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Monday, August 17, 2009

Six Flags Over Patent Law -- Microsoft's $290m in Damages in I4I

Several months ago, I wrote about the phenomenon of patent suits being brought in the federal courts of eastern Texas.  The judges and juries there seem unduly plaintiff-friendly in patent suits.  That has caused the towns of Marshall, Tyler, and Texarkana to host patent suits having nothing to do with those places, but in which hundreds of millions of dollars are often at stake.

The latest such instance was in I4I v. Microsoft, a case in which a jury in May awarded the plaintiff $200 million in damages; last week, the judge enhanced the award to $290 million.  He also enjoined Microsoft from selling copies of Word that infringe the patent in suit, which has been construed to cover certain use of custom XML in Microsoft Word DOCX-format files.  (The judge did not require Microsoft to send a software update to existing Word customers to kill the functionality.)  I've never used custom XML, so I don't expect to miss the feature in Office 2010; others may.

Some commentators have immediately lashed out, suggesting that the patent is old stuff and invalid.  I think it's a little risky to base an analysis of the lawsuit on a quick review of the patent, no matter how many means-plus-function elements are in the apparatus claims, and no matter how similar the method claims are to those means-plus-function apparatuses.

The fact that the judgment occurred in the Eastern District of Texas necessarily casts some shadow over the judgment because of perceived favoritism there toward patent suits, as I wrote about in my paper.  The trouble with trying -- as the Eastern District of Texas has done -- to be a magnet for patent suits is that by and large plaintiffs, not defendants, choose to sue.  To get patent cases, you need to draw plaintiffs, and to draw plaintiffs you need big judgments in favor of plaintiffs.  This is not to say that there is anything wrong with the result in this particular case (on which I take no opinion), but rather there is something wrong that people can say "there goes the Eastern District of Texas again."

This, of course, begs the question why Toronto-based I4I sued Redmond, Washington based Microsoft (which is incorporated in Delaware), in remote Texas, nowhere near any parties, witnesses or facts having to do with the case.  Barring a real or perceived benefit to plaintiffs of the Texas courts, there is no reason to sue in Texas.  The federal district court in Buffalo, NY, is less than a two-hour drive from Toronto.  Chicago, Detroit, and Minneapolis are airline hubs convenient both to Seattle and Toronto.  Indeed, it is hard to imagine any location in the continental United States less convenient to these particular parties and to the administration of justice than eastern Texas.  (Perhaps Florida.)

In my paper (at pages 6-10), I explained the problem with current venue provisions, 28 U.S.C. sections 1391 and 1400.  These provisions govern in which federal courts suit may brought, and which, as applied to corporate defendants in patent cases, are often tantamount to having no limitations on suit at all.

I argued in my paper that even if the rough Texas justice turns out, after detailed analysis, to be fair, the perception of unfairness is enough to require a legislative solution.  Federal judges are held to make sure that there are no "appearances" of partiality in their own Code of Conduct, and the federal judicial districts as a whole ought to be held to similar high standards:  One federal judicial district ought not repeatedly mete out justice potentially out of line with what the other 90-plus federal districts would do.

Congress had proposed fixing patent venue as part of a broader patent reform agenda.  That reform, which had looked like it would pass this session, became derailed by, among other things, health-care reform.  I criticized the pending legislative proposals, and advanced my own (at page 16).

Under my proposal, the case would have been brought in either Delaware or Washington State, assuming Microsoft's pertinent engineers are all on the Redmond campus.  What about Buffalo?  Not under my proposal.  That is a reflection of my attempt to accommodate Congress's concern about plaintiffs' manufacture of venue by moving to jurisdictionally-desirable locations, such as eastern Texas.  Rather than getting into threshold disputes about whether a plaintiff's location is genuine or manufactured -- a conflict that could add months to a lawsuit, and that could require discovery and testimony -- it's better just to focus on the defendant's location.  One could rationalize the anti-Buffalo result here under my proposal by noting that the plaintiff is Canadian, and that U.S. venue provisions are ordinarily protective of U.S. citizens, not foreigners (who are subject to venue throughout the U.S. and not merely near where they are located).  So my proposal might not always find the most convenient location, but at least it has the benefit of preventing, as Justice Scalia might call it, a new "renegade jurisdiction" like the Eastern District of Texas from arising.

posted by Sidney Rosenzweig @ 2:55 PM | IP

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Tuesday, July 7, 2009

Nesson & Tenenbaum: Distorting Wiretapping Law and Possibly Violating Rule 11

Joel Tenenbaum is a 25-year-old graduate student at Boston University.  The music industry caught him illegally sharing songs online.  Through counsel, he has tacitly admitted as much, conceding his use of Kazaa, and is focusing his defense instead on arguments that the copyright scheme is, essentially, unconstitutionally punitive.  My colleague, Tom Sydnor, recently addressed some of these constitutional arguments in his historical examination of statutory damages in copyright cases.  The blog Copyrights & Campaigns has covered the Tenenbaum case exhaustively.

Tenenbaum is represented by Harvard Law School Professor Charles Nesson, whose conduct as counsel has been bizarre.  He has surreptitiously recorded and made public conversations with opposing counsel, his own consultants/experts, and even his own wife.  One might argue that some of this -- particularly disclosure of the consultant/expert recordings that are both against his client's interest and may otherwise be protected from disclosure as attorney work product -- is in violation of certain ethical obligations Nesson has under Massachusetts' ethics laws.  The most complete litany of Nesson's odd litigation behavior is chronicled here.  I would prefer, however, to leave it to Tenenbaum himself to determine the effectiveness of counsel and to avoid slinging unnecessary ethical accusations here. 

What this blog post focuses on instead, are the wiretapping-related motions in the Tenenbaum case.  Nesson may have violated the federal court's rules of conduct, and even if not, his position about the scope of federal wiretap laws is alarming.

Continue reading Nesson & Tenenbaum: Distorting Wiretapping Law and Possibly Violating Rule 11 . . .

posted by Sidney Rosenzweig @ 6:40 PM | IP

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Monday, June 1, 2009

Supreme Court to Weigh in on Business Method (and Software?) Patents

The Supreme Court granted certiorari today in Bilski v. Doll.  (All of the court filings, as well as the docket and the Federal Circuit's decision below, are available here via SCOTUSblog.)  Accordingly, the Supreme Court will hear the case in its upcoming term that begins in the fall. This is significant, especially if the Supreme Court issues a ruling broader than did the Court of Appeals for the Federal Circuit when it ruled en banc in October 2008.  Specifically, the Federal Circuit avoided the question that parties and amici put to it:  whether and when software patents are allowable.

Continue reading Supreme Court to Weigh in on Business Method (and Software?) Patents . . .

posted by Sidney Rosenzweig @ 5:20 PM | IP

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Tuesday, May 26, 2009

Expedited Patent Examination for Green Technology

With little fanfare, the U.K. Intellectual Property Office ("UK IPO") has moved patent applications covering so-called "green" technologies to the head of the queue for expedited examination. (Tip to Intellectual Property Watch for picking up on this.)  As a result of the priority, the UK IPO expects patents to issue in nine months, rather than in the ordinary two or three years.  Is this a good idea for the United States?  Probably not.  It isn't clear to what degree this "fast track" will actually result in faster or greater commercialization of green technologies.  Moreover, while faster patent examination is a laudable goal for any and all patent applications, greater resources are needed in the U.S. Patent & Trademark Office ("US PTO") for other -- arguably more important -- matters, such as reexamination of already-issued patents.

Continue reading Expedited Patent Examination for Green Technology . . .

posted by Sidney Rosenzweig @ 2:16 PM |

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Thursday, May 14, 2009

The ACLU Takes on Patent Protection

Earlier this week, the ACLU filed suit in New York federal district court challenging the patents owned, by, among others, Myriad Genetics, the University of Pennsylvania and the University of Utah. The suit is little more than ACLU grandstanding in an area in which it lacks any experience or expertise.

The patents in suit deal with certain human genes, mutations of which correlate to increased risk of breast and ovarian cancers in women. That, of course, explains why the ACLU's Women's Rights Project is involved in the suit. While I have a lot of respect for the ACLU generally - I have represented the ACLU in pro bono matters in the past, and would do so in the future in certain First Amendment and other contexts - that respect does not extend to the ACLU's participation in the patent litigation here.

Continue reading The ACLU Takes on Patent Protection . . .

posted by Sidney Rosenzweig @ 3:38 PM | IP

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Tuesday, April 21, 2009

Patent Reform: Toothless Changes for Post-Grant Review

After the reintroduction of the patent reform bill in the Senate, I posted some of my initial thoughts on this blog.  This post follows up with some more thoughts about the revised schemes for reexamination and cancellation.  These procedures provide redress when a patent should never have been granted in the first place.  The trouble with the current system is that it is too slow and expensive.  The delay prejudices patentees for whom reexaminations cast clouds on their patent rights, and for members of the public, for whom long-pending reexaminations cast clouds on their ability to practice potentially infringing inventions.  Although a substantial portion of Congress's attention to patent reform has been directed to fixing the reexamination scheme, the changes to reexamination procedures are too modest to have any measurable effect.  Meantime, Congress's new "cancellation" procedure suffers from judicially unenforceable deadlines and is likely to be abused.

Continue reading Patent Reform: Toothless Changes for Post-Grant Review . . .

posted by Sidney Rosenzweig @ 2:30 PM | IP

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Monday, April 6, 2009

Trademarks and Search-Engine Ads: What's Permissible?

If I search for "Proflowers" on Google, can Google lawfully sell FTD Florists the right to have an advertisement that appears alongside my search results?  There has been no authoritative answer to this seemingly simple question.  The Second Circuit's recent decision in Rescuecom v. Google brings us a step closer to resolving the issue.  The court's decision, while failing to give Google everything it wanted, strikes a good balance between consumer protection and Internet commerce.

Continue reading Trademarks and Search-Engine Ads: What's Permissible? . . .

posted by Sidney Rosenzweig @ 3:19 PM | IP

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Wednesday, March 25, 2009

Finally, an R&D Tax Credit Done Right

The Obama administration's recent budget calls for a ten-year extension of the tax credit for private-sector research and development expenses.  See the White House press release.  That is welcome news.

The exact details of the credit are, like all other things tax-related, rather complicated, but it costs the Treasury about $7.5 billion per year.  Also complicated is the history of the tax credit:  For the nearly thirty years that the tax credit has existed, it has been often granted annually, and sometimes retroactively.  It has expired some thirteen times in its existence; sometimes Congress steps in to provide retroactive credit, and sometimes there is no credit at all.  A useful timeline of the R&D tax credit appears on page 3 of this report.  Most recently, it was not until October 2008, as part of the emergency economic stimulus, that the tax credit was provided retroactively for fiscal year 2008.

President Obama notes that every dollar of the tax benefit "stimulates as much as an additional dollar of private R&D spending in the short run and two dollars in the long run.  Every $1 of R&D adds $2 of benefit to our economy and society as a whole."  A little online research will show that some detractors cast doubt on those numbers and see the credit as an unreasonable subsidy to large corporations.  An economic analysis of the exact benefits of the R&D tax credit is beyond the scope of this blog entry; it seems safe to assume, however, that the tax credit spurs a substantial amount of R&D.

Using tax policy to spur R&D seems eminently reasonable.  The alternative to private sector R&D is, of course, public sector R&D or directed research grants.  That's a tricky thing for this or any government to do well.  Where public money should be allocated is highly politicized and highly charged.  Public investment in R&D forces the government to make big bets on the direction of technology.  But technology is by its very nature highly unpredictable.  I would rather have a thousand companies themselves bet on the direction of technology than the government by fiat.

The way in which the tax credit has been doled out in past years, however, gives credence to some of the detractors of the R&D tax credit.  A tax credit meant to serve as an incentive for R&D spending should actually provide that incentive.  Retroactive tax breaks arguably fail to provide any incentive.  This concept comes up all the time in connection with intellectual property rights:  Should patent terms or copyright terms be allowed to be extended retroactively?  See, for example, the Supreme Court's 2003 decision in Eldred v. Ashcroft regarding copyright term extension.  Retroactive payouts do not increase incentives to invent; they reward people who have already done so.

Research labs do not spring up overnight, and they do not disappear like Cinderella's carriage at the stroke of midnight New Year's Eve.  Any reasonable reliance on a tax credit for R&D necessarily will span several years.  Accordingly, the tax credit itself should also span several years.  That way, the private-sector can make reasonable and informed decisions.  The Obama budget should be commended for doing just that.

posted by Sidney Rosenzweig @ 2:02 PM | Taxes

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Friday, March 20, 2009

Senator Kyl's New Patent Bill -- Reopening the Patent-Reform Debates

Earlier this week, Senator Kyl introduced a new patent reform bill of his own.  This one will compete with the bill introduced by Senators Leahy and Hatch a few weeks ago.  I wrote about my first impressions of the Leahy-Hatch bill here.

Dennis Crouch at Patently-O has noted that the Kyl bill is more patent-holder friendly than the Leahy-Hatch bill.  That it is.  The bill stirs up a lot of issues that I had considered resolved by now.  To the extent that the Kyl bill garners some support on the Judiciary Committee, it calls into question how quickly the Senate will be able to pass any patent reform measure this session.

Continue reading Senator Kyl's New Patent Bill -- Reopening the Patent-Reform Debates . . .

posted by Sidney Rosenzweig @ 2:56 PM | IP

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Tuesday, March 17, 2009

Bogus Reliance on the Clean Air Act's Compulsory Patent Licensing

Advocates for compulsory licenses of patented technologies in developing nations like to assert that such licensing is common in the United States.  If it's OK in the United States, then it ought to be OK elsewhere.  In my recent paper directed to Joseph Stiglitz's arguments, I explained in detail the impertinence of relying on the use of compulsory licenses in merger and antitrust proceedings in the United States.  See here at pages 17-20.

But the compulsory-license advocates make a lot of other misleading arguments.  This post focuses on one:  the compulsory licensing provision, section 308, of the Clean Air Act, codified at 42 U.S.C. s 7608.  (This provision is particularly noteworthy in light of my previous post about the inappropriateness of compulsory licensing for green technologies.)

Jamie Love likes to cite the example of the Clean Air Act because it establishes, as he puts it, "norms" for compulsory licensing in the United States.  What Love never mentions is that in the forty years this provision of the Clean Air Act has existed, it has never been invoked, and the structure of the provision seems designed to ensure that it never will.

Continue reading Bogus Reliance on the Clean Air Act's Compulsory Patent Licensing . . .

posted by Sidney Rosenzweig @ 2:20 PM | IP

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Monday, March 16, 2009

China & Compulsory Licenses for "Unworked" Patents

posted by Sidney Rosenzweig @ 11:35 AM | China, IP

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Thursday, March 12, 2009

Compulsory Licenses & Green Technology

posted by Sidney Rosenzweig @ 4:35 PM | IP

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Tuesday, March 3, 2009

The Patent Reform Act of 2009 (Here We Go Again)

posted by Sidney Rosenzweig @ 5:02 PM | IP

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Tuesday, January 27, 2009

Apple's Patent on Touch-based Gestures

posted by Sidney Rosenzweig @ 11:34 AM | IP

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  Six Flags Over Patent Law -- Microsoft's $290m in Damages in I4I
Nesson & Tenenbaum: Distorting Wiretapping Law and Possibly Violating Rule 11
Supreme Court to Weigh in on Business Method (and Software?) Patents
Expedited Patent Examination for Green Technology
The ACLU Takes on Patent Protection
Patent Reform: Toothless Changes for Post-Grant Review
Trademarks and Search-Engine Ads: What's Permissible?
Finally, an R&D Tax Credit Done Right
Senator Kyl's New Patent Bill -- Reopening the Patent-Reform Debates
Bogus Reliance on the Clean Air Act's Compulsory Patent Licensing
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