and particularly the intent and freedom to publish that identifies fundamental research " The information contained in this article is an overview and introduction to a complex area of the law and is not in any way intended to be either legal advice or opinion. Thomas J. Cooper is a partner in Venable's International Trade Group. Mr. Cooper can be reached at 202.344.4857 or tjcooper@venable.com. Venable Opens California Office Venable LLP has entered the California market by having the lawyers from two Los Angeles-area firms with strengths in litigation, media and advertisement, entertainment, real estate and corporate matters join with Venable to establish a California office. Washington-based Venable announced that the lawyers from the firms of Gorry Meyer & Rudd L.L.P. ("GM&R") of Century City and Whitwell Jacoby Emhoff LLP ("WJE") of Beverly Hills have agreed to join Venable. The two Los Angeles firms bring 20 additional attorneys including their six name partners to Venable, which will now have nearly 500 lawyers in Washington, D.C., Baltimore, New York City and Los Angeles. The 105-year-old firm entered the New York market last year with the integration of New York litigation boutique Heard & O Toole. Venable s new office opened on August 1 and is located at 2049 Century Park East. Two Attorneys Join Venable's Intellectual Property Group Joan Ellis, Ph.D., a former research scientist and patent examiner, has joined Venable LLP's Washington office as a partner in the firm's Patent Prosecution Group. Dr. Ellis joins from the Board of Patent Appeals and Interferences (BPAI), where she had been an Administrative Patent Judge focusing on biotechnology patent disputes since 1995. From 1987 to 1994, she was a patent examiner with the United States Patent and Trademark Office (USPTO). Prior to becoming a lawyer, Dr. Ellis spent close to 13 years as a scientist conducting basic research involving genetic material. Her research resulted in the first malaria antigen ever cloned; she holds a patent on the technology she developed at New York University while obtaining her doctorate. As a faculty member with The Rockefeller University, she designed and implemented numerous research studies, supervised and trained laboratory personnel, and coordinated a joint project with scientists at the National Institutes of Health. During her 11-year tenure as a judge with the BPAI, Ms. Ellis authored over 250 ex parte decisions and over 50 inter partes decisions, 82 of which are in the public domain. As one of six judges in BPAI's biotechology group, Dr. Ellis was responsible for deciding appeals and interferences involving molecular biology, pharmaceuticals, diagnostic assays and medical devices. Many of the decisions she authored concerned cutting-edge patents for inventions having a significant public health impact. For instance, in the inter partes appeal in Hitzeman v. Rutter, she decided who was the first to invent the vaccine

VENABLE'S IP NEWS & COMMENT 7 for Hepatitis B. The vaccine is now required for all pre-adolescent children in the United States, and the World Health Organization would like to implement the same requirement on a global scale. Dr. Ellis was also responsible for determining the inventorship of the assay that today is used throughout the United States to screen blood samples for HIV. Both decisions were affirmed on appeal by the U.S. Court of Appeals for the Federal Circuit. Prior to becoming a judge, Dr. Ellis evaluated numerous biotechnology patent applications as an examiner. She also trained junior examiners to evaluate patent applications. She was awarded the American Intellectual Property Law Association Examiner of the Year Award in 1994. Michael R. Graif has joined Venable's New York office as a partner, providing a boost to the firm's intellectual property practice and its New York presence. Mr. Graif brings a wide range of IP experience to the firm. He has handled virtually every aspect of intellectual property work, from major technology transactions to patent and trademark prosecution to litigating infringement and misappropriation disputes. His clients have ranged from startups to Fortune 500 corporations. Mr. Graif's IP deal experience includes due diligence work, developing IP strategies for acquisition and enforcement, as well as negotiating and preparing complex licensing, outsourcing, development and joint venture agreements. He also has significant experience in assessing the risks of intellectual property investments of financial institutions and hedge funds, advising on the potential for disputes over IP investments, examining patent portfolios, and reviewing market exclusivity and other competitive issues. In the trademark and copyright arenas, Mr. Graif has counseled clients on clearance, registration and enforcement issues. He has handled matters involving merchandise licensing, publicity and privacy rights, domain names, e- commerce, and other Internet-related issues. Mr. Graif also is a registered patent attorney who has not only prosecuted patent applications, but has many years of experience litigating patent infringement cases as well. Editor: Clifton McCann Associate Editor: Mary Ellen Himes Patent/Trade Secrets Contributing Editor: Catherine Voorhees Trademark Contributing Editor: Mark Harrison Copyright Contributing Editor: Josh Kaufman IP Litigation Contributing Editor: Peter Curtin Questions and comments concerning material in this newsletter can be directed to Clifton McCann at cemccann@venable.com or Mary Ellen Himes at mehimes@venable.com. Venable's IP News & Comment is published by the Technology Division of the law firm, Venable LLP, 575 7 th Street, N.W., Washington, D.C. 20004. www.venable.com. It is not intended to provide legal advice or opinion. Such advice may only be given when related to specific fact situations.