Patent Portfolios: Protecting Corporate Value

By Ronald A. Rudder (OBLON, USA)

Posted: 25th October 2017 08:03

The value of patent portfolios to corporations is well established. For example, Microsoft reportedly paid AOL $1.1 billion for 800 patents related to advertising, search, mapping, and multimedia.[1] Nortel was paid $4.5 billion dollars for 6000 patents related to mobile design, wireless, and data networking.[2] In another example, Google paid $12.5 billion for Motorola Mobility and its 17,000 patents.[3]
Recent developments in U.S. patent law (as highlighted below) have impacted how patent portfolios should be built to best protect corporate assets. Correspondingly, any analysis of the strength of existing patents and patent applications must take into consideration these recent developments.
 
America Invents Act
With the implementation of the America Invents Act (AIA), the validity of a patent can be challenged outside of a court room. While patents could previously be challenged in the USPTO through ex parte or inter partes reexamination proceedings, these proceedings were typically perceived to be tilted in the patentee’s favor. The new AIA post-grant proceedings have proven to be significantly more effective at overturning patents. Early on, a high percentage of claim cancellation in the USPTO's post grant proceedings led former chief Judge Randall Rader of the United States Court of Appeals for the Federal Circuit to describe the PTAB as “death squads killing property rights”.[4] Accordingly, the way in which patents are procured in the United States has changed, as has litigation strategy.
 
Until recently, infringement was still the primary driver behind most patent prosecution philosophies. This is because patent invalidity can be exceedingly costly and difficult to prove in a district court. For example, an overly broad claim has obvious benefits for proving infringement. This same claim is less of an invalidity concern given the presumption of validity accorded issued patents in the courts; the clear and convincing evidence necessary to invalidate; and the necessary time and legal fees.
 
As such, securing a claim that was overreaching relative to the closest prior art, was a calculated risk that most patentees were happy to take. The PTAB has forever changed that calculus.[5]
 
If broad claims are still desired, then dependent claims focusing on the various point(s) of novelty should be included along with different independent claims of varying scope and coverage. Multiple continuation and/or divisional applications, as well as improvement /selection invention patents, should be pursued in order to provide a patentee with multiple patents providing multi-layered patent scope protection, each of which would need the cost and time of post grant review to invalidate.
 
Obama Administration Mandates
On June 4, 2013, President Obama announced five executive actions "to help bring about greater transparency to the patent system and level the playing field for innovators."[6] Of these executive actions, Executive Action 2: Clarity in Patent Claims (formerly "Tightening Functional Claiming") in particular has significantly impacted claim scope. USPTO examiner training materials illustrate the “traps” that Applicants can fall into when using functional language, including:
1) failure to provide a clear-cut indication of claim scope
2) failure to explain the function to be performed such that the written description does not show that the inventor had possession of the claimed invention
3) failure to provide an enabling disclosure commensurate with the scope of the claims when the claim language covers all ways of performing a function.[7]
 
Thus, there is heightened scrutiny on the contents of the specification. Without inclusion of materials in the specification addressing the potential failures above, Applicants can be left without remedies to their claims during prosecution and may be left without adequate defences in post grant review proceedings or in court.
 
Statutory Subject Matter
The scope of claims available to U.S. applicants which are considered statutory subject matter continues to be further restricted. In general, the USPTO scrutinizes claims to see if the claims set forth subject matter that is significantly more than “well understood, routine, conventional activities in the relevant field of art”.[8] If not, the claims are rejected. The USPTO on its website has a page which presently provides links to more than 50 training modules and aids for assisting examiners with decisions on statutory subject matter.[9] In this sense, 35 U.S.C, 101 has become an even more critical “threshold issue” than before.[10]
 
Indeed, subject matter once considered fairly immune from statutory subject matter rejection is now subject to heightened scrutiny. For example, in the computer science arts, the USPTO now advises examiners to make a determination of whether claims in this field are directed to an improvement in existing computer technology. It also advises the examiners to look to the specification for teachings that the claimed invention achieves benefits such as increased flexibility, faster search times, and smaller memory requirements.[11] In the nature-based product and life sciences field, the USPTO advises examiners to determine if the claimed product is markedly different from that in nature.[12], [13] In a rather surprising example of a vaccine comprising a peptide F and a pharmaceutically acceptable carrier, the USPTO advises that, while the mixture of these two naturally occurring components is novel and does not occur in nature, the claim encompasses a mixture where the peptide is heterogeneously dispersed in the water, but such heterogeneous mixing does not change the structure, function, or other properties of the peptide or the water in any marked way. The claimed mixture, despite being “novel” and not occurring in nature, was patent ineligible because the claimed mixture as a whole does not display markedly different characteristics compared to the naturally occurring counterparts. Accordingly, the contents of the specification, language of the claims, and claim interpretation can impact patent eligibility.
 
Conclusion
Recent developments in U.S. patent practice have placed more emphasis on the details in the specifications with regard to the claims of the portfolio surviving the issues noted above. Accordingly, assessing the value of a patent portfolio involves an assessment of the strengths and weaknesses of the claims contained in the portfolio, including the strengths and weaknesses of the specification supporting the claims.
 
Ronald A. Rudder, Ph.D. is in the firm's Electrical Patent Prosecution, IP Transactions, and Patent Interference practice groups. Dr. Rudder has a deep understanding of advanced electronics, advanced materials for electronics, nanotechnology, semiconductor materials and processing, scientific instrumentation, laser and imaging technologies, and vacuum technology, as gleaned from 13 years  as a Senior Research Engineer with Research Triangle Institute in North Carolina. He assists clients routinely on patent portfolio management, has worked with corporate counsel on due diligence matters involving semiconductors and advanced manufacturing, and has worked with corporate counsel on interference proceedings and trial procedures at the USPTO.
 


[1]  http://www.wsj.com/articles/SB10001424052702303815404577333323756192742.
[2]http://www.wsj.com/articles/SB10001424052702303812104576440161959082234.
[3]  http://www.wsj.com/articles/SB10001424053111903392904576509953821437960.
[4]  http://www.ipwatchdog.com/2014/03/24/ptab-death-squads-are-all-commercially-viable-patents-invalid/id=48642/.
[5]http://www.iam-media.com/magazine/issue/76/Roundtable/A-closer-look-at-the-PTABs-new-post-issuance-review-procedures, commentary from Scott McKeown of Oblon.
[6]https://www.uspto.gov/patent/initiatives/uspto-led-executive-actions-high-tech-patent-issues.
[7]https://www.uspto.gov/patent/initiatives/uspto-led-executive-actions-high-tech-patent-issues#heading-3.
[8]https://www.uspto.gov/sites/default/files/documents/ieg-may-2016-memo.pdf.
[9]https://www.uspto.gov/patent/laws-and-regulations/examination-policy/2014-interim-guidance-subject-matter-eligibility-0.
[10]In re Comiskey, 499 F.3d 1365, 1371 (Fed. Cir. 2007); State St. Bank & Trust Co. v. Signature Fin. Grp., Inc., 149 F.3d 1368, 1372 n.2 (Fed. Cir. 1998) (finding § 101 to be a threshold issue that must be addressed before other questions of patentability).
[11]https://www.uspto.gov/sites/default/files/documents/ieg-may-2016_enfish_memo.pdf.
[12]https://www.uspto.gov/patents/law/exam/mdc_examples_nature-based_products.pdf.
[13]https://www.uspto.gov/sites/default/files/documents/ieg-may-2016-ex.pdf.

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