1. Patents & Patentability: What You Need to Know to Ask the Right Questions Presented by: AMSTER ROTHSTEIN & EBENSTEIN LLP Anthony F. Lo Cicero Amster Rothstein & Ebenstein, LLP 90 Park Avenue New York, NY 10016 212-336-8000 alocicero@arelaw.com Lisa S. Mankofsky Foley & Lardner LLP 3000 K St., N.W. Suite 600 Washington, D.C. 20007 202-672-5384 lmankofsky@foley.com

2. 2 What is a patent? A patent is –a limited right –granted by the U.S. (or other) government –to exclude others from practicing an invention.

3. 3 What is a patent? Applies to –the first and true inventors of –a new, not obvious and useful development –in exchange for the public disclosure of the invention. Lasts for 20 years from filing date

4. 4 What rights flow from a patent? A patent is a right to exclude others from practicing the claimed invention. –Does not guarantee that the patent owner can practice the invention, only that others can not. The patent owner is entitled to at least some compensation if other companies infringe. The patent owner may be entitled to injunctive relief.

5. 5 What is an invention? An “invention” occurs when there is a “conception” and “reduction to practice.” –Conception is the mental part. Coming up with the idea. –Reduction to practice is actually making the invention. Filing of an application is considered a type of reduction to practice.

6. 6 Who is an inventor? An inventor is one who contributed to the conception of an invention claimed in one or more of the claims of the patent. One who merely acts as the “hands” of an inventor is not an inventor.

7. 7 What are the criteria for patentability? Novelty Utility Non obviousness Patentable subject matter

8. 8 Novelty No single reference has all of the elements of the claim. What is claimed: 1. A widget having: A B C and D Prior Art 1 A widget having A and B. Prior Art 2 A widget having A and C. Prior Art 3 A widget having A, B, C and D. X Not novel

9. 9 Utility The invention must be useful.

10. 10 Non obviousness It would not have been obvious to one of ordinary skill in the art. Obviousness is typically determined by combining references: pencil + eraser = pencil with eraser

11. 11 What is patentable subject matter? “Process” – acts or series of acts “Machine” – concrete structure “Manufacture” – some tangible article or commodity “Composition of matter” – two or more substances

12. 12 What is prior art? –“known or used by others” in the U.S. before the invention –Published or patented by others before the invention –Published or patented by anyone more than one year before the earliest effective filing date –On sale or offered for sale in the U.S. more than one year before the earliest effective filing date –In public use or display more than one year before the earliest effective filing date

13. 13 How is a patent obtained? 18 months IDS, Paper work PCT & Non- U.S. Filings U.S. Publication PCT – National Filings Conceive Invention Patent Search File Pat. App. with USPTO Prepare Invention Disclosure Draft and Revise Patent Application Pre-filing Activities Filing Date U.S. Prosecution Office Actions and Responses U.S. Patent Issues 1 year 30 mos. PCT Prosecution

14. 14 Patentability Requirements Found at 35 U.S.C. – § 101 – Subject Matter/Utility – § 102 – Novelty – § 103 – Non-Obviousness – § 112 – Adequate Disclosure

15. 15 Why Seek a Patent? 1.To protect and enhance market share 2.To protect technology that creates a key differentiator from competitors 3.To protect investments in R&D, and prevent others from copying 4.To prevent others from patenting your technology and exploiting it 5.To license your invention to others, and thereby generate licensing revenues 6.To generate value through patent infringement litigation 7.To have bargaining chips for cross licensing and for avoiding patent infringement litigation 8.To create assets that can be bought and sold and thereby increase your company’s value overall

16. 16 Why Is Patent Eligible Subject Matter a Controversial Topic? The Issue:  This has a major impact on some industries because it affects very important business concerns such as o Protecting and increasing market share o Protecting R&D investments o Increasing licensing revenue, and o Incurring litigation costs or increasing revenue brought in from litigation Whether there should be a broad scope of eligibility confirmed Whether there should be a narrow scope of eligibility, thereby closing off some patent protection OR

17. 17 Why Is Patent Eligible Subject Matter a Controversial Topic? Huge jury awards and settlements in patent infringement litigation have brought patents to the forefront in many industries, especially involving high tech companies and computer software NPEs – Non–Practicing Entities –Entities that do not use the inventions they have patented –Typically assert patents for purely financial gain –NPEs are playing a major role in the debate

18. 18 The Debate: Broad vs. Narrow Protection Those Arguing for a Broad Scope of Patent Protection –Argument: Broad protection is needed to promote innovation and competition –Examples of companies making this argument are: Startups that use patents to build and protect market share against larger, more entrenched competitors Companies able to charge premium prices for their patented products Companies able to license their patented inventions –NPEs

19. 19  Those Arguing for a Narrow Scope of Patent Protection –Argument: Narrow protection is needed to prevent the continued growth of patent infringement lawsuits, and especially suits by NPEs –Examples of companies making this argument are: Companies who consider patents a drain on their bottom line and want their competitors to have fewer patents, which the competitors might seek to license or might be the basis of a patent infringement lawsuit Companies who believe that NPEs are using patents to hold up industry sectors, especially high tech sectors This strain is exacerbated in the present economic environment where companies already face greater cost pressures The Debate: Broad vs. Narrow Protection

20. 20 Let’s Play: “Is This Patentable?” A new method for manufacturing a pharmaceutical A fuel-efficient automobile engine A hammer A vaccine for swine flu Gravity A mathematical algorithm A genetically modified bacterium A business method for hedging the risk of commodities trading

21. 21 Where It All Begins 35 U.S.C. § 101 “Whoever invents or discovers any new and useful process, machine, manufacture or composition of matter, or any new and useful improvements thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.” So, there are four statutory categories of patent eligible subject matter: –Processes –Machines –Manufactures –Compositions of matter

22. 22 Examples of Milestones in Determining Patentable Subject Matter Scope Biotech – Chakrabarty case –Case involved an invention of a genetically modified bacterium –The U.S. Supreme Court interpreted § 101 broadly: “Anything under the sun that is made by man” is patentable. Diamond v. Chakrabarty, 447 U.S. 303, 308-09 (1980) This decision, which occurred during the nascent years of biotechnology, had a positive effect on the growth of the industry

23. 23 Biotech – Chakrabarty case –Not Patentable: laws of nature, natural phenomena or abstract ideas Mathematical formulas or algorithms Products and processes of nature Genes, proteins, cells or organisms as occurring in nature Mental processes Examples of Milestones in Determining Patentable Subject Matter Scope

24. 24 Computer Software – Supreme Court Trilogy (Benson, Flook, and Diehr) –The Benson invention: Method of programming a general purpose digital computer using an algorithm to convert binary-coded decimal numbers into pure binary numbers –The Court found the Benson invention unpatentable because the invention was an algorithm, which is no more than abstract mathematics Gottschalk v. Benson, 409 U.S. 63, 71-72 (1972) Examples of Milestones in Determining Patentable Subject Matter Scope

25. 25 Computer Software – Supreme Court Trilogy (Benson, Flook, and Diehr) Benson: –Phenomena of nature, mental processes and abstract intellectual concepts are not patentable because they are the basic tools of scientific and technological work –But, new and useful inventions derived from such discoveries are patentable –The Supreme Court emphasized its decision did not preclude computer software from being patented; it just precluded software where the only useful characteristic is an algorithm Examples of Milestones in Determining Patentable Subject Matter Scope

26. 26 Computer Software – Supreme Court Trilogy (Benson, Flook, and Diehr) –The Flook invention: Method of calculating alarm limits by using an algorithm to make the system responsive to trends but not momentary fluctuations in process variables such as temperature –Similar to Benson, the Flook invention was found unpatentable because the invention was based on an algorithm, which must be considered to be in the prior art Parker v. Flook, 437 U.S. 584, 594-95 (1978) Examples of Milestones in Determining Patentable Subject Matter Scope

27. 27 Computer Software – Supreme Court Trilogy (Benson, Flook, and Diehr) –The Diehr invention: method of molding raw, uncured synthetic rubber into cured precision products using a mathematical equation – This invention was found to be patentable because Diehr “seek[s] only to foreclose from others the use of that equation in conjunction with all of the other steps in their claimed process.” Diamond v. Diehr, 450 U.S. 175, 187-88 (1981) Examples of Milestones in Determining Patentable Subject Matter Scope

28. 28 Computer Software – Supreme Court Trilogy (Benson, Flook, and Diehr) Diehr: –The Supreme Court insisted that patent eligibility must be decided on the basis of the claim (or invention) considered as a whole –Unlike in the Flook case, in Diehr, the claimed invention was found to depart from the prior art in more than just a facially trivial way Examples of Milestones in Determining Patentable Subject Matter Scope

29. 29 Business Methods – State Street Bank –The State Street Bank invention: a data processing system for implementing an investment structure –The Federal Circuit found this patentable because “the transformation of data, representing discrete dollar amounts, by a machine through a series of mathematical calculations into a final share price, constitutes a practical application of a mathematical algorithm, formula, or calculation, because it produces ‘a useful, concrete and tangible result.’” State Street Bank & Trust Co. v. Signature Financial Group Inc., 149 F.3d 1368, 1373 (Fed. Cir. 1998) Examples of Milestones in Determining Patentable Subject Matter Scope

30. 30 Business Methods – State Street Bank –The Federal Circuit held that the claimed invention as a whole must be useful and accomplish a practical application –The Federal Circuit set a standard for business method patents, which required that the claimed invention must produce a “useful, concrete and tangible result” This standard has since been overruled –The Supreme Court denied certiorari Examples of Milestones in Determining Patentable Subject Matter Scope

31. 31 Business Methods – State Street Bank –State Street Bank opened the flood gates for business method patents, resulting in a surge of applications and granted patents –The large volume of business method patents granted has been criticized because Early in the surge of applications, the USPTO allowed a high number of these applications (although in recent years, there has been a lower allowance rate) Some of these patents are perceived to be too broad or of poor quality, perhaps because of the difficulty Patent Examiners have in searching for prior art Patent Examiners are perceived not to be suitably qualified to evaluate these inventions because they usually have a science background and not a business background Examples of Milestones in Determining Patentable Subject Matter Scope

32. 32 Business Methods – Bilski –The Bilski invention: a method of hedging the risk in the field of commodities trading –This process is performed by people without any requirement of computer-based manipulation –The Patent Examiner and the PTO’s Board of Appeals found the invention was not patentable The Federal Circuit also held that this invention was not patentable, and in doing so, tried to clarify the standards applicable in determining whether a claimed method constitutes a statutory “process” under § 101 Examples of Milestones in Determining Patentable Subject Matter Scope

33. 33 Business Methods – Bilski –Relying on Benson, Flook, Diehr, and other Supreme Court cases, the Federal Circuit outlined a “machine or transformation” test –Under this test, a claimed process is patent eligible under § 101 if: 1. It is tied to a particular machine or apparatus; or 2. It transforms a particular article into a different state or thing In re Bilski, 545 F.3d 943, 961-62 (Fed. Cir. 2008) (en banc) Examples of Milestones in Determining Patentable Subject Matter Scope

34. 34 Business Methods – Bilski –The Federal Circuit held that The claimed “use of a specific machine or transformation of an article must impose meaningful limits on the claim’s scope” The “transformation must be central to the purpose of the claimed process” The “useful, concrete and tangible result” inquiry from the State Street Bank and other cases is inadequate –The Federal Circuit did not rule out the possibility that it may in the future refine or augment the “machine or transformation” test or how it is applied Examples of Milestones in Determining Patentable Subject Matter Scope

35. 35 Business Methods – Bilski –The Supreme Court accepted certiorari of this appeal –The high interest in various industries, bar groups and academic circles in how this case is decided has resulted in a large number of amicus briefs being filed –The Supreme Court has scheduled its oral argument in this appeal for November 9, 2009 Examples of Milestones in Determining Patentable Subject Matter Scope

36. 36 Conclusion This is a time of great potential flux in the patent law –The PTO and Congress are considering various patent reform proposals, and –The Supreme Court is addressing a fundamental issue concerning the proper scope of patent protection