Maximizing portfolio value through smart claim drafting - targeting potential infringers in method claims

Patent claims are the most important part of a patent, as the claims define the invention for which the patent holder holds an exclusive monopoly. Patent portfolio value is dependent on a variety of factors. Three very important factors are:

• Likelihood of use of the claimed invention by attractive target companies,
• Ease of enforcement of infringement of the patent claims, and
• Difficulty of invalidation of the patent claims.

Typically the main driver of value of a patent portfolio is the value of the United States (US) patents. Therefore US law is pertinent. Since a US patent is valid for 20 years from the date of filing, the state of US law at the time of discovery of an alleged infringement is pertinent.

Two well-known types of patent claims are system and method claims. A system claim covers the structural features of an apparatus which has been invented. A method claim is usually a series of steps describing how an invention is to be applied. Each of these types of claims have advantages and disadvantages.

For a method claim to be infringed in the US, it is necessary for every step in the method claim to be performed. A major issue with method claims in the US is “divided” infringement, that is, where different parties perform the steps described. For ease of enforcement of infringement, it is best to avoid divided infringement by asking the following questions:

1. Who is/are the potential infringer(s) to be targeted by the claim? 
2. What steps are they likely or not likely to perform?
3. How should the claim be written to cover the steps in (2)?

Here are some example implementations of this process.

Example 1: Patent revolving around a software application or “app”

To answer question 1, there is a need to determine the intended target of the claim. It would be in the best interest of the patent holder to target either

• The producer of the app, or
• The vendor who makes the app available for the end-user

and not the end-user.

For question 2 which concerns steps likely or unlikely to be performed, it is important to remember that the producer or vendor is unlikely to be using the app themselves. Rather the producer or vendor is likely to perform the steps of providing tools to the end-user to use the app, or enabling the end-user to perform a function via the app.  

Then to address question 3, the method claim can be written as a series of “providing” or “enabling” steps or similar. If in doubt, it may be useful to write more than one method claim. Furthermore, the drafter should revisit the specification and drawings to ensure that there is sufficient support for such method claims.

Example 2: Patent for a physical product

For question 1, it is likely that the patent holder would want to target either:

• The manufacturer of the physical product, or
• The vendor who makes the physical product available for the end-user,

For question 2, the manufacturer is likely to be assembling the physical product. The vendor is likely to be selling the physical product to the end-user.

  

Question 3 can then be addressed by drafting the method claim as a series of “assembling” or “providing” steps or similar. Again, if in doubt, it may be useful to draft two or more different method claims. As with example 1, the drafter should revisit the specification and drawings to ensure sufficient support.

 

Finally, it is important to remember that the fact pattern of each case may be unique. Furthermore, the future state of US patent law is uncertain and unpredictable. One mitigating strategy in the US to address both these issues is by filing continuation applications. This helps keep the family alive, and therefore adapt the claims to ever-changing patent law and to address different fact patterns and potential targets.

Re-examination as a tool for US patent litigation: Waymo vs Uber

Re-examination can be a useful tool to address United States (US) patent litigation. The utility of re-examinations in US patent litigation was demonstrated recently in the Waymo vs Uber case. Waymo sued Uber for patent infringement and trade secret misappropriation on its Light Detection and Ranging (LIDAR) technology. Uber agreed to settle the lawsuit by redesigning its LIDAR technology so as to avoid the Waymo patent, and giving Waymo USD 245 million of equity and a commitment not to copy Waymo technology.

       

The main patent in question in this infringement case was US Patent 9,368,936 to Lenius et al (the “’936 patent”). Eric Swildens, an engineer working for a cloud computing startup, then decided to challenge the ‘936 patent by requesting the United States Patent and Trademark Office (USPTO) to undertake an ex parte re-examination .

Briefly, in an ex parte re-examination request, the challenger can submit prior art patent and other printed publications to the USPTO to show that a patent’s claims were either anticipated or obvious in light of the prior art. The USPTO then decides if a substantial new question (SNQ) of patentability has been raised. If an SNQ has been raised, and the USPTO agrees with the challenger’s assertions, then the patent claims are rejected. The patent owner can make arguments, add new claims or amend existing claims to address these rejections.

Mr. Swildens submitted the prior art against the ‘936 patent in August 2017. In December 2017, the USPTO issued an office action rejecting all the claims of the ‘936 patent. After a response by Waymo, followed by another USPTO rejection and a further Waymo response, in September 2018 a final office action was issued by the USPTO rejecting all but 3 claims of the ‘936 patent. Waymo can still act to defend the ‘936 patent but has not done so as yet.

While the final outcome is unclear at this moment, it points to the utility of re-examinations as a tool against litigation. Based on USPTO statistics from December 2017, ex parte re-examinations have resulted either in all claims cancelled or claims having to be amended around 79% of the time. This makes them a potentially useful and low-cost weapon in litigation, as long as the claims can either be cancelled completely or are amended sufficiently to allow noninfringement arguments to be made. This will depend on factors such as the quality and scope of the prior art.

A competently filed ex parte re-examination costs around USD 50,000 including both USPTO and legal fees. Mr. Swildens did a prior art search, drafted and filed the re-examination request himself, keeping the cost down to USD 6,000.

There is a good chance that Uber may 

- not have had to undertake a costly redesign of its LIDAR technology, or 

- have had to pay Waymo less than USD 245 million in equity. 

It is interesting that Uber did not challenge the ‘936 patent. Mr. Swildens expressed surprise that Uber had not filed a re-examination.

In short, re-examination can be a useful and potentially low-cost tool to address US patent litigation. Even the threat of re-examination using relevant prior art can act as a deterrent or be used as a negotiating tool to obtain a more favourable settlement. To mount an effective re-examination, the defendant should make sure that a high quality prior art search is performed, and that a strong written submission is made to the USPTO.

Disclaimer: The above is not meant as legal advice. The author is not a lawyer. In the event of litigation, the author recommends seeking out legal advice from a lawyer.

Best Practices for Software Applications post-Alice

Strategies which give software patent applicants time and flexibility to counteract the effects of the US Supreme Court’s Alice decision become more valuable with each passing day. As I pointed out in a previous blog post, this is because:

• The United States Patent and Trademark Office (USPTO) continues to issue clarifying guidelines for applicants to deal with the impact of the Alice decision; and
• The courts, namely the United States Court of Appeals for the Federal Circuit (USCAFC), continue to bring down judgments which further clarify Alice. 

The recent McRO vs Bandai and BASCOM vs AT&T USCAFC decisions and accompanying USPTO November 2016 memorandum; and USPTO December 2016 Subject Matter Eligibility Examples demonstrate this continuing clarification. In a previous blog post, I also discussed lessons which could be drawn from the USCAFC Enfish vs Microsoft decision. Putting together those lessons and the recent clarifications, a set of best practices for software patent applications is emerging, as I will explain below.

In its November 2016 memorandum, the USPTO stated the following notable points with regard to McRO vs Bandai:

• Examiners should consider the claim as a whole and not try to overgeneralize or simplify it into gist or core principles
• An improvement in computer-related technology may also be claimed as a set of “rules” that allow computer performance of a function not previously performable by a computer. Indications of improvement include
• Teaching in the specification about how the claimed invention improves a computer or other technology; and
• Claiming a particular solution to a problem or a particular way to achieve a desired outcome defined by the claimed invention as opposed to claiming the idea of a solution or an outcome.

With regard to BASCOM vs AT&T, the USPTO stated the following in both its November 2016 memorandum and December 2016 Subject Matter Eligibility Examples:

• Examiners should consider additional elements both in combination and individually when determining whether a claim as a whole is patent eligible. This is because the claim as a whole may pertain to a non-conventional and non-generic arrangement of known conventional elements.
• The limitations in the claims confine the invention to a specific practical application of the abstract idea.

In the December 2016 Subject Matter Eligibility Examples, the USPTO provided two further examples relating to automated teller machine (ATM) technology, and technology to track inventory. In both cases, the USPTO gave examples of claims directed to each of the technologies which were patent eligible, because these claims relate to specific implementations; and the combination of elements in the claims relate to the performance of functions in a non-conventional and non-generic way.

Based on the continuing clarifications and Enfish vs Microsoft, a set of best practices for software applications post-Alice can be drawn up:

1.  Describe the underlying hardware where the software resides using non-generic terms. Software does not exist in a vacuum. Also using non-generic terms makes it more difficult for the examiner to state that the additional elements either individually or in combination are generic components. Furthermore, the examiner is less likely to find that the claims are directed to an abstract idea, if the claims are tied to the underlying hardware.
2. State clearly within the specification how the invention at hand improves the operation of the underlying hardware over the prior art. For example, in McRO vs Bandai, the USCAFC relied on the specification’s explanation of how the claimed rules enabled automation of specific tasks that previously could not be automated.
3. Direct the claim towards a particular solution to a problem or a particular way to achieve a desired outcome defined by the claimed invention.
4. Use claim language that allows the applicant to make prosecution arguments to tie in with the language of the USPTO guidelines relating to the above decisions.
5. Tie the claim language to the hardware using more “technical” language rather than generic terms.

Additionally, it may also be worthwhile to propose a narrower independent claim where the words “enhance” or “improve” are used. While these may seem unnecessarily narrowing to some, sometimes trading off breadth for an issued patent is useful. As I pointed out in my last blog post “Take It or Keep Going”, advantages include:

• Easier to convince investors for fundraising,
• Easier to market products connected to the application, and
• Less resources needed to continue prosecution of the application.

Take it or Keep Going?

Occasionally during patent prosecution, a patent examiner will indicate to an applicant that while they are not willing to grant an independent claim, they are willing to grant a narrower dependent claim. The applicant then has two choices: take the narrower dependent claim or continue in prosecution.

Taking the narrower dependent claim gives the applicant a valid granted patent. The applicant can now market products covered by the granted patent, as patented. The applicant can inform potential investors of the granted patent. The downside is that once the patent is granted, it may be very difficult if not impossible to change the scope of the claims. In effect the applicant has to “live with it.”

Continuing prosecution exposes the applicant to the risk of increased spending without much more to show for it. However there is a chance that the applicant may get claims of broader scope than the narrower claim.

As with many things in business, the answer to this question depends on many factors. These factors include:

• Motivation for obtaining the patent,
• Resource factors,
• Competitive factors,
• Examiner attitude, and
• Jurisdiction.

The impact of each of these factors on answering this question are detailed below:

Motivation for obtaining the patent

What is the motivation of the applicant in pursuing the patent? This should be the first question asked. If the motivation is to, for example, facilitate marketing of the product or convince investors, then it may be advantageous to accept the narrower claim instead of delaying it in prosecution. If however the aim is to get the broadest protection possible, then the applicant should consider continuing prosecution.

Resource factors

In addition to money, continuing prosecution will consume an applicant’s time and energy. The applicant should consider whether there are enough resources to continue prosecuting the patent. On the other hand, obtaining a granted patent may open the door to an increased flow of resources. Having a granted patent may facilitate investment or partnership which may lead to increased resources available to the applicant.

Competitive factors

Sometimes, the narrower claim may cover a feature that is either commonly used or improves the functioning of a product owned by the applicant. If so, then taking the narrower claim may be attractive to the applicant. It then makes it difficult for a competitor to design around the feature without significantly reducing any associated value proposition of a competing product.

Having a patent may also be valuable for marketing. Patents are useful to, for example, a company pursuing a product differentiation strategy. The company can, for example, market itself as innovative or cutting edge.

Examiner attitude

An important indicator of the success of continuing in prosecution is the attitude of the examiner to the claimed invention. If the examiner seems to be intransigent on the independent claim or minor modifications to the independent claim, but is willing to grant the dependent claim, then it may be best to take the dependent claim.

One way to gauge examiner attitude is by requesting a telephone or face-to-face interview with the examiner to discuss the independent claim. This will enable the applicant to get a “read” on examiner attitude.

Jurisdiction

The answer to the question also depends on the jurisdiction. For example, the United States (US) allows applicants to file continuation and continuation in part applications. Therefore, an applicant can take a narrower claim, then file a continuation application and try to get claims of broader scope. Other jurisdictions may not have the same rules in place, so it may be worthwhile to continue prosecuting the application.

Also, the relationships between jurisdictions may be important. For example, assume that an applicant has two applications from the same family in the US and jurisdiction X. Assume that jurisdiction X is of lower priority strategically to the applicant compared to the US. Then the examiner in jurisdiction X poses the above choice to the applicant.

If there is a patent prosecution highway (PPH) agreement between jurisdiction X and the US, it may be in the applicant’s interest to take the narrower claim in jurisdiction X. This enables the applicant to accelerate grant of the application in the US using the PPH agreement. Once the US application is granted and before the patent is issued, the applicant can then file a continuation or a continuation part application in the US to try to get claims of broader scope.