26 Apr’18

Oil States Energy v. Green’s Energy: Implications for the Patent Market

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World IP Day 2018 coincides with a highly anticipated, landmark decision by the US Supreme Court in the case of OIL STATES ENERGY SERVICES, LLC v. GREENE’S ENERGY GROUP, LLC, ET AL. which relates to the process known as inter partes review (IPR).

Inter Partes Review Process

The IPR process, as introduced by the America Invents Act of 2011, allows any person (other than the patent owner) to file a petition with the USPTO with request for cancellation of one or more claims of a previously issued patent on the grounds that the claim fails the novelty or non-obviousness standards for patentability. Before the USPTO Director can institute an IPR, the Director must determine that there is a reasonable likelihood that the petitioner would prevail with respect to at least one of the claims challenged. Once instituted, the PTAB examines the patent’s validity. The petitioner has the burden of proving unpatentability by a preponderance of the evidence. If there is no agreement between the patent owner and the petitioner to settle the case, the PTAB must issue a written final decision no later than a year after it notices the institution of inter partes review. If the Board’s decision becomes final, the Director must issue and publish a certificate. The certificate cancels patent claims finally determined to be unpatentable, confirms patent claims determined to be patentable, and incorporates into the patent any new or amended claim determined to be patentable. If a party is dissatisfied with the Board’s decision, they can seek judicial review in the Court of Appeals for the Federal Circuit. When reviewing the Board’s decision, the Federal Circuit assess the Board’s compliance with governing legal standards de novo (i.e., without reference to any legal conclusions made by the PTAB) and its underlying factual determinations for substantial evidence.

Oil States Case Overview

Oil States Energy Services and Greene’s Energy Group are both oilfield services companies. Oil States obtained a patent in 2001 relating to an apparatus and method for protecting wellhead equipment used in hydraulic fracturing and in 2012 sued Greene’s Energy for infringing the patent. Greene responded by challenging the patent’s validity and also petitioned the USPTO to institute inter partes review. The USPTO found that Greene had established a reasonable likelihood that the two challenged claims were unpatentable and, thus, instituted inter partes review. Both proceedings progressed in parallel with the District Court ruling in favor of Oil States and then the USPTO issuing a final written decision concluding that the claims were unpatentable. Oil States sought review in the Federal Circuit challenging the Board’s decision as well as challenging the constitutionality of inter partes review.  The Federal Court affirmed the Board’s decision in favor of Greene that the claims were unpatentable.  Oil States, in challenging the constitutionality of inter partes review, argued before the Supreme Court that actions to revoke a patent must be tried in an Article III court before a jury.  Oil States wanted the Court to recognize patent rights as the private property of the patentee which would bring it into the domain of Article III Courts.  Article III vests the judicial power of the United States in one Supreme Court, and in such inferior Courts as the Congress may from time to time ordain and establish. Consequently, Congress cannot confer the Government’s judicial power on entities outside Article III. When determining whether a proceeding involves an exercise of Article III judicial power, the Court’s precedents have distinguished between public rights and private rights. Those precedents have given Congress significant latitude to assign adjudication of public rights to entities other than Article III Courts.

Supreme Court Oil States’ Decision

The Supreme Court held that the determination to grant a patent is a matter involving public rights and need not be adjudicated in Article III court.  By issuing patents, the USPTO takes from the public rights of immense value, and bestows them upon the patentee. Specifically, patents are public franchises that the government grants to the inventors of new and useful improvements. The franchise gives the patent owner the right to exclude others from making, using, offering for sale, or selling the invention throughout the United States. Additionally, granting patents is one of the constitutional functions that can be carried out by the executive or legislative departments without judicial determination. When the USPTO adjudicates the patentability of inventions, it is exercising the executive power. Inter partes review involves the same basic matter as the grant of a patent, and it therefore falls on the public rights side of the line. Like the initial review, the Board’s inter partes review protects the public’s paramount interest in seeing that patent monopolies are kept within their legitimate scope.

Foresight’s Commentary on the Oil States decision

The Oil States makes clear the power of Congress to provide the USPTO with broad post-issuance authority. In other words, the status quo remains in the US patent market. From a patent valuation perspective, IPRs have already negatively impacted the value of patents due the uncertainty coupled to these proceedings. The Oil States decision reinforces the constitutionality of IPR proceedings and may further complicate the processes by which patent owners monetize their assets and would add Oil States to the list of cases such as Alice and Mayo that reinforce the uncertainty in the market regarding the patentability of cutting edge inventions.

While the Supreme Court’s Oil States decision has been largely anticipated by the IP community, one should review it in conjunction with Andrei Iancu’s recent public statements, which might arguably be the more interesting development this week. Director Iancu’s statement that “human-made algorithms that are cooked up, invented as a result of human ingenuity are different from discoveries and mathematical representations of those discoveries” might signal an effort by the Director to push for changes in validity considerations that would include these algorithms that can be distinguished from mathematical representations of discoveries. This statement may signal the emergence of a market for patents claiming algorithms, a market that currently resides behind NDAs and trade secret protection.

** Foresight’s commentary to Oil States, along with the commentary of other industry leaders, was published by IPWatchdog.

Full article here
16 Jan’18

Insights from WIPO’s “World IP Indicators 2017” Report: Key Patenting Trends Around the Globe

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The World IP Organization (WIPO) has recently published its annual report titled: “World Intellectual Property Indicators 2017”, covering world IP filing activity for 2016.  The report is a comprehensive coverage of global patent and trademark filing trends, comparing and ranking the world’s leading regional patent and trademark offices (“IP Offices”) by their level of activity in the various categories.

At a high level, it seems like many of the trends observed in 2015 continue into 2016: the global number of filings and grants keeps trending up; China continues to dominate in terms of annual filings and grants (breaking another record of 1.3 million filings this year); and the top 10 filing companies worldwide are all Asia-based multinationals.

Patent Filing Trends

A record number of 3 million patent applications were filed worldwide in 2016, up 8.3% from 2015, as seen in the figure below:

Source: World IP Indicators 2017, WIPO

Driving the strong growth in global filings was an exceptional number of filings in China. The State Intellectual Property Office of the People’s Republic of China (SIPO) received 1.3 million patent applications in 2016 – more than the combined total for the United States Patent and Trademark Office (USPTO; 605,571), the Japan Patent Office (JPO; 318,381), the Korean Intellectual Property Office (KIPO; 208,830) and the European Patent Office (EPO; 159,358). Together, these top five offices accounted for 84% of the world total in 2016.

Below is a summary table showing the activity in the top 10 IP Offices in 2016:

Source: World IP Indicators 2017, WIPO

When it comes to understanding China’s continued explosive growth in new patent applications – over 1.3 million filed in 2016, an increase from the 1.1 million in 2015 (the first year the 1 million filings barrier has been exceeded in any country) — the circumstances surrounding the increase in Chinese patent filings are unique and should have come as no surprise to anyone following the Chinese government’s five-year plan of 2011. As explained in an article published in Nov. 2016 in the EE Times by Foresight’s president, Efrat Kasznik, over the last 50 years the Chinese Communist Party implemented a series of five-year plans which guided China’s rapid economic growth.  The 2011 five-year plan’s themes of sustainable growth included some specific targets for patent filing per capita.  The increased filing activity over the last five years is the direct result of a calculated government effort, enabled by an unprecedented allocation of legislative and administrative resources to support China’s State IP Office. Thus, the sharp rise in Chinese patent filings between 2010 and 2016 is very unique to China’s political circumstances, and is not necessarily correlated with the natural progression of innovation.

When reviewing filing trends by country, one of the most critical observations is the ratio of resident to non-resident filings.  A higher ratio of non-resident filings in any given country, is usually an indication not only of the size of that market for the underlying innovations, but also of the strength of the IP enforcement regime in that country.  Here, the trends from 2015 are repeating in 2016: as explained by Ms. Kasznik in her article, ratio in China is about 90% resident filers to 10% non-resident filers, a reflection of the relatively weak enforcement regime in China.  Conversely, the USPTO and the European Patent Office exhibit a ratio of resident to non-resident filings of about 50/50, attesting to the strength of IP enforcement regimes in those regions.

Patent Grants Trends

In 2016, an estimated 1.35 million patents were granted worldwide, up 8.9% on 2015.

Source: World IP Indicators 2017, WIPO

SIPO granted 404,208 patents in 2016, followed by the USPTO (303,049), the JPO (203,087), KIPO (108,875) and the EPO (95,956). The top five IP offices issued more than 1.1 million combined, accounting for 83% of the world total.

Not surprisingly, the number of new grants is trending upwards over time along with the number of new filings.  The WIPO report also includes statistics related to the operational efficiency of IP offices, such as: the number of examiners, application pendency times, and patent examination outcomes.  The workload of IP offices as measured by the number of incoming patent applications has increased over time, but so has their examination capacity to process those applications. The WIPO data show there has been no significant increase in application-to examiner ratios, and for a number of IP offices, growth in numbers of examiners has outstripped the increase in applications.

Another interesting metric reported is the number of patents in force in 2016: the estimated number of patents in force worldwide rose from 7.8 million in 2009 to 11.8 million in 2016. The USPTO leads with 2.8 million patents in force in 2016, followed by the JPO (2 million), SIPO (1.8 million) and KIPO (1 million). These four IP offices account for 63% of all patents in force worldwide.

Filing by Company

The top 10 patent applicants worldwide are Asia-based multinationals: Canon Inc. (Japan) was the top applicant for the period from 2011 to 2014, with 30,476 patent families worldwide, followed by Samsung Electronics (Korea) with 26,609 patent families, and Japanese companies Panasonic (22,899), Toshiba (22,627) and Toyota (22,190). Robert Bosch of Germany (16,582) was the highest-ranking non-Asian company at number 12.

Only 9 countries of origin comprise the top 100 list of applicant companies for the period from 2011 to 2014: Japan (40), China (26), Korea (15), U.S. (9), Germany (6) and one each from France, the Netherlands, Sweden and Taiwan.

 

 

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