On Sunday, the New York Times returned to third-party funding of lawsuits with “Investors Put Money on Lawsuits to Get Payouts:”

Large banks, hedge funds and private investors hungry for new and lucrative opportunities are bankrolling other people’s lawsuits, pumping hundreds of millions of dollars into medical malpractice claims, divorce battles and class

As widely reported by every tech site on the internet, last week Oracle (which recently acquired Sun Microsystems) sued Google for infringing upon a variety of software patents Sun obtained while developing the Java software platform.

For the facts, I can’t improve upon the fine commentary at Groklaw, CNet, and tech-specific sites like

In a patent infringement suit, the defendant’s first line of defense is almost always a counterclaim that the plaintiff’s patent is either invalid or unenforceable. There’s little to lose in raising the counterclaim and potentially a lot to gain, including the possibility of a judgment rendering the patent invalid forever.

Patently-O refers us to Golden

The Supreme Court released its opinion in Bilski v. Kappos this morning, which tested the sufficiency of a "business method" patent relating to the hedging of risk in investments.

Four Justices wanted to scrap "business methods" patents altogether. Five wanted to scrap just the patent at issue here.

Given the complexity of the issues involved, I’m

I haven’t seen Iron Man 2, but Robert Farley and Davida H. Isaacs have, and they’ve written a great column about the legal issues at the heart of the story, The Stark Reality of Defense Contracting:

Iron Man 2 is the most expensive movie ever made about an intellectual property dispute….

In the United States, inventors are supposed to profit from their creations, as emphasized in the original comics. But Iron Man 2 takes a different tack. While trying to fend off Vanko, Stark is pressured by the U.S. government to give up the secrets of the Iron Man suit. After Stark refuses a senator’s demand that he relinquish his body-armor technology, the government forcibly takes it from him, only to turn it over to a competitor that then uses the technology to fulfill its own defense contract. Consciously or no, this echoes the real world; the United States government can take such actions with almost total legal impunity.

In real life, most inventors aren’t trying to "privatize peace." Many just want to get a government contract. Their inventions are kept as trade secrets, like the Iron Man suit, or they are patented. (In the film, Pepper Potts, played by Gwyneth Paltrow, demands action from "patent attorneys," but Stark Industries obviously hadn’t patented the technology, or else the government would already have access to the information needed to reproduce the armor.) It is not unheard of for a potential contractor to provide the government with product specifications, only to then watch the government award the contract to a competitor that has suddenly and suspiciously generated remarkably similar technology. For example, Crater Corporation charged that Lucent Technologies improperly used its tennis-inspired coupler to fulfill a Defense Department contract.

These inventors theoretically have their own superpower at their disposal: the Fifth Amendment’s "Takings Clause," which requires compensation for government appropriation. But it has one weakness: the military and state secrets privilege, which has been invoked with increasing frequency in the past 25 years.

… [Courts] have treated the privilege as legal Kryptonite, dismissing inventors’ lawsuits. In Iron Man 2, Stark’s competitor Hammer could have immediately begun production after acquiring the Iron Man suit, insisting that it had generated the technology itself. Had Stark sued, the government could have claimed state-secrets privilege, protecting details of the contract and production design from Stark’s lawyers. Stark would have been left without recourse to obtain the evidence needed to prove his case.

I would have quoted more, but for my respect of their intellectual property rights.

Indeed, in Crater Corp. v. Lucent Technologies, the United States officially intervened and tried to halt the case entirely, because, it asserted, "any information to be obtained in [discovery regarding the manufacture or use of the coupler by or on behalf of the United States] was protected by the state secrets privilege." The Court of Appeals for the Federal Circuit didn’t rule on that claim, because it dismissed the case under 28 U.S.C. § 1498(a), which:

provides "an affirmative defense for applicable government contractors." Va. Panel Corp., 133 F.3d at 869, 45 USPQ2d at 1232. If a patented invention is used or manufactured for the government by a private party, that private party cannot be held liable for patent infringement. Trojan, Inc. v. Shat-R-Shield, Inc., 885 F.2d 854, 856, 12 USPQ2d 1132, 1134-35 (Fed.Cir.1989); W.L. Gore & Assocs., Inc. v. Garlock, Inc., 842 F.2d 1275, 1282-83, 6 USPQ2d 1277, 1283-84 (Fed.Cir.1988).

And that’s just what happened:

We affirm the district court’s dismissal of Crater’s patent infringement claims because there is no genuine issue of material fact that Lucent’s use and manufacture of the allegedly infringing coupler was for the government. Because Lucent established its affirmative defense under 28 U.S.C. § 1498(a), Lucent’s activities cannot be held to be infringing.

All’s fair in love and war-for-profit.

Let’s get back to the patent infringement versus trade secret issue.

Once Tony Stark invents his Iron Man suit, he has two legal options to protect his intellectual property: file for a patent or treat the suit as a trade secret. The law protects both patents and trade secrets, but in different ways.

With a patent, the inventor publicly discloses the invention by filing a patent. If the patent is granted, the inventor is granted exclusive legal domain over the use of the patent for a limited amount of time. If someone wants to build the same device, they can do so by simply reviewing the patent, but they will have to pay the inventor for the use or sale of that device. As a reward for making the instructions public, the inventor is granted a plethora of legal protections, such as the ability to file for injunctions against infringement, and to recover attorney’s fees and treble damages in a lawsuit.

With a trade secret, the inventor is required to "take reasonable measures to keep the information secret." If they do that, and "the information derives independent economic value… from not being generally known to, and not being readily ascertainable through proper means by, the public," then federal law makes it a crime to misappropriate that information. Here’s an example of the types of things that can get you indicted, such as under the Economic Espionage Act:

Taking the allegations in the Superseding Indictment as true, the defendant engineers were to design tire manufacturing equipment for "off the road" (OTR) tires for their employer Wyko. The defendants formed a plan to take unauthorized photographs of Goodyear’s OTR manufacturing equipment under the guise of evaluating Wyko equipment. While at the Goodyear facility, defendant Roberts falsely told the security guard that he had signed a nondisclosure agreement within the past year. The defendants then falsely stated to the Goodyear engineer that they were there to evaluate Wyko-made equipment. Defendant Howley used his cellular telephone to take photographs of Goodyear’s OTR manufacturing equipment while defendant Roberts acted as lookout. Defendant Howley emailed the photographs to his work email account and then sent them to defendant Roberts’ work email account. Defendant Roberts emailed the photographs to Wyko employees in England.

With a trade secret, state common law allows compensatory relief, through typically not attorney’s fees or treble damages. Similarly, it’s harder to get an injunction for misuse of a trade secret than for infringement of a patent. (Here’s an example in the Second Circuit of misappropriation being clear, but there being no clear risk of "irreparable harm," and so no injunction.)

So, Tony Stark gets to choose: disclose the details of the invention in a patent and correspondingly get superior civil (i.e. monetary) relief if someone copies it, or try to keep the invention secret himself and hope that criminal law dissuades people from stealing it.

In his case it’s a no-brainer. He has no intent to sell the technology and he’d lose his advantage if others had it, too. A trade secret it is.


Continue Reading Iron Man’s Suit Isn’t Patented, It’s A Trade Secret (Seriously)

Via Blawgletter (and a couple other sources), the whole eleven-judge Federal Circuit issued a rare en banc opinion that held, 9-2, that Harvard, MIT, the Whitehead Institute for Biomedical Research, and Ariad Pharmaceuticals, Inc. couldn’t, well, I’ll let Barry Barnett explain:

Ariad, MIT, the Whitehead Institute, and Harvard claimed that Eli Lilly infringed their patent on ways to reduce the symptoms of some diseases by causing a protein — Nuclear Factor kappaB* — to behave.  The problem (as Blawgletter gleans from the judges’ five opinions) arises from the fact that the inventors seem not to have figured out how to suppress symptom-causing NF-kB activity.  They appear simply to have discovered that NF-kB existed and guessed that somehow bringing it to heel would help sick people feel better.

Ariad, MIT, Whitehead, and Harvard urged that the first paragraph of section 12 requires a patent to say only enough to “enable” an in-the-know person to build something that makes NF-kB curtail its hurtful conduct inside human cells.

I knew some of the folks at those places were smart, but I never realized they were so smart they didn’t have to actually invent anything to get a patent. Instead, they can just describe a problem and then claim a patent over someone else’s solution.

To call the case “significant” is an understatement. Among those submitting amicus briefs to the Federal Circuit were:

  • The University of California
  • Federal Circuit Bar Association
  • Monsanto Company
  • GlaxoSmithKline
  • Microsoft Corporation
  • Google Inc.
  • Verizon Communications, Inc.

…and a dozen other schools and technology, pharmaceutical, and research companies who make—or pay—billions of dollars related to broad patents that claim to cover discoveries, but not necessarily inventions, in scientific fields.

The Federal Circuit, however, is even smarter still:

[A] separate requirement to describe one’s invention is basic to patent law. Every patent must describe an invention. It is part of the quid pro quo of a patent; one describes an invention, and, if the law’s other requirements are met, one obtains a patent. The specification must then, of course, describe how to make and use the invention (i.e., enable it), but that is a different task. A description of the claimed invention allows the United States Patent and Trademark Office (“PTO”) to examine applications effectively; courts to understand the invention, determine compliance with the statute, and to construe the claims; and the public to understand and improve upon the invention and to avoid the claimed boundaries of the patentee’s exclusive rights.

[…]

Perhaps there is little difference in some fields between describing an invention and enabling one to make and use it, but that is not always true of certain inventions, including chemical and chemical-like inventions. Thus, although written description and enablement often rise and fall together, requiring a written description of the invention plays a vital role in curtailing claims that do not require undue experimentation to make and use, and thus satisfy enablement, but that have not been invented, and thus cannot be described. For example, a propyl or butyl compound may be made by a process analogous to a disclosed methyl compound, but, in the absence of a statement that the inventor invented propyl and butyl compounds, such compounds have not been described and are not entitled to a patent.

Ariad Pharmaceuticals, Inc. v. Eli Lilly and Co., pp. 12, 26.

Specific to the patent at issue,

The ’516 patent discloses no working or even prophetic examples of methods that reduce NF-κB activity, and no completed syntheses of any of the molecules prophesized to be capable of reducing NF-κB activity. The state of the art at the time of filing was primitive and uncertain, leaving Ariad with an insufficient supply of prior art knowledge with which to fill the gaping holes in its disclosure. See Capon, 418 F.3d at 1358 (“It is well-recognized that in the unpredictable fields of science, it is appropriate to recognize the variability in the science in determining the scope of the coverage to which the inventor is entitled.”).

Whatever thin thread of support a jury might find in the decoy-molecule hypothetical simply cannot bear the weight of the vast scope of these generic claims. … Here, the specification at best describes decoy molecule structures and hypothesizes with no accompanying description that they could be used to reduce NF-κB activity. Yet the asserted claims are far broader.

Thus, the patent was invalid.

The Federal Circuit’s opinion, though, goes much farther than the facts of the case, with a broad rule for future “discovery” patents:

Ariad complains that the doctrine disadvantages universities to the extent that basic research cannot be patented. But the patent law has always been directed to the “useful Arts,” U.S. Const. art. I, § 8, cl. 8, meaning inventions with a practical use, see Brenner v. Manson, 383 U.S. 519, 532-36 (1966). Much university research relates to basic research, including research into scientific principles and mechanisms of action, see, e.g., Rochester, 358 F.3d 916, and universities may not have the resources or inclination to work out the practical implications of all such research, i.e., finding and identifying compounds able to affect the mechanism discovered. That is no failure of the law’s interpretation, but its intention. Patents are not awarded for academic theories, no matter how groundbreaking or necessary to the later patentable inventions of others. “[A] patent is not a hunting license. It is not a reward for the search, but compensation for its successful conclusion.” Id. at 930 n.10 (quoting Brenner, 383 U.S. at 536). Requiring a written description of the invention limits patent protection to those who actually perform the difficult work of “invention”—that is, conceive of the complete and final invention with all its claimed limitations—and disclose the fruits of that effort to the public.

That research hypotheses do not qualify for patent protection possibly results in some loss of incentive, although Ariad presents no evidence of any discernable impact on the pace of innovation or the number of patents obtained by universities. But claims to research plans also impose costs on downstream research, discouraging later invention. The goal is to get the right balance, and the written description doctrine does so by giving the incentive to actual invention and not “attempt[s] to preempt the future before it has arrived.” Fiers, 984 F.2d at 1171. As this court has repeatedly stated, the purpose of the written description requirement is to “ensure that the scope of the right to exclude, as set forth in the claims, does not overreach the scope of the inventor’s contribution to the field of art as described in the patent specification.” Rochester, 358 F.3d at 920 (quoting Reiffin v. Microsoft Corp., 214 F.3d 1342, 1345 (Fed. Cir. 2000)). It is part of the quid pro quo of the patent grant and ensures that the public receives a meaningful disclosure in exchange for being excluded from practicing an invention for a period of time. Enzo, 323 F.3d at 970.

Id., pp. 28-29 (emphases added).

I think the Federal Circuit made the right decision both on the statute and on the policy—there’s a substantial consensus today that our patent system is unjustly overprotective in many areas, including biochemical research—but the decision is not without some costs. As the Circuit recognized with the “loss of incentive” part above, it was already hard for scientists to justify to non-scientist corporate managers or school trustees the value of basic research without referencing the financial upside of patentable discoveries. Now that will be even harder, since the financial upside is less lucrative and less secure.

That said, basic research progressed well enough for hundreds of years without the over-patenting we have today, and even a small increase in government funding could likely make up for any new losses due to reduced patentability. Thus, on the whole, the case is a victory for law and for science.


Continue Reading Federal Circuit Invalidates Harvard and MIT’s Patent For NF-kB Gene Expression

Fred Wilson links to his partner Brad Burnham’s post, "We need an independent invention defense to minimize the damage of aggressive patent trolls:"

I know of no case where the engineers in one of our companies were aware of the patents that are now being used to attack them. The moral rightness of this

As Patently-O reports this morning, 

The Supreme Court recently rejected Medela’s petition for certiorari arguing that the conclusion of obviousness should be made by a judge rather than a lay jury.

In the wake of Medela’s failure, Acushnet (maker of Titleist) is now asking the Supreme Court to hold that "a court reviewing a jury’s [obviousness] verdicts must always independently render its own legal conclusion regardless of whether one or all of the jury’s underlying findings are accepted as adequately supported by the evidence." Taking that a step-further, Acushnet argues that a jury’s verdict on the question of obviousness should be seen as "entirely advisory as to the ultimate legal conclusion." 

Medela was intriguing — and Acushnet would be even more intriguing — because many believed that the Supreme Court’s unanimous opinion in KSR International Co. v. Teleflex, Inc. gave the courts even more power to dispose of patent infringement cases prior to reaching a jury trial by making the court involved even further in determining the "nonobviousness"* of new inventions.

The denial of certiorari in Medela, however, implied the opposite, thereby preserving the primary role of juries — to resolve factual disputes — in patent cases.  A denial of certiorari in Acushnet would be a big win for plaintiffs, since it would empower them to argue that the district court can only grant summary judgment if there is no way the jury could find the patented invention "nonobvious."

On the merits of the petition, Acushnet’s argument is incompatible with the civil litigation and jury trial system envisioned by the Federal Rules of Civil Procedure. We don’t demand jury service from ordinary citizens, particularly the weeks of jury service required for patent trials, just so they can render "advisory opinions." We demand jury service to evaluate the material facts over which there is a "genuine" dispute.


Continue Reading Supreme Court (Intriguingly) Respects Jury’s Role In Patent Infringement Cases

Oh, Ashcroft v. Iqbal, will we ever stop blogging about you?

The newest online debate pits the class action defense lawyers at Drug & Device Law against University of Pennsylvania Law School Professor Stephen Burbank at PENNumbra, the online supplement to UPenn’s Law Review.

Beck and Herrmann open with a defense of Iqbal

Business Week points us to the major cases.

As Litigation & Trial is a legal, rather than a business, blog, I’m going to take their list of cases but replace their description of each with the actual legal issue at stake, along with links to SCOTUSWiki, which hosts all of the relevant briefs for