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DARK DAYS AHEAD The Patent Pendulum By Gene Quinn.

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1 DARK DAYS AHEAD The Patent Pendulum By Gene Quinn

2 An Ambitious Agenda Phase 4 Phase 1 Phase 2 Phase 3 A Brief History of the Problem Recent SCOTUS Decisions CAFC on Obviousness The End: Q & A

3 A Brief History of the Problem Phase 1 For a very long time there has been a believe that innovation simply happens. Some innovations, even if new/useful, don’t deserve to be patented. Whenever a patent is granted something has been taken from the public domain. This view traces all the way back to SCOTUS flash of creative genius test. Today the problem is ignorance, misinformation and propaganda.

4 Flash of Creative Genius Since Hotchkiss v. Greenwood, decided in 1851, it has been recognized that, if an improvement is to obtain the privileged position of a patent, more ingenuity must be involved than the work of a mechanic skilled in the art... That is to say, the new device, however useful it may be, must reveal the flash of creative genius, not merely the skill of the calling. If it fails, it has not established its right to a private grant on the public domain. Cuno Engineering Corp. v. Automatic Devices Corp., 314 U.S. 84 (1941)

5 Anti-patent Ignorance Twitter founded in 3/2006 Filed patent application to cover “tweeting” in 7/2008 As of 9/30/2013 has 9 U.S. patents and 95 patent applications Twitter went public in 11/2013 Acquired 900 patents from IBM in 12/2013 SEC filings: constantly explain patents are “important” and other companies have MANY more patents, which presents significant risk moving forward.

6 Modern Tech Industry Doesn’t Exist Without Patents Software has been patented since 1965. The tech industry is VERY different today than before software patents, which should be self-evident. It is also VERY different compared to when software patents started to first become more commonplace in the early 1980s. Apple, Facebook, Twitter, Google, Priceline and SO many other companies have been built on software patents. Do we only want trivial? Plugins that don’t work, or software created and then not updated, or Apps that do trivial things may not need patents, but they are never patented anyway.

7 Software Programming “It can take many years and many hundreds of team members to create a software package akin to something you might see from IBM or even a new Apple operating system. These things are not coded by a second year engineering student, and they are not trivial. It is amazing to me that anyone things creating software is trivial given how infrequently software works, how often it needs to be updated and patched, and all of the security vulnerabilities and identity theft issues that even the largest retailers face on an increasing basis.” Taken from Fairy Tales and Other Irrational Beliefs About Patents Published on September 26, 2014.

8 Phase 2 SCOTUS

9 Mayo v. Prometheus 566 U.S. ____ (2012) SCOTUS proclaimed that they “decline the Government’s invitation to substitute §§102, 103, and 112 inquiries for the better established inquiry under §101.” First, it is not an invitation to use 102 and 103 for novelty and non-obviousness; it is absolutely required by Title 35. Second, 101 is not the “better established inquiry” because in the 200 years leading up to Mayo v. Prometheus it had NEVER been used by any court to find a patent claim invalid because it lacked novelty, which is exactly what the Supreme Court did when it acknowledged that the claims did not cover a law of nature but rather only added conventional steps.

10 AMP v. Myriad Genetics U.S. Supreme Court, June 13, 2013 “cDNA is not a product of nature and is patent eligible under §101, except insofar as very short series of DNA may have no intervening introns to remove when creating cDNA. In that situation, a short strand of cDNA may be indistinguishable from natural DNA.” “Nor are Myriad’s claims saved by the fact that isolating DNA from the human genome severs chemical bonds and thereby creates a nonnaturally occurring molecule.” But Chakrabarty said: “[R]espondent’s micro-organism plainly qualifies as patentable subject matter. His claim is not to a hitherto unknown natural phenomenon, but to a nonnaturally occurring manufacture or composition of matter – a product of human ingenuity…”

11 Alice v. CLS Bank Decided June 2014 Used what they called the Mayo framework, which is ironic given how the Court so famously misapplied patent law in the Mayo case. First, determine whether the claims at issue are directed to one of those patent-ineligible concepts. Second, examine claim elements to determine whether it contains an inventive concept sufficient to transform the claimed abstract idea into a patent-eligible application. “The relevant question is whether the claims here do more than simply instruct the practitioner to implement the abstract idea of intermediated settlement on a generic computer. They do not.” “The method claims recite the abstract idea implemented on a generic computer; the system claims recite a handful of generic computer components configured to implement the same idea.”

12 Bilski v. Kappos 561 U.S. ____ (2010) The machine-or-transformation test is not the sole test for patent eligibility. Federal Circuit erred when it ruled that MOT was the singular test to determine whether an invention is patentable subject matter. 101 does not categorically preclude business method patents. The categorical exclusion argument was undermined by the fact that federal law – 35 USC §273(b)(1) – explicitly contemplates the existence of at least some business method patents: Under §273(b)(1), if a patent- holder claims infringement based on a method in a patent, the alleged infringer can assert a defense of prior use. All 9 agreed Bilski application was properly rejected. Majority: it was properly rejected because it was an abstract idea. Concurrence: wanted to say business methods are not patent eligible unless tied to an otherwise patentable invention (see Stevens footnote 40).

13 Consequences U.S. no longer has favorable patent laws for biotech, medical diagnostics and software. Companies will move to more favorable jurisdictions (see tax inversion). Expect far fewer medical devices (see Medtronic brief in Bilski), far more copying, only crawling incremental innovation. Portfolios substantially devalued will eventually mean shareholder value will be compromised. Wall Street will figure out that tech companies have no useful exclusive rights. Market for selling and licensing is drying up fast. Why both patent? Trade secret the new norm, which harms public. Investors reluctant to invest; not good for job creation.

14 CAFC in Ultramercial A method for distribution of products over the Internet via a facilitator, said method comprising the steps of: a first step of receiving, from a content provider, media products that are covered by intellectual property rights protection and are available for purchase, wherein each said media product being comprised of at least one of text data, music data, and video data; a second step of selecting a sponsor message to be associated with the media product, said sponsor message being selected from a plurality of sponsor messages, said second step including accessing an activity log to verify that the total number of times which the sponsor message has been previously presented is less than the number of transaction cycles contracted by the sponsor of the sponsor message; a third step of providing the media product for sale at an Internet website; a fourth step of restricting general public access to said media product; a fifth step of offering to a consumer access to the media product without charge to the consumer on the precondition that the consumer views the sponsor message;

15 CAFC in Ultramercial a sixth step of receiving from the consumer a request to view the sponsor message, wherein the consumer submits said request in response to being offered access to the media product; a seventh step of, in response to receiving the request from the consumer, facilitating the display of a sponsor message to the consumer; an eighth step of, if the sponsor message is not an interactive message, allowing said consumer access to said media product after said step of facilitating the display of said sponsor message; a ninth step of, if the sponsor message is an interactive message, presenting at least one query to the consumer and allowing said consumer access to said media product after receiving a response to said at least one query; a tenth step of recording the transaction event to the activity log, said tenth step including updating the total number of times the sponsor message has been presented; and an eleventh step of receiving payment from the sponsor of the sponsor message displayed.

16 CAFC and Obviousness The Next Battleground for Patent Owners Phase 3

17 CAFC and Obviousness The Next Battleground for Patent Owners Phase 3

18 CAFC and Obviousness The Next Battleground for Patent Owners Phase 3

19 CAFC and Obviousness The Next Battleground for Patent Owners Phase 3

20 CAFC and Obviousness Phase 3

21 CAFC and Obviousness Phase 3

22 CAFC and Obviousness Phase 3

23 The End ~ Q&A Gene Quinn Patent Attorney Founder of Email: Phone: 703-740-9835 Phase 4

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