• Sprint is urging the FCC to quickly hold hearings to rule on whether the transfer of spectrum licenses from T-Mobile to AT&T serves the public interest. AT&T’s proposed $39 billion acquisition of T-Mobile is currently under review by the FCC after the US Justice Department sued to block the proposal.

• Senators Blumenthal (CT) and Franken (MN) introduced a bill on Tuesday that would prohibit wireless companies from having contract clauses that require consumers to use binding arbitration rather than suing in the case of a contract dispute.

• On Wednesday, members of the House reviewed the FTC’s recommendations to the Children’s Online Private Protection. The proposed changes would require greater permission from parents of children under the age of 13 before information could be collected from them on the Web.

• Also on Wednesday, Senator Coons (DE) and Kohl (WI) proposed amendments to the pending Currency Exchange Rate Oversight Reform Act of 2011. The amendments would allow private federal civil actions for trade secret infringement and would allow Customs & Border Patrol to share information on suspected counterfeiters with US rights holders.

• Samsung wants courts in France and Italy to prohibit Apple’s iPhone 4S, claiming that the iPhone infringed two of its patents. Samsung and Apple are currently in around 20 patent infringement legal disputes.

• AstraZeneca returned to court this week to defend its US patent on Crestor, a multibillion-dollar cholesterol drug, against generic drug makers who are appealing a decision from the US District Court in Delaware. In June 2010, the court ruled that generic firms failed to prove the patent was invalid because it was obvious.

37 CFR 1.56 (Rule 56) establishes that there is a duty to disclose information to the Patent Office. The regulation states that “[e]ach individual associated with the filing and prosecution of a patent application has a duty of candor and good faith in dealing with the Office, which includes a duty to disclose to the Office all information known to that individual to be material to patentability.” The failure to disclose information could result in a later ruling of inequitable conduct and an invalidation of the patent.

In 1998 the Federal Circuit wrote, “inequitable conduct resides in failure to disclose material information… with an intent to deceive.” It is clear that inequitable conduct is made up of two distinct elements and they are: (1) intent; and (2) materiality. These two elements must each be proven by clear and convincing evidence.

Relationship of Office Actions to the Duty to Disclose

A recent question that has been debated among patent prosecutors is whether the duty to disclose material information extends to a duty to disclose the contents of previous office actions from related and/or unrelated patent prosecutions. More practically, patent prosecutors are worried that if they make a decision not to disclose the contents of a previous office action, that failure to disclose will later be used in an allegation of inequitable conduct that could invalidate the patent.

An office action is a response from the examiner at the United States Patent and Trademark Office to a filing by a patent prosecutor in the course of prosecuting a patent. An office action can be an allowance of the claims, a rejection of the claims pursuant to substantive patentability rules, or an objection to the claims pursuant to procedural rules. By its very nature, an office action merely represents the opinions and conclusions of the examiner who sent it and that examiner’s subjective interpretation of patent law and procedure. It is therefore unclear whether office actions fit within the definition of material information.

To answer the question whether office actions must be disclosed, it is therefore necessary to investigate the meaning of “material information” as it is set forth in Rule 56 to determine the extent of the materiality prong of the inequitable conduct test.

Material Information

Is an office action “information”?

Prior to determining whether an office action is material information, it must be determined whether it is information in the first place. As stated above, an office action represents the opinions and conclusions of an examiner at the USPTO based on the facts, arguments, and assertions put forth by the applicant in the patent application and in the prosecution history. It is possible that this definition does not bring office actions within the meaning of information, such that a categorical rule that they need not be disclosed can be established.

However, the language of the regulation and the Manual of Patent Examining Procedure (MPEP) suggests that such a narrow reading of the word “information” should not be endorsed. Rule 56 states that “all information” must be disclosed and it is therefore clear that the regulation is not referring to only prior art. The MPEP says that “the term “information” in Rule 56(a) is intended to be all encompassing.” The MPEP specifically mentions that all information must be disclosed, “regardless of the source.” There is a duty to disclose “information… as to other co-pending United States applications which are “material to patentability.”

The fact that neither the regulation nor the MPEP go into great detail about the meaning of “information” seems to indicate a broad definition of information, particularly when it is modified by the word “all.” This suggests that the “information” requirement will not provide an easy categorical rule as to whether office actions from other patent prosecutions need be disclosed. Rather, an office action from a different patent prosecution probably fits within the meaning of “information” and therefore its materiality must be analyzed in the same way as the materiality of any other information for which there may be a duty to disclose.

Materiality

Once it is established that an office action fits within the meaning of information, the entire disclosure question stems from the definition of materiality provided by the regulation. Rule 56(b) says that information is only material “it is not cumulative to information already of record or being made of record in the application, and (1) [i]t establishes, by itself or in combination with other information, a prima facie case of unpatentability of a claim; or 2) [i]t refutes, or is inconsistent with, a position the applicant takes in: (i) [o]pposing an argument of unpatentability relied on by the Office, or (ii) [a]sserting an argument of patentability.

There are two aspects to the materiality question, which can be referred to as timing and substance. With regard to timing, information is only material if it is not cumulative to information already of record. This means that regardless of the substantive nature of the information, if it has already been disclosed (or at least a way of obtaining it has been disclosed) then there is no duty to disclose it.

Not surprisingly, the majority of the focus of the case law has tended to be about the substantive materiality question addressed in Rule 56(1) and the standard has evolved over time. Early doctrine regarding materiality of information involved three tests that the court laid out in In re Multidistrict Litigation Involving Frost Patent. There was an objective ‘but for’ test, a subjective ‘but for’ test, and a ‘but it may have test’.[1]

More recently, there are two different tests that the CAFC has used in determining whether information is material. Prior to 1992, the courts used a reasonable examiner test, asking whether a reasonable examiner would have deemed the information material. This was based on the language of Rule 56 prior to its being changed in 1992.

In 1992, the language of Rule 56 was amended to its current form, involving a prima facie case of unpatentability. It appeared that the reasonable examiner test was no longer pertinent. However, recently, the court in Digital Control, Inc. v. The Charles Machine Works suggested that the reasonable examiner test was still alive and the prima facie test provides an additional test of materiality.

Is an office action “material”?

Cumulativeness

It is possible that the timing aspect of at least some types of office actions makes them inherently cumulative to information already of record such that the substantive question of materiality need not be addressed. With regard to cumulativeness, it should be noted that there is a potential difference between office actions from parent applications of the application at issue and office actions from unrelated applications. It is likely that in a regular patent application, office actions from other unrelated patent applications fit within the rule and qualify as information known to the individual and they are not cumulative to information already of record. Therefore, because office actions from other unrelated applications are not of record in the present application, there may be a requirement to disclose them, depending on their substantive materiality.

With regard to the question of disclosure in continuing applications of office actions from parent applications and other related applications, it is more questionable whether office actions are not cumulative. MPEP 609.02 says that it is “not necessary for the applicant to submit an information disclosure statement in the continuing application that lists the prior art cited by the examiner in the parent application” and that “the examiner of the continuing application will consider information which has been considered by the Office in the parent application.” Therefore, in the filing of a continuing application, it would appear that the office actions are cumulative to information already of record and the substantive question of materiality need not be addressed.

However, recently, the court in Larson Mfg. Co. of South Dakota, Inc. v. Aluminart Products Ltd. said that office actions from related co-pending patent applications can be material to prosecution. The court emphasized that the knowledge of a potentially different interpretation is clearly information that an examiner would want to have and therefore is material. Therefore, it is important to note that the court seemed to endorse the reasonable examiner test that was kept alive by the Digital Control court and the court seemed to somewhat merge the timing/substance questions in evaluating the materiality of office actions.

It therefore seems apparent that no categorical rule can be derived either with respect to unrelated office actions or with respect to related office actions based on their cumulativeness. Thus, with regard to the question of whether office actions must be disclosed to the PTO, it depends on an evaluation of the substantive nature of the information contained in the office action.

The substantive aspect of office actions

Assuming that the relevant materiality question is whether information creates a prima facie case of unpatentability and that the question of whether a reasonable examiner would want to have the information is still relevant, it seems that there is a requirement to disclose the contents of office actions.

Under the reasonable examiner test, which is still relevant according to the Digital Control court, a reasonable examiner would want to know about office actions from other patent prosecutions and to know about other examiners’ views on the subject matter. With regard to the language of the current Rule 56, an examiner’s opinions and conclusions based on the application, the prosecution history, and the prior art is probably enough to establish a prima facie case of unpatentability.

Furthermore, in 1992 the Federal Circuit in LaBounty Mfg v. U.S. Int’l Trade Comm’n established that there is a duty to err on the side of disclosure in ‘close cases.’ Essentially, when in doubt about whether the information should be disclosed, it is not simply a recommendation that the disclosure should be made but rather there is a duty to disclose. Additionally, disclosing earlier office actions from other prosecution can be used in subsequent litigation to show good faith and negate deceptive intent.

Conclusion

All of this doctrine seems to suggest that there is nothing unique about office actions with respect to the duty to disclose. Office actions are information. They are not necessarily cumulative to information already of record, even in cases of continuing applications. The fact that they consist of an examiner’s opinions and conclusions does not inherently mean that they cannot establish a prima facie case of unpatentability pursuant to Rule 56(1). Therefore, the materiality of previous office actions must be analyzed exactly the same way as all other information with respect to the duty to disclose.

A common feature of modern human clinical trials is a double-blind placebo test. In such a trial, neither the doctor administering the drug nor the patient knows who is receiving the active drug and who is receiving a placebo. The placebo effect is well documented and commonly understood as a mental expectation response to being told that you are receiving a powerful drug. Patients taking a placebo report a variety of responses: some patients on the placebo report feeling better; some report no response and no side effects; others report that they are feeling worse or only experiencing side effects. Some patients, who are not experiencing side effects, believe they are receiving the placebo tend to drop out of studies. Patient drop out is a serious problem and in response, the “active placebo” was developed.

Active Placebos

An active placebo is a placebo that causes the same side effects as the active drug, but does not treat the patient’s disease. This helps to convince patients that they are receiving the active drug in the trial, and makes them less likely to drop out (but more likely to report side effects and curative effects of the drug).  Active placebos are commonly used in pain trials, giving people symptoms like drowsiness, nausea, or dry mouth.

Patentability under §101

35 U.S.C. §101 requires that a patent be given for any “new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof…” The “useful” requirement of §101 has been used to exclude immoral inventions from patentability. While this category used to include things like gambling machines, today things like suicide machines or a letter bomb would be excluded on an immorality basis. Could an active placebo fail the utility test of §101?

§101 utility requires a practical or specific utility, operability, and a beneficial utility. An active placebo would meet the operability requirement by showing that it did in fact give some people side effects. Presumably, the side effects would have to come from a pharmaceutically active ingredient in the placebo, and not be a result of mental expectation from the patient. The placebo would also pass the practical or specific utility test because it is useful in clinical trials for reducing the likelihood of patient drop out. However, is the active placebo beneficial? It is a device used to trick people into thinking they are taking a curative drug, when in fact the pill does nothing but give them a stomach ache!

The beneficial utility test is a very low bar, and a device that deceives the public may still have a beneficial utility. Here, it may come down to how the claims are written. A composition or compound claim for a drug to induce headaches or nausea would almost certainly be allowed. However, a method claim to tricking patients and taking advantage of the placebo or mental effects of the drug might tip the scales in the other direction. In the European Patent Office, the patent may fail, partly because the EPO expressly allows examiners to consider the morality of an invention, but also because the EPO, under the European Patent Convention, would not grant any method claims filed on an active placebo as being a surgical method.

The use of active placebos presents many regulatory and legal issues that the Bioethics Committee should consider, including patent eligibility. Some other issues involve the informed consent doctrine, the ethics of “do no harm”, and the integrity of clinical trials.  No matter what the committee recommends, they will face a tough decision that could affect many clinical study participants in the future.

The new system incorporates five additional metrics along with the two that are currently used to measure the quality of patent examination.  The current system measures the quality of the action describing the final disposition of the application, either in an allowance or a final rejection, and the quality of actions taken during the course of examination.  The new system additionally measures (1) the quality of the examiner’s initial search for prior art, (2) the use of best examination practices in the first action on the merits, (3) trends in compact and efficient examination as reflected in aggregate USPTO data, (4) the perceptions of applicants and practitioners as measured by surveys, and (5) the perceptions of examiners as measured by surveys.

First Things First

The new metrics focusing on the initial work of examiners appear to be an improvement over the current system for at least two reasons.  First, they coincide with the USPTO’s new count system for examiner production levels.  This count system was implemented in February 2010 and awards examiners more credit for their initial actions taken on applications relative to credit received for subsequent actions.  The count system was designed to decrease redundancy in subsequent actions, encourage quicker resolution of issues with applications, and spur earlier identification of patentable subject matter.  The newly added metrics should assess the effectiveness of this count system by determining compliance with the best practices associated with initial actions.  Since examiners are receiving relatively more credit for first actions than for subsequent actions, it makes sense to keep closer tabs on their initial work.  The effects of the new count system may also be analyzed by measuring the degree to which global USPTO data is indicative of compact prosecution.

A second improvement of the new metrics for examiners’ initial work is their linking of searches at the USPTO with the work product of other patent offices, such as the European Patent Office (EPO) and the Japan Patent Office (JPO).  In evaluating examiners’ use of this work product, the initial search metric relies on two factors: the proper consideration of a search report from another office as well as examiners’ notation of searching other offices for actions taken on related cases.  Work completed by other offices is a valuable resource to examiners in the U.S., and this metric should indicate how often examiners are taking advantage of this resource.  This is especially important since one study has shown that examiners rarely rely on applicant-submitted art in making rejections.

The People Have Spoken…

The new metrics involving surveys will provide subjective perceptions of quality and should encourage the participation of the public and the examining corps in identifying the best practices of patent examination.  The external quality survey addresses issues such as the availability and responsiveness of examiners to applicants’ requests as well as the overall examination quality.  The internal quality survey addresses the effectiveness of tools and training available to examiners and the degree to which applicants facilitated high-quality examination.

The USPTO will report the results of each metric as well as aggregate data used in their calculations periodically on the agency’s website.  The new quality measurement system does not attempt to alter patentability standards, nor is it used as the USPTO’s internal quality review of examiners.  However, it should serve to better educate and enable participants in the patent process to comply with existing standards and improve the overall quality of patent examination.

• The Copyright Office released its latest group of exceptions to the Digital Millenium Copyright Act’s anti-circumvention provision. Wired and cnet news report on the exception for jailbreaking mobile phones.

• Also in DMCA news, Ars Technica discusses the Fifth Circuit decision that bypassing technological protections to access software for a fair use does not violate the DMCA anti-circumvention provision.

• The Supreme Court ruled on patentable subject matter in Bilski v. Kappos. Cnet, The MTTLR Blog, and IP Watchdog give their takes on the decision.

• Patent Docs reports on the memo issued by the USPTO to its examiners in the wake of Bilski. In a similar vein, Patently-O takes a look at the first post-Bilski test cases.

• The case between Joel Tenenbaum and the RIAA has taken another turn as U.S. District Judge Nancy Gertner slashed the jury verdict by 90%, calling it “unconstitutionally excessive.” See the coverage from Wired and Eric Goldman.

• Holman’s Biotech IP Blog looked at the recent limits that the EU Court of Justice has placed on patent protection for gene sequences.

• IP Watchdog has some thoughts on the early stages of a multi-billion dollar lawsuit filed against PayPal by XPRT Ventures, Inc.

Are Genes Patentable?

Naturally occurring things, even if newly discovered, may not be patented.  The ACLU asserts that the isolated genes in Myriad’s patents are no different from the genes that occur in nature.  The ACLU’s lawsuit seeks to invalidate Myriad’s patents.  They also argue that the patent covers basic human knowledge or thought (more specifically, the process of comparing the mutated gene to the normal one) and is therefore a violation of the First Amendment.  If the court accepts this reasoning, genes will no longer be patentable material under § 101.

Why It Matters: The BRCA Genes and Cancer

The BRCA-1 and BRCA-2 genes are linked to hereditary breast and ovarian cancer.  Women with mutations in these genes have a 40-85% chance of developing breast cancer, and suffer an increased risk for ovarian cancer as well.  Diagnostic tests can reveal these mutations, allowing women to better assess their risk.  Many women who have the mutated genes can undergo screening for the cancers earlier and more frequently than usual; some may even elect to have prophylactic surgeries.  Results can also serve to alert female relatives that they are more likely to have the mutation.  However, since Myriad holds patents on BRCA-1 and BRCA-2, it currently possesses a right to exclude others from performing these diagnostic tests.

The ACLU’s complaint points out that Myriad has failed to license its patent widely, which carries with it important implications.  Given that there are no alternatives, Myriad may freely price their diagnostics; many argue that the current rate ($3000 per test) is too expensive for many of the women who need to be tested.  Additionally, without other laboratories conducting similar tests, women are unable to secure second opinions.

The Big Picture

About 20% of human genes are patented.  Patent holders can prevent a researcher from studying or testing a particular gene.  Many of these genes, like BRCA-1 and BRCA-2, are associated with serious illness, including Alzheimer’s, muscular dystrophy, and colon cancer.  The ability to screen for genetic predispositions to these and similar diseases represents a great advance in personalized and predictive care.  There is concern, however, that allowing gene patents might slow development in this area.  The ACLU claims that, with gene patents, there is no opportunity to invent around the patent or to build upon and improve it.  They argue that this produces a disincentive to innovate.

As the court wrote in its opinion denying Myriad’s motion to dismiss, “the resolution of these issues will have far-reaching implications, not only for gene-based health care . . .  but also for the future course of biomedical research.”

For additional reading: Medical News Today, GEN

The ACLU’s complaint is available here.

By Claire Devine and Kyle de Neve.

• Bloomberg reports that Yahoo has settled a lawsuit that accused the Internet search company of allowing unauthorized resellers of Mary Kay products use Mary Kay’s logos in pop-up advertisements.

• Facebook is sued again for being too free with your personal information: Wired.com’s Threat Level blogs that a Texas woman has filed a lawsuit against Facebook, accusing the company of conspiring with Blockbuster to illegally obtain information from users who rent or purchase movies from Blockbuster.com.

• The new Rock Band ticks off Gwen Stefani: LA Times blogs that the band No Doubt has filed a suit against Activision, the maker of Guitar Hero, for exceeding contract terms outlining the permitted uses of avatars of various band members.

• In patent news, Patently-O provides a comprehensive roadmap on how to construe patent claims.

• David Kappos, the Director of the US Patent and Trademark Office, has recently put up a blog site for promoting dialogue with the IP community.

• The downside of being a monopoly: Gizmodo.com thinks that the recent settlement between AMD and Intel for $1.25 billion will not end accusations of Intel’s anti-competitive business practices.

• The International Business Times writes that Aruba Networks Inc. has agreed to settle with Motorola for $19.8 million for the alleged infringement of two patents related to the management of wireless computer networks and network security.

• From the biggest screen to the courtroom: The Wall Street Journal reports that Cinemark is seeking declaratory judgment of non-infringement and invalidity of two Imax theater-geometry patents.

Overall, the Justices pushed both sides to advance a reasonable standard for evaluating the types of applications that should be patented.  Most Justices were skeptical on granting patents to business methods.  Justice Ginsburg, for example, expressed concern that granting business method patents would also open the door to patenting “an estate plan, tax avoidance, how to resist a corporate takeover, [and] how to choose a jury”.  At the same time, however, some Justices were dissatisfied with the narrow “machine or transformation test” issued by the Federal Circuit (according to which methods must be either tied to a particular machine or transform specific subject matter in order to be patentable). It appeared that the Justices were aware that stating too strict a standard may very likely have negative implications for industries such as computer technology and biomedicine.  Regardless, judging from the criticism voiced by the Justices regarding the patentability of the business method claims in Bilski’s application, it appears likely that the Court will rule against Bilski’s claims.

The oral argument began with Jakes arguing that the Court should adopt a flexible standard as opposed to the rigid and narrow test adopted by the Federal Circuit.  In particular, Jakes argued that the test should be whether there is a “practical application of a useful result” that involves “physical steps”.  The Justices (including Justice Breyer and Justice Sotomayor) continuously questioned Jakes regarding what he thought would be a reasonable standard.  In particular, Justice Sotomayor suggested that a proper standard should be one that is tied to something, such as inventions, technology, sciences, or the useful arts.  Justice Ginsburg pushed for a standard that would base patentability on science or technology, which she argued is a standard that is used successfully in Europe and other countries.

Criticisms were expressed regarding Bilski’s claims.  In particular, Justice Roberts said that he failed to see any physical steps in the patent claim at issue.  In addition, Justice Kennedy was concerned that Bilski didn’t involve something that was tangible, and that the claims failed to show how the “substance” was different before the process and after the process.

When Stewart took the podium, the Justices bombarded him with questions about the “machine or transformation test”.  In particular, Justice Roberts stated that the test would seemingly allow even the most tangential and insignificant use of a machine to be patentable.  In addition, Justice Breyer stated his concern that a new machine test allowing a patentable process simply because the process is running on an old machine would be too broad.  Justice Stevens suggests that the question should instead be whether the new process is patentable apart from the machine.  Seeming to acknowledge this difficulty, Stewart responded that this case was probably not the best case to push for a broad standard on evaluating patentable subject matter (e.g., claims involving software innovations or medical diagnostics techniques).  He stated that he would rather the Court rule only on the narrow issue of whether these particular claims are patentable and leave the other issues unresolved.

It is interesting to note that at one point during the arguments, Justice Sotomayor explicitly stated that the ruling in this case would be limited to statutory limitation of “process” and thus would not overrule State Street (which was limited to machines).

Based on the Justices’ questions, it seems likely that the Court will restrict future patents on business methods.  The Court may also issue a rather strict standard on future software patents.  However, there seems to be enough hesitancy from most of the Justices to suggest that the standard adopted will most likely not be as strict as the one issued by the Federal Circuit.
A complete transcript of the oral argument can be found here.

By Jane Wu and Brian Harley.

• Patently-O wonders whether the Supreme Court might take the opportunity afforded by the upcoming Bilski method patent case to scrap software patents, and states the socio-economic case for abandoning them.

• Engineering crime scenes: Lawyers.com considers a study which suggests that fabricating DNA evidence is far from science fiction.

• For an international perspective: European blogs Marques and Catch Us If You Can!!! weigh in on the use of “RNA” in trademarks as addressed by the European Court of First Instance (full text of the CFI’s judgment here).