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[DMCA-Activists] ABA Report on FTC Report on Competition and US Patent P
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Seth Johnson |
Subject: |
[DMCA-Activists] ABA Report on FTC Report on Competition and US Patent Policy |
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Thu, 30 Oct 2003 00:42:28 -0500 |
(Forwarded from James Love's CP Tech Random Bits list)
-------- Original Message --------
Subject: [Random-bits] ABA Report on FTC Report on Competition and Patent
Policy
Date: Wed, 29 Oct 2003 16:13:20 -0500
From: James Love <address@hidden>
To: IP-Health
<address@hidden>,address@hidden
AT-IP REPORT
Electronic Newsletter of the Intellectual Property Committee
ABA Section of Antitrust Law
October 29, 2003
We are pleased to bring you this summary by Robin Moore, an Attorney
Advisor with the FTC who is a member of the ABA Antitrust Section,
Intellectual Property Committee Newsletter Editorial Board, of the recently
issued FTC Report: To Promote Innovation: The Proper Balance of
Competition and Patent Law and Policy (the FTC Report). A press release,
executive summary and the extensive FTC Report can be accessed on the FTCs
website at http://www.ftc.gov/opa/2003/10/cpreport.htm
The FTC Report addresses the patent law and policy aspects addressed in the
joint FTC/DOJ hearings on Competition and Intellectual Property Law and
Policy. A further report on the antitrust/competition law aspects is
expected in the not too distant future. The FTC has made ten specific
recommendations in the Report, as explained in Robins summary and the FTC
documents. This write up, of course, is subject to the disclaimer that it
is not issued by the FTC, any views expressed should not be attributed to
the Commission or any Commissioner, and that the full FTC Report must be
consulted for the views of the Commission and its Staff.
The ten recommendations in the FTC Report are:
1. As the PTO Recommends, Enact Legislation to Create A New Administrative
Procedure to Allow Post-Grant Review of and Opposition to Patents.
2. Enact Legislation to Specify that Challenges to the Validity of a
Patent Are To Be Determined Based on a Preponderance of the Evidence.
3. Tighten Certain Legal Standards Used to Evaluate Whether A Patent Is
Obvious
4. Provide Adequate Funding for the PTO
5. Modify Certain PTO Rules and Implement Portions of the PTOs 21st
Century Strategic Plan
a. Amend PTO regulations to require that, upon the request of the
examiner, applicants submit statements of relevance regarding their prior
art references
b. Encourage the use of examiner inquiries under Rule 105 to obtain
more
complete information, and reformulate Rule 105 to permit reasonable
follow-up
c. Implement the PTOs recommendation in its 21st Century Strategic
Plan
that it expand its second-pair-of-eyes review to selected areas
d. Continue to implement the recognition that the PTO forges a balance
between the publics interest in intellectual property and each customers
interest in his/her patent and trademark
6. Consider Possible Harm to Competition Along with Other Possible
Benefits and Costs Before Extending the Scope of Patentable Subject Matter
7. Enact Legislation to Require Publication of All Patent Applications 18
Months After Filing
8. Enact Legislation to Create Intervening or Prior Use Rights to Protect
Parties from Infringement Allegations That Rely on Certain Patent Claims
First Introduced in a Continuing or Other Similar Application
9. Enact Legislation to Require, As a Predicate for Liability for Willful
Infringement, Either Actual, Written Notice of Infringement from the
Patentee, or Deliberate Copying of the Patentees Invention, Knowing It to
Be Patented
10. Expand Consideration of Economic Learning and Competition Policy
Concerns in Patent Law Decisionmaking
Ed Biester
Vice Chair, Intellectual Property Committee
215.979.1162
address@hidden
******************************************************************
Summary of the October 2003 FTC Report: To Promote Innovation: The Proper
Balance of Competition and Patent Law and Policy
By Robin Moore
Background and Business Testimony
The FTCs report focuses on the relationship between Competition and
Intellectual Property (specifically, patents) and how each system impacts
innovation. Based on the Hearings record, the report makes a number of
observations about how competition and the patent system drives innovation
and makes a number of recommendations for the patent system aimed at
furthering innovation. The first two chapters of the report discuss the
tensions between patent and competition policy, and how each system impacts
innovation. The report begins with the observation that both the patent
system and competition promote innovation (and long-term consumer welfare)
but recognizes that each system may reach these goals through different
analyses. For example, where patent law is concerned with whether the
claimed invention is novel, nonobvious, and useful and whether the patent
application meets the disclosure requirements, competition policy asks
whether the patent is necessary to encourage innovation. The report also
observes that neither of these systems can fully promote either stand-alone
or follow-on innovation and that the two systems must be properly balanced
to achieve an appropriate level of innovation.
Chapter three of the report applies these principles to specific
high-technology industries pharmaceutical, biotechnology, computer
hardware (including semi-conductors), and computer software and the
Internet. Relying on testimony from business representatives, the report
makes clear that patents play varying roles of importance across these
industries. For example, according to the report, strong patent protection
plays a very important role in innovation for the pharmaceutical and
biotechnology fields; whereas, computer hardware and software rely more
heavily on competition as a driver of innovation. Computer hardware
manufacturers, on the other hand, reported that they rely heavily upon
trade secrets. Many of these industries also identified various problems
arising from the issuance of questionable patents or patents that are
overly broad, especially in light of the cost of patent litigation.
Patentability Standards
Chapter four examines various patentability standards and the potential
competitive effects that arise from the implementation of those standards
by both the PTO and the Federal Circuit. It makes a number of
recommendations aimed at achieving better quality patents and a better
blend of patent and competition law. The report first examines the
non-obviousness requirement and notes that a standard that is either too
lax or overly restrictive can create problems both from patent and
competition perspectives. The report suggests that in assessing whether an
invention meets the nonobvious standard, asking whether the invention would
have arisen but for the exclusionary rights provided by the patent
provides a useful guiding principle. The report then recommends tightening
the application of two specific tests for nonobviousness the Federal
Circuits application of the suggestion test and the commercial success
test. According to the report, many panelists expressed concern that the
Federal Circuit has applied the suggestion test (which asks whether the
prior art would have suggested to one of ordinary skill in the art) too
narrowly by requiring specific prior art references with clear instructions
on how to combine the references. The report argues that such a narrow
application raises the bar for finding obviousness and understates or
completely reads out the standard requiring that the innovation be beyond
that of a person having ordinary skill in the art. Such an analysis could
result in patents being issued on obvious inventions to the detriment of
competition. As a result, the report recommends that the obviousness
analysis should ascribe to the person having ordinary skill in the art the
ability to combine or modify prior art references that is consistent with
the inventive process.
Panelists also expressed concern that the Federal Circuits application of
the commercial success test might be used by courts to rebut a prima facie
case of obviousness based on the prior art. Currently, the court requires
that the patentee show that claimed features of the patent are coextensive
with those of the successful invention but does not require that the
patentee show that the invention itself, rather than other factors (such as
marketing savvy of the patentee) caused the success. Once the patentee has
established the nexus between the patent claims and the successful
invention, the burden shifts to the challenger to present evidence
rebutting the inference that the invention caused the commercial success.
The report notes that because any number of things can lead to the
commercial success of a product, it may not be a reliable indicator of
nonobviousness. In addition, it points out that the patents passing the
commercial success test are the very patents that are most likely to impact
competition since they may, among other things, confer market power. The
report accordingly recommends that the patentee bear the ultimate burden of
demonstrating that the claimed invention caused the commercial success and
that courts consider in each case whether the commercial success reflects
the technical nonobviousness of the claimed invention.
In addition, the report examines patent continuations and the potential for
opportunistic behavior surrounding their use. (Continuations can redefine
the scope of patent claims). While noting that continuations can serve
legitimate purposes, the report emphasizes that when they are used to
capture competitors products once those competitors have sunk investment
costs, continuations impose great costs on the competitor and may have a
detrimental impact on competition. As a result, the report recommends
legislation that would protect third parties who have developed or are
using a product or process prior to the filing of the continuation.
Chapter four also discusses four areas where patentability standards appear
to be working well with competition and innovation the enablement
requirement, the written description requirement, the doctrine of
equivalents, and the PTOs Utility Guidelines.
Recently, the Federal Circuit has expanded the written description
requirement to invalidate certain patent claims, particularly in the
biotech context. The report analyzes the debate surrounding the recently
expanded disclosure requirements, highlighting that the breadth of the
patent necessarily impacts the incentives for initial and follow-on
innovation. After a survey of the economic literature and the panel
discussions, the report concludes that where the initial innovation is
costly and the follow-on innovation is predictable, broad initial patent
rights are likely appropriate. Where the converse holds, however, the
report argues that initial inventors should obtain narrower rights, leaving
follow-on innovators greater room for reward. The report concludes that
the current disclosure doctrines accord reasonably well with those goals
since the disclosure requirements currently vary with the predictability of
the art and the nature and skill level of the person with ordinary skill in
the art. The report also addresses the doctrine of equivalents and takes
the position that the Supreme Courts interpretation of the doctrine seems
to strike an appropriate balance between public notice and the patentees
ability to secure the benefits of its patent. Likewise, the report
commends the PTOs Utility Guidelines (which have been well received in the
patent community).
PTO Procedures
Chapter five considers patent examination procedures at the PTO and delves
into two topics highlighted by the hearing testimony: (1) the ex parte
nature of the initial patent determination, and (2) patent re-examination
procedures. The report first tackles the question of whether the PTO has
adequate access to the prior art, particularly where the prior art may not
come in the form of previously issued patents. The report also points out
that an ex parte examination requires the examiner to challenge an
applicants assertions on his own, a job made more difficult by the fact
that the courts have placed the burden on the PTO to demonstrate why it has
rejected a patent. The report recommends that the PTO amend its
regulations to require that applicants submit statements of relevance upon
the request of the examiner, noting that requiring submissions only upon an
examiners request should appropriately confine costs. In addition, the
report recommends that the PTO use examiner inquiries more often and more
extensively. Along these lines, the report urges the PTO to reform a
current regulation that allows patent applicants to reply to inquiries by
simply stating that the information is unknown or not readily available.
Hearing participants advocated that the reexamination procedures need
improvement either by enhancing the current inter partes reexamination
proceedings, instituting post-grant opposition or reviews, or implementing
pre-grant opposition. The report recommends that Congress enact
legislation providing for post grant review. The review, as recommended by
the report, would differ from current reexamination in several respects.
It would expand the scope of reviewable subject matter by adding review for
written description, enablement and utility invalidity claims to those
already covered (novelty and nonobviousness). In addition, the report
recommends that the proceeding allow cross-examination of witnesses and
appropriate, carefully circumscribed discovery. To protect patentees
against undue harassment and delay, the report recommends that review be
initiated or maintained only upon a suitable threshold and that limits be
established to protect against undue delay in requesting review and against
harassment through repetitive petitions. The report also recommends that
the review be presided over by an administrative patent judge and that
review be conducted within well-defined limits.
Moreover, the report suggests that settlement agreements resolving
post-grant review proceedings be filed with the PTO and be made available
to other government agencies under terms comparable to those currently
applicable to interferences.
In addition, the report recommends publication of patents 18 months after
patent publication regardless of whether the patent applicant has sought
protection abroad.
The report also tackles two issues that arise in patent litigation the
clear and convincing evidence standard and willful infringement and its
accompanying treble damages. Under current patent law, a patent challenger
must overcome the presumption that the patent is valid through clear and
convincing evidence. The report acknowledges that the presumption of
patent validity rightly places the burden of overturning the PTOs
determination on the patent challenger. However, it recommends that
legislation be enacted to specify that challenges to patent validity should
be determined based on a preponderance of the evidence. The report argues
that preponderance of the evidence is the appropriate standard, because it
mirrors the standard adhered to by the PTO for issuing the patent in the
first instance. Furthermore, the report notes that given the constraints
on patent examiners (limited time, limited access to prior art, etc.) there
is no support for heightening the burden for challenging the patent in
court.
In addition, the report recommends raising the threshold for finding
wilfulness. This recommendation responds to hearing participants
exhortations that the specter of treble damages (from an adverse willful
infringement ruling) deters inventors from searching out and reading
patents that may be relevant to their invention. Specifically, the report
recommends that legislation be enacted requiring either actual, written
notice of infringement from the patentee or deliberate copying of the
patentees invention with knowledge of the patent. To deal with the
possible proliferation of spurious demand letters from patentees, the
report also recommends that the written notice take a form sufficient to
give the recipient standing to challenge the patents validity.
Competition and Patent Policy Intersection
The last chapter of the report stresses that competition and patent policy
generally work well together and that each system should take the other
into account to promote consumer welfare. The report acknowledges that for
various reasons patents promote innovation. It also asserts that many of
the patentability standards are grounded in consumer goals notes that based
on hearing testimony, it appears that neither the PTO nor the Federal
Circuit has kept those goals in mind in their policymaking decisions. The
Report recommends that the PTO and Federal Circuit take economic learning
and competition policy concerns into account.
Without drawing conclusions, the report also tees up the debate over
whether the Federal Circuit has attempted to expand its jurisdiction over
the years and the impact of Holmes v. Vornado on its jurisdiction.
Similarly, the report flags the debate surrounding the Federal Circuits
decision in NobelPharma v. Implant Innovations which asserts exclusive
Federal Circuit jurisdiction over questions of whether conduct in patent
prosecution and enforcement is sufficient to overcome Noerr-Pennington
immunity.
Chapter Six also makes a number of institutional recommendations for the
PTO and the Antitrust Agencies. First, the report recommends that the PTO
receive increased funding so that it can improve the quality of issued
patents. The report also supports the PTOs recommendation that it expand
its second pair of eyes review and suggests that the program cover
semiconductors, software, and biotechnology. In addition, the report
recommends that the PTO continue its recent trend of acknowledging that it
balance both the public interest and individuals interest in issuing a
patent.
As a final matter, Chapter six states that the FTC will take steps to
increase communication between the Antitrust Agencies and the PTO. Among
other things, the FTC commits to continue to file amicus briefs in cases
arising at the intersection of antitrust and patent law and to ask the PTO
to reexamine questionable patents when such action is warranted. In
addition, the report proposes to facilitate communication by establishing a
liaison panel between the Antitrust Agencies and the PTO, founding an
Office of Competition Advocacy within the PTO, and by requesting that
Congress expand the Patent Public Advisory Committee membership to include
competition experts and economists.
************************************************************************************************************************************************************************************************************************************************************
Robin Moore is an Attorney Advisor at the Federal Trade Commission, and any
views expressed are those of the author, not those of the Commission or any
Commissioner. The full FTC Report should be consulted for FTC and staff
views. address@hidden
************************************************************************************************************************************************************************************************************************************************************************
AT-IP Report is the electronic Newsletter of the Intellectual Property
Committee of the American Bar Association, Section of Antitrust Law. The
views expressed in the AT-IP Report are the authors only and not
necessarily those of the ABA, the Section of Antitrust Law or the
Intellectual Property Committee. If you wish to comment on the content of
this Electronic Newsletter, please write to the ABA, Section of Antitrust
Law, Attention: Intellectual Property Committee, 750 North Lake Shore
Drive, Chicago, Illinois 60611. Copyright 2003 American Bar Association.
**********************************************************************************************************************************************************************************************************************************************************************
--
James Love, Director, Consumer Project on Technology
http://www.cptech.org, mailto:address@hidden
tel. +1.202.387.8030, mobile +1.202.361.3040
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