Chia-Yu Chang @ Law, P.C. 315 W. 70th Street, #12L New York, NY 10023
(212)769-1756 cychang at cychanglaw dot com
Chia-Yu Chang is an attorney admitted to practice in NY and before USPTO, and practices primarily in intellectual property (patent, trademark, copyright, trade secret), corporation, commercial transaction, finance, and estate planning. Before joining the legal profession, Chia-Yu was a fixed-income research analyst with Salomon Brothers. He holds a BS degree in geology from National Taiwan University, MS degrees from Indiana University and Columbia University, and a JD degree from Benjamin N. Cardozo School of Law. On the personal side, Chia-Yu has practiced Tai-Chi for over 20 years, and is currently learning Taiko drumming.
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Monday, March 31. 2014
- Trade secrets +1; patents -1
The America Invents Act, enacted on September 16, 2011, amended the Patent Act in several critical areas. One of the amendments was directed to §273, which provides a defense to infringement for “prior use” of a patented invention.
Generally, §273 allows an entity that has been accused of infringing certain types of patents to escape liability if the entity has first used the patented invention at least 1 year before the effective filing date of the patent. The permissible “prior use” can be either internal or public. Even before the enactment of the previous §273 in 1999, there had been calls for a broad “prior use” defense for all patentable inventions since at least as early as the 1960s, but Congress was not able to act on these calls. Primarily because of the commercialization of the internet, the proliferation of business method patents, and the 1998 State Street decision where the Federal Circuit explicitly held that business methods were patent eligible, Congress was able to gather enough votes in 1999 to pass a “prior use” defense under the previous §273, but only for the narrow scope of “methods of doing or conducting business.”
As an example, Company A began using a business method internally as a trade secret in 1995. Company A did not apply for a patent for the method, having determined that business methods generally were not patentable. In 2000, however, Company B obtained a patent on the same method, and accused Company A for infringing the patent. In such a case, Company A can raise the “prior use” defense pursuant to the previous §273 to prove that it is not liable for infringement.
Under the previous §273, however, if Company A had used a method of manufacturing, instead of a method of conducting business, it would not have been able to avail itself to the “prior use” defense. Because of this, proponents for a broader scope of the “prior use” defense had argued that the absence of such a broader defense would lessen the competitiveness of US manufacturers with foreign competitors, and encourage US corporations to move manufacturing overseas.
In the amended §273, Congress was finally able to expand the “prior use” defense to virtually all patentable subject matters, including processes, machines, manufactures, or compositions. Under the amended §273, an entity accused of infringing a patent can escape liability if it had invented and commercially used the patented invention at least 1 year before the earlier of the effective filing date of the invention or the date when the invention was disclosed to the public.
In practice, the expanded “prior use” defense under the amended §273 will further encourage inventors to use trade secrets, instead of patents, to protect their inventions. In this round of disclosure against secrecy, therefore, secrecy has scored a win. In terms of public policy, however, we should keep in mind that one of the primary rationales for granting patents is to encourage public disclosure of inventions, so the general public can share and build on the fruits of individual intellectual endeavors. We should continue to monitor and assess the practical implications and impacts of such a shift from disclosure to secrecy.
Additionally, AIA includes many other provisions to improve the patent system, such as prior art submission, post-grant review, inter partes review, and fee-setting power of USPTO. USPTO has also embarked on several initiatives, such as incorporations of crowdsourcing for prior arts. Let’s hope these and other future changes will achieve the right balance between disclosure and secrecy in encouraging innovations and ensuring competitions.
 Public Law 112-29.
 See, e.g., Joe Matal, A Guide to the Legislative History of the America Invents Act, Part II of II, 21 Fed. Cir. B. J. 539, 555 (2012), available at http://www.uspto.gov/aia_implementation/guide_to_aia_part_2.pdf.
 §4302(a) of the American Inventors Protection Act, Public Law 106-113, titled the First Inventor Defense Act, codified as 35 U.S.C. §273(a)(3).
 If US manufacturers used patents to protect their inventions, the patents would be difficult to enforce overseas. On the other hand, if US manufactures used trade secrets for protection, they would be subject to attacks by others who obtained patents on the inventions. See, e.g., Matal, at 552. §271(g) of Patent Act, enacted in 1998, partially alleviated this concern by providing that an imported product made overseas using a process patented in US would be liable for infringement. See, e.g., http://www.finnegan.com/resources/articles/articlesdetail.aspx?news=c9459d08-6491-4e06-8ab2-aa12db3045b7.
 “IN GENERAL. -- A person shall be entitled to a defense […] with respect to subject matter consisting of a process, or consisting of a machine, manufacture, or composition of matter used in a manufacturing or other commercial process, that would otherwise infringe a claimed invention being asserted against the person[.]” Sec. 5(a) of the America Invents Act, codified as 35 U.S.C. §273(a).
Monday, September 5. 2011
- Patents used primarily to attract VCs by software startups
UC Berkeley Law School conducted a comprehensive patent survey in 2008, asking young start-up technology companies to respond to several patent-related questions. (See here and here.) More specifically, the survey included the following questions (not exhaustive):
The ~1300 companies that responded to the survey encompassed the software, computer hardware, biotechnology, and medical device industries. More than 700 of them, however, were software companies. One of the co-authors, Pamela Pamuelson, wrote an interesting article in 2010 summarizing the survey results particularly of software companies. Below is a quick recap of her summaries:
Therefore, the first finding of the survey is that software startups generally do not consider patents important in gaining competitive advantages. Unlike biotech or medical device companies, software companies prefer using first-mover advantage, complementary assets, copyright, trade secret, trademark, or reverse engineering to compete in the marketplace. (Click on thumbnail above to view original chart.)
The survey also revealed, however, that those companies backed by VC were much more likely to apply for patents than non-VC-backed companies. -- The software startups that participated in the survey were originally selected from 2 databases: ~500 from Dunn & Breadstreet (DB) and ~200 from VentureXpert (VX). About 10-15% of the DB companies and all of the VX companies were backed by VCs. In responding to the question whether they currently held or were seeking patents, only ~1/4 of the DB companies (with 85-90% not backed by VC) answered positively. On the other hand, ~2/3 of the VX companies answered positively.
From the survey results, it appears software startups use patents primarily to attract or retain VC investments, rather than as a competitive advantage in the marketplace. It is not clear, however, whether the change in strategy toward patents (with or without VC investments) was caused by the perception of the software entrepreneurs regarding VCs, or by the actual requirements of the VCs.
But, perceived or not, the fact that VCs and software entrepreneurs may hold such different views toward the values of patents is significant. It points to the need of a flexible patent system.
Tuesday, August 30. 2011
- Fair use for small companies
Recently, Marc Andreesen, the co-founder of Netscape, wrote an interesting article titled “Why software is eating the world”. (See here.) Basically, the article is a recap of the Web movements during the past 10 years since the internet bubble burst in the early part of the last decade. Indeed, Andreesen cited numerous software-focused companies that are biting into the market shares of many old-timer hardware-based companies. These software companies are mostly household names such as Amazon, Netflix, Pixar, Google, Groupon, etc.
Given the controversies that have been associated with software patents, I was curious how these “new” software companies approach patents. So, I looked up the US patents and patent applications held by the companies mentioned in Andreesen’s article. See table below.
Pixar Amazon 479 Netflix Shutterfly Snapfish PayPal Rovio Skype Twitter Zynga Spotify
It’s pretty clear and not surprising from the table that older companies tend to build up larger patent portfolios than younger ones. This can happen due to the natural growth of a company’s products and technologies with time, and the consequential growth of its patent portfolio. However, the severe backlogs and delays in USPTO can also significantly impede patent protections for younger companies. (Eg, see here, where the inventor of a cloud-based video game technology waited for 8 years to receive a patent.)
Therefore, younger (and smaller*) technology companies do not really benefit much from the existing patent system, particularly for software companies. Even if they have the funding to submit patent applications, they will not receive the protections for the first 3-8 years of their operations. Admittedly, it is also less likely that they will be burdened with patent infringement lawsuits (until later, when and if they survive and grow bigger), but neither will smaller companies be able to effectively protect their inventions from being siphoned off by others, or to protect their investments.
Our patent systems have increasingly become the battlefield for large corporations. (Witness the fierce billion-dollar battle over the Nortel patent portfolios between Google, Apple, RIM, Microsoft, etc.) In that case, why not simply exempt smaller companies from patent infringements, expanding the fair use of patents? That seems to be only fair!
* P.S. Younger companies may not necessarily be smaller. Among the companies in the table above, Groupon, Zynga, or Twitter probably can no longer be considered "small". However, generally being young and being small do tend to go hand-in-hand.
Friday, January 14. 2011
- Tiptoeing for a balance, or taming of the shrew
Many people have discussed the case, Bilski v. Kappos, and so I will not repeat it. (See, e.g., here & here.) As a quick introduction, Bilski was an inventor who applied for a patent on a “method of hedging commodity transactions”; USPTO rejected it; it was appealed eventually to the US Supreme Court; and on 6/28/2010, the Supreme Court rejected the patent application as well.
Bilski did not involve software directly, but its sibling category, “business methods” (specifically, “method of hedging”). Software, however, invariably involves steps (ie, methods) of computation, and therefore the general holding in Bilski with respect to method-type inventions could be applied to software patents by analogy.
The big-picture issue in Bilski was the threshold question, “What type of ‘method’ inventions are not eligible for patents regardless of whether they are new, ingenious, or properly disclosed to the public?” The Supreme Court held that if these “method-type” inventions are simply “abstract ideas”, then they would not be eligible for patent protections, categorically. (Four of the justices would have held that all business methods were not patentable.) The Court, however, declined to give a clear guidance on how to define “abstract ideas”, and simply threw the ball back to the lower court (ie, Appellate Court of the Federal Circuit; no pun intended) to find the solution.
Most people agree with the principle that “abstract ideas” should not be eligible for patent monopolies. The principle has been a fundamental cornerstone of US patent laws since as early as the nineteen century. (E.g., Rubber-Tip Pencil Company v. Howard, 87 U. S. 498 (1874)) The devil, however, is in the details. And the real battlefield is in how USPTO and the courts decide which inventions are “abstract ideas”.
With respect to software inventions, BPAI (Board of Patent Appeals and Interferences of USPTO) in its recent decisions appears to have equated “abstract ideas” with the term “software per se”. Moreover, BPAI has shown increasing tendency to dispose of software patent applications based on the “software per se” ground since 2007. (See table below.)
I have listed below some of the software applications that have been rejected in 2010, post-Bilski, by BPAI on the “software per se” ground.
Case Date Claimed Invention* Ex Parte Proudler 07/08/2010 Ex Parte Birger et al 07/13/2010 Ex Parte Fellenstein et al 07/27/2010 Ex Parte Choo et al 07/28/2010 Ex Parte Ramanujan 08/12/2010 Ex Parte Christian et al 08/23/2010 Ex Parte Russo et al 08/30/2010 Ex Parte Hong 09/21/2010 Ex Parte Kropaczek et al 10/13/2010 Ex Parte Sung et al 10/28/2010 Ex Parte Martin 11/15/2010 Ex Parte Asare et al 11/17/2010
Ex Parte Proudler
Ex Parte Birger et al
Ex Parte Fellenstein et al
Ex Parte Choo et al
Ex Parte Ramanujan
Ex Parte Christian et al
Ex Parte Russo et al
Ex Parte Hong
Ex Parte Kropaczek et al
Ex Parte Sung et al
Ex Parte Martin
Ex Parte Asare et al
In these cases, BPAI referred to MPEP 2106.01(I), which is titled “Functional Descriptive Material: ‘Data Structures’ Representing Descriptive Material Per Se Or Computer Programs Representing Computer Listings Per Se”. The term “software per se” under BPAI, therefore, seems to refer to “data structure per se” and “computer listing per se”. Furthermore, the texts of the MPEP section distinguish the “per se” category based on whether the software or data structure defines “structural and functional interrelationships” between the software or data structure and other claimed elements of the computer. The section, however, does not define any standard or test in determining whether such “structural and functional interrelationships” have been sufficiently defined to avoid the “software per se” rejection.
Note that not all applications that had been rejected by the examiner on the “software per se” ground were affirmed by BPAI. See, e.g., Ex Parte Thornton et al, 01/06/2011. ("A system that manages the updates of land parcel drawings.") Moreover, in its first opinion after Bilski, (Research Corp Tech v. Microsoft), the Appellate Court of Federal Circuit on 12/8/2010 held that a method of generating halftone images was patent eligible. This holding contradicted with BPAI’s earlier determination in Ex Parte Hong (see table above), which also involved methods of processing pixel images. It remains to be seen whether BPAI will modify its position toward all software patent applications following Research Copr Tech, or distinguish the opinion on its facts.
Even after the anxiously anticipated Bilski opinion, there is still no clear legal guidance in deciding whether or not a software invention is simply an “abstract idea” and thus barred categorically from patent protections. This void will certainly result in more confusions and inconsistencies at USPTO and the various courts, and thus impart greater uncertainties in the software patent application processes.
Tuesday, July 14. 2009
- Are trade secrets patentable?
Friday, March 7. 2008
-- In the context of greenhouse gas emission and climate change
Friday, December 15. 2006
Google rolled out its brand new "Patent Search" tool yesterday. (See here.) I quickly tested the tool. Looks like it includes only issued US patents, not published patent applications. (I am guessing non-US patents and patent applications should be coming soon.) At this point, the Google Patent Search tool does not offer much more than the search features provided in USPTO web site. (Here.) I did a quick search for the phrase "spinal cord injury" on both the USPTO web site and Google. USPTO returned 1875 results, but Google returned 672. Not sure why yet. Also, for each individual patent, Google Patent Search displays the "Abstract", "Claims", "Citations", and "Referenced By" sections as texts. The "Description" section, however, is only available as images. The USPTO database is all text-based, except older patents.
Wednesday, December 6. 2006
The Supreme Court has shown sudden interests on patent disputes in recent years. Just this year alone, the Court has determined/heard at least 5 patent cases. See table below.
Each of these cases can have potentially far-reaching impacts on our patent system, and can mean lots of $ gained or lost for many companies. Many industrial giants have therefore taken advantage of this once-in-a-life-time opportunity and sought to advocate their own interests by submitting amicus briefs to the high court. Many of these amicus briefs expressly supported one particular side. For me, this is an interesting opportunity to find out who supports what.
Wednesday, November 29. 2006
Suppose that composition S is an important medicine. It was found, however, that the composition degrades rapidly when it is exposed to the air, generating corrosive acids and causing difficulties in its storage and transportation. Subsequently, Company A discovered that the degradation was due to reactions between the composition and a group of acids commonly present in the air. Because of this finding, Company A was able to further discover that by adding composition W to composition S, the mixture would no longer degrade in the presence of the acids. Company A wants to apply for a patent on the mixture composition. There is, however, one problem. Before Company A's discovery, Company B had already synthesized the mixture of W & S, although at that time the mixture was only used for the purification of composition S, and Company B (or anyone else) did not know the mixture could prevent the reaction between S and the acids in the air. Can Company A obtain a patent for the mixture composition?
Friday, October 6. 2006
I have posted several write-ups on spinal cord injury related patents. (See here in the patent archive.) These patents involve technologies in the fields of cellular, molecular, and genetic biology, or other related fields. Even with these discoveries, we understand the search for an effective treatment for spinal cord injury is still an ongoing effort. However, the pace of advancement in these fields during the past 2 decades has been amazing.
Title: Genetic inhibition by double-stranded RNA
Inventor: A. Fire; S. Kostas; M. Montgomery; L. Timmons; S. Xu; H. Tabara; S. Driver; C. Mello
Assignee: The Carnegie Institution of Washington, Washington, DC; The University of Massachusetts, Boston, MA
Filing date: 12/18/1998 (provisional application filed on 12/23/1997)
Issue date: 01/14/2003
(Page 1 of 3, totaling 29 entries) » next page
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Wednesday, June 4 2014
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Thursday, April 10 2014
Expanded “prior use” defense under AIA
Monday, March 31 2014
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Thursday, February 16 2012
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11/14/2011 Presentation on Climate Change
Friday, December 9 2011
Software patents and venture capital
Monday, September 5 2011
Software & patents
Tuesday, August 30 2011