Historical Patent Trolls: James Beaumont Neilson Edition

James, massive Troll and Fit model for Scrooge 

It is often argued, with copious amounts of digital ink, that patents are a net drain on innovation and our economy.

I tend to push back against this position, mainly out of enlightened self-interest.  I work in the IP field, if we did away with it at the whim of a subset of libertarian minded technocrats, I would have a hard time finding gainful employment. Or, at least a hard time finding employment which affords me the opportunity to opine on various sundry matters of a historical / philosophical sort. 

However, the impetus to push back against the characterization of this, or any time period, as a particularly unique moment in human history is fueled by those same historical pursuits.

The arguments against non-practicing entities (Trolls) stem from the proponent's perceived enlightened self-interest.  The core position of the patent detractor is a belief that the system as it stands (and has stood for 200 years) benefits the lazy at the expense of the industrious. The arguments are premised on a belief that the worker, the programmer, the system builder is innovating, advancing commerce and technology, creating jobs. In contrast, the dilettante inventor, the thinker, the small time experimenter with her one-off patent, is holding progress hostage to her insatiable appetite for licensing fees and royalty payments. Better, the argument goes, to scrap the patent system than for some to pay for technology which they use but do not place much value upon. 

This argument is usually presented in the context of software, as though the concept of non-practicing entities and expensive legal battles over the scope and value of patent rights came into being with the advent of the internet.

In fact, this exact line of thinking was espoused almost 200 years ago by an association of Iron works industrialists who were desperately seeking a way to avoid paying for technology leashed to "extortion-level" licensing fees.  

A brief aside regarding British ironworks in the 1820's. When one has spent all day acquiring iron ore from the heart of some lonely mountain and that same someone wishes to turn that iron into rail lines, rifles and other fine instruments of the Imperium, one needs to smelt the iron.  Traditionally, that was done by blowing (blast) cold air over coke (a purified form of coal that has been roasted) and iron inserted into this (blast) furnace. 

Enter Mr. James Beaumont Neilson. Neilson, manager and engineer of the Glasgow Gasworks, discovered that if you raise the temperature of the air you are injecting into the furnace ( to around 300F), you need far less coke.  Additionally, and most importantly, depending on the temperatures levels and coal type, you could switch from expensive fancy coke, to the normal everyday-get-a-lump-in-your-stocking coal as your fuel (something of which the British Isles had plenty). 

Neilson proceeded to obtain a series of patents in Great Britain, Scotland, and Ireland in 1828-29 on this hot blast technology.  Neilson then set about licensing this technology. By 1835, hot blast furnace technology was in every ironwork in Scotland, save one. The license fee was set at the low price of 1 pound per ton of iron produced. This licensing scheme was considered by Neilson to be of a low enough price that people would not circumvent the license and become wanton infringers.  

Neilson was wrong. Almost immediately, Scottish Iron Masters formed an association, which bound the members under penalty of 1000 pounds, to resist:

 "by every method which a majority should recommend, any practical acknowledgment of the validity of  Neilson's patent." 

At the same time, several English Ironmasters were making use of the hot blast technology while refusing to take out licenses.  Neilson eventually won judgments against the English Iron Masters, but spent the next 9 years battling the Sottish Association, Harford Coal, Household Coal, and finally Baird Ironworks.  

Baird initially took a license, determined later that it was 'extortion of the highest sort' and ceased payment. The resulting litigation, Neilson v. Baird, turned into a spectacle. The jury trial lasted 9 days, with more than 100 witnesses called. Estimated attorney costs were multiples of the typical costs for patent infringement in the mid-19th century.  The witnesses spanned the range from businessmen to what modern Patent litigators would classify as testifying experts on enablement, inventorship, validity and damages issues.

When the testimony was compiled, the full picture of Neilson's technology and the scope of infringement was painted. In the 10 years that Baird used the hot furnace they has seen an increase in net profits of more than 260,000 pounds  (more than approx 180,000,000 in USD). The jury sided with Neilson and awarded damages of 11,000 pounds, roughly 10 million dollars in modern sums. He had asked for 20,000 pounds). 

According to modern interpretations, Neilson was a troll of the highest order. He never once claimed to be in the business of iron smelting, only in the allied field of gas works. He had a broad based licensing program that went, sometimes aggressively, after an entire industry. Lastly, he was not shy about litigating his patents and seeking damages from those he accused of infringement.

However, Neilson is widely considered a celebrated inventor, the father of the Hot Blast Furnace, and major contributor to the industrial revolution. If one seeks to modify the patent system, one must account for the Neilsons as well as the standard trolls. What separates their actions in the minds of the public? What anti-patent troll statute would have allowed Neilson to prevail, while barring those egregious abusers of the patent system? I am not sure I have seen a good answer. 

Jordan Garner

  

Flat Design and the Decline of the GUI Design Patent

 With the advent of IOS7, Apple has joined Microsoft (Metro) and Google (Now) in putting to rest (for the time being) digital skeuomorphic designs. While a good thing for designers who like clean lines, it might complicate future GUI Design Patent Strategies.

A quick primer, digital skeuomorphic design elements are when the interface or the icon is designed such that it looks like the physical world object that it is designed to digitally replicate. For example, the bookshelf in Ibook, is digital skeuomorphic design. There is no reason that a digital container of book files needs to look like a bookshelf; other than to relate to you, the user, what is the purpose of the digital program. Additionally, buttons with dropped shadows, or clever isometric representations of objects within the icon space, are all examples of digital skeuomorphic design.

However, with the advent of flat design across the three major mobile development platforms, things like icons designed to look like bookcases is going to be a thing of the past. Flat design, like its "Modernism" architectural equivalent is premised of reducing the ostentation ornamentation. In the same way that neo-Gothic architecture like this gave way to boxy simplicity of like this, so too does flat design trend to simple geometric forms and a studied lack of ostentation and ornamentation.

Part of this change has been led by a difference in attitudes regarding the purpose of the GUI in the first place.  Digital skeuomorphic designs were originally used to help people with no inherent knowledge of the inner workings of computers to easily map real world actions to digital ones. A digital file was made to look like a physical office file. A digital delete function was made to look like a trash can, etc. Now, with at least two generations of American consumers raised on digital entertainment, there is less of a need to visually explain the functions of each icon. It is simply enough, in most instances, to state its function and designate an area for the user to interact with that function.

lots of rectangles, no shadows 

GUIs, flat or not, can be protected by design patents. In 1996, the USPTO created guidelines for the protection of GUIs based on its decision in Ex Parte Strijland.  GUI design or surface ornamentation is protectable as long as it is shown to be novel, not obvious, and not functional. The claimed design may be presented as a line drawing or a digital image. Color and grayscale are allowed to be presented in the same GUI application, but line drawings and digital images are not. Animated designs are also patentable in the United States, and must show a minimum of two views of the animation. 

This is all a long winded intro into the point. Of the recent victories that Apple has achieved against Samsung, Apple succeeded in proving that Samsung had copied a design patented GUI (seen at left). As you will note,  this Apple design is chock full of skeuomorphic elements. This includes not only the icons themselves, but their placement, the shape of the icons, their slightly beveled appearance etc.

However, by moving to a flat design paradigm, Apple and its competitors are moving into a field whose sole purpose is to simplify the display elements, not add ornamentation. As noted above, design patents mush have a non-functional use, and must be directly related to the ornamentation. If flat design takes hold, it will be increasingly difficult for designers to obtain protection for flat designs as they  essentially become functional identifiers for computer tasks. As a result, we are going to see a lot of convergent design elements that people will accuse other people of stealing, but no one will be able to obtain a patent on.

As a result, it is preferable to augment your GUI design patent strategy with a screen shot copyright strategy. This way, if it is an instance of blatant copying, you are still protected by an enforceable IP right.

Jordan Garner

Russian Hackers vs Giant Vampire Squids

Of course, the poor illustration to the left is a wildly inaccurate retelling of the current legal battle being waged between banking giant Goldman Sachs, the Federal Government, and Russian Computer programmer Sergey Aleynikov.  While I won't go into the detail  (you can find info here, here and here) these are the basics. 

In 2008, Mr. Aleynikov, computer programmer, Russian Immigrant, and stand-in for future Bond villain, went to work for Goldman Sachs. During his tenure at the "Giant Vampire Squid" of Wall Street, he came across (or illegally accessed) some code base relating to high frequency high volume trading algorithms. Later, proving once again that there is no better capitalist than a former communist, Sergey struck out on his own, joining a financial start-up.

 Goldman Sachs, who had been paying Sergey 400k a year, insisted that he had stolen the code and was using it to make money at the expense of Goldman Sachs making money. Furthermore, Goldman claimed that the code, improperly used, could lead to destabilization of the financial markets. 

(It is a good thing that Goldman Sachs is responsibly in control of "Market Destabilizing Technology" ; We wouldn't want that to fall into the wrong hands)

Getting in the way of Goldman Sachs and profit; or destabilizing the world financial markets are  great ways to get the Feds called down on you.  

In December 2010 Aleynikov was convicted of the two counts of theft of trade secrets and transportation of stolen property under The National Stolen Property Act, 18 U.S.C. § 2314, and the Economic Espionage Act of 1996, 18 U.S.C. § 1832. 

Even though Federal Probation Service suggested a 24 months sentence, the Court in Lower Manhattan sentenced him to 97 months in prison, plus three-years of supervised release and a $12,500 fine. Furthermore, three weeks before sentencing, Aleynikov was incarcerated on request of the government, as he was judged  a flight risk.

Much like land wars in Asia, and going against a Sicilian when death is on the line, one simply can't take code from Goldman Sachs and expect anything less than utter devastation.

However, Mr.  Aleynikov was not quite helpless. His attorney appealed his conviction, asking the Second Circuit to review the District Court's decision denying a motion to dismiss the indictment for failure to state a claim. The Second Circuit heard oral argument on his appeal and, later that same day, unanimously ordered his conviction reversed and a judgment of acquittal entered. 

A copy of the opinion is here.

In summary, the Russian immigrant played the oldest trick in American Jurisprudence...A technicality. 

He argued that the source code was not a "stolen" "good" within the meaning of the NSPA, and  the source code was not “related to or included in a product that is produced for or placed in interstate or foreign commerce” within the meaning of the EEA.  The code was for internal Goldman Sachs use, and was not a 'good' so much as a component of a service that was offered. A plain, reasonable reading of either statute failed to cover his actions.  The Appeals Court agreed, and reverse the judgment of the district court.

Of course that is not the end of the story. The current Congress, who can't even agree to send money to hurricane victims, quickly drafted and passed, the Theft of Trade Secrets Clarification Act.  Then, noted anti-capitalist and Anti-wall Street Crusader President Barack Obama signed the Act into law. 

The Act expands the EEA so that it casts a wider net over actions that constitute a trade secret.  The EEA now applies to trade secrets related to "a product or service used in or intended for use" in commerce.  Senator Patrick Leahy, the sponsor of the bill, said specifically the new language would encompass trade secrets like Goldman’s internal source code, which, though not for sale, "was part of a financial trading system that was used in interstate commerce every day."  Cong. Rec. S6978 (daily ed. Nov. 27, 2012). 

So there are 3 takeaways here. 

1. If you are Goldman Sachs and you don't like a law, call a Senator and you get a new one.

2. For non-Goldman Business. The scope of Federal Trade Secret protection has just been expanded greatly. It is advisable that you reference this law in any employment contracts or other Disclosure or retention agreements, just so that employees know that prison and fines await them.  

3. For non-Goldman Employees. You need to make sure that any code or documentation that you come across, does not find its way into your side, start-up projects. The threat of this law and the repercussions they entail are pretty serious and can easily derail a career. There will be employers that will cite this law against innocent employees, so the only way to protect yourself is to meticulously document where the code you are using is originating. No short cuts.  

Patenting Deliciousness

This is not a picture of patented deliciousness. Original photographer found here. 

The Internet is reporting that Oklahoma State University (Go Cowboys!) is attempting to patent a "cut" of steak.  While general reporting has focused on the fact that this new improvement in the Steak-y Arts will be called "The Vegas Strip" ( which does sound delicious) no one is focusing on the fact that the Inventors pretty much opened themselves up to a Sec. 103 Rejection based on the interview.  

For those who don't know (and why you would be reading a patent blog without knowing about patents...) merely filing a patent on something is no guarantee that you will actually get a patent on that thing. A lot of  digital ink has been used to decry the patent system as innovation restricting.  However, these garment rending positions are usually taken by people who have less than a common familiarity with the workings of the patent system. Once you apply for a patent, that application (helpfully called a "Patent Application") is examined by a Patent Examiner, and is not automatically turned into a patent.  

It is that Patent Examiner's job to determine if your patent application meets certain legal and procedural hurdles.  In this case, hopefully the patent application for Vegas Strip is given to a Patent Examiner who is an expert in Tastiness (I have a PhD in Tastiness from Finger-licking University, but I don't like to brag). According to OSU, the patent is not for the steak itself, but for the series of cuts used to make the steak.  For those of you aware, OSU just gave away that the patent is to a "Method" and not a "thing".  So the Tasty Expert Patent Examiner would look at this method of steak cutting a see if it has been done before, or if it is obvious (Sec. 103) in light of previous steak cuttings methods.  

The spokesperson for OSU's Steak Patenting Initiative (I just make up the initiative part), when asked how the method works said: 

"If i told you, it would be a hint to where this muscle is," he said. "A knowledgeable person would say, 'Aha!'"

Well, if that doesn't sound like "it would have been obvious to one skilled in the art" I don't know what is.   So, what's the point.  Well, one point is to not give interviews about your specious patent applications. 

A second, better point, is to not freak out every time someone says that they filed for a patent on the color blue, or a user interface, or some stupid Facebook integration program.  Merely filing the patent does not get you from A to B.  The patent office has plenty of mechanisms for weeding out bad, and obvious ideas, and does a pretty good job at it.  I think we can all sleep safely knowing that Oklahoma will not corner the market on deliciousness. 

Jordan Garner, Leason Ellis, Patents

Stanford v. Roche (Fed. Cir. 2009)

Stanford v. Roche (Fed. Cir. 2009) 08-1509r.pdf (PDF via www.patentlyo.com).

Using federal NIH funding, Stanford scientists developed and patented a method of using PCR to measure HIV virus concentration in blood plasma. The development was done in partnership with the PCR maker Cetus. The Cetus PCR business was later purchased by Roche, and Stanford subsequently offered to license the patent rights to Roche (for a substantial royalty). After negotiations stalled, Stanford sued Roche for patent infringement. Roche claims that it has ownership rights or - at least - shop rights to the patents based on its acquisition of Cetus's PCR assets. The district court (N.D. Cal.) rejected Roche's claim of rights, but did find the patents invalid as obvious (on summary judgment).

The Fed. Cir. made a number of findings about the nature of Roche's defense as well as the validity of the patent itself. What I found interesting was the discussion on assignment of rights.

Roche provides some interesting practice notes for both the small litigator as well as the patent prosecutor. In fact, small law firms which combine both (such as my own) would do well to study Roche for all the practical morsels of legal knowledge that the Fed. Cir. is serving up. Roche is a good example of the conventional wisdom that the "little things" end up being a big litigated issue. In Roche that "little thing" was the often over-looked portion of client / new matter application intake, the assignment. Assignment intake and filing are generally a routine matter, something that takes a back seat to IDSs and application drafting. However, Roche shows the importance of not only a) making sure that the client provides the full scope of information for the assignment in take form, but b) that the practitioner ask some follow up questions to make sure that the client is not "on notice" about rights transfers, and if they are "on notice", that suitable steps be taken to resolve the assignment issues.

As a first issue the Fed. Cir. reaffirmed that contractual issues surrounding assignments of patents are intimately tied into issues of standing, and hence, are subject matter ripe for federal review. As a more practical matter, Roche brings to light is something that every employment / contract agreement drafter should be aware. The assignment between the inventor and Stanford and the Inventor and Roche (by way Cetus) determined the order of the transfer of ownership rights, even though the temporal order and the transfer order of relationships was reversed.

The Fed. Cir. held:


Recordation of Rights: Patent ownership regularly transfers without the new owner recording the assignment with the USPTO. Recordation is not required, but it does offer some benefits. Notably, where two entities both claim ownership (as there are in this case), a second assignee can hold title if it records first.

A [prior] assignment . . . shall be void as against any subsequent purchaser or mortgagee for a valuable consideration, without notice, unless it is recorded in the Patent and Trademark Office within three months from its date or prior to the date of such subsequent purchase or mortgage. 35 U.S.C. 261.

One caveat in the statute is that the subsequent assignee must be a bona fide purchaser - i.e., take "without notice" and pay "valuable consideration." Here, the Federal Circuit found that Stanford was at least on inquiry notice of the relationship between the inventor and Cetus and the potential for a rights transfer.

Here, the inventor "agreed to assigned" to assign his patent rights to Stanford. Roche at 11. The Court interpreted this as requiring a subsequent written instrument in order to effect the transfer.

This is in contrast to the Cetus transfer which stated "do hereby assign", which effected a present assignment of the future invention without requirement of a subsequent additional written instrument. Roche at 12,

The lesson learned by Stanford and its attorneys is to make sure that if a recordation of the assignment is taking place at the time desired by the parties. To do this, you must insure that the proper terms of art are being used to effect immediate transfer.

Conversely, if immediate transfer is not desired, we now have several Fed Cir decisions that will allow for a proper time-line of assignments to be drafted.

I think a lot of licensees and contractual drafters are going to be copying and pasting "do here by assign" on to all of their new drafts.

(GA)

Martek Biosciences V. Lexicographer

Martek v. Nutrinova presents an interesting case for the burgeoning lexicographer. The term at issue is "animal" and the question is whether or not Humans are covered by said term. The majority held that an applicant, when they have not expressly defined limits to a term (i.e. animals = all animals -humans and kittens), there is no inherent exclusion to members of the term. (If you claim "Rock Bands" then "Creed" is coverd by that disclosure. Arguments before the CAFC that "Creed is christian Rock, Not rock rock" will get you nowhere, since you never limited Rock Bands to "good rock bands").

The majority goes on to point out that regardless of if the preferred embodiments in the specification appear to limit the definition, preferred embodiments are just subsections that have been highlighted for the overall disclosure, and not limiting on the overall specification.

Judge Rader dissents, finding that the totality of the specification should be used to determine if there is a inherent limitation in the lexicographer's definition. Specifically, the usage of the term "raised" with respect to animal made it so the term animal could never apply to people.

Brief aside: Rader here is making a moral / western civilization post modern argument that would not exist 200 years ago. While it is true that Humans are not raised (in the same manner as livestock) at the moment, it was not always the case. The Chattel Slavery system was designed to treat people as live stock, and it is possible that this specific invention would have been useful to someone who wanted to raise Omega-3 intensive individuals. While I agree with Rader's assertions that the term raised makes the definition of Human suspect, I am not a huge fan of using moral arguments to craft borders on the term.


Regardless of the whether Rader and the dissent is correct, the case provides a helpful bit of practical drafting guidelines. It makes sense, if you are going to be you own lexicographer, to put the broadest definition possible in your specification. However, if the broad reading needs some specific tweaking, that tweaking should be done in the preferred embodiments, and not in the general specification. In Martek's case, the reference to raised animals could have been placed in a preferred embodiment clause that spoke directly to the raising of animals. In this way the argument would not have rested on if "raised" modified "animal", but if perferred embodiments can limit general disclosurs. (one is settled law, and one was up for interpertation).

I have often remarked that I draft applications starting with the specification, but always draft the preferred embodiments last. Doing it this way, it is possible to pick out some of the areas that are going to give you problems down with the Examiner, and hopefully shore them up.