February 2008 Archives

The Court of Appeals for the Federal Circuit has ordered a rehearing of In re Bilski, a case involving a patent for a method for managing risk in commodities trading. The claimed method is not tied to any particular technology, nor does it teach a transformation of computer data or matter, but is rather a method of doing business. The Patent Board of Appeals has rejected the claim as unpatentable and Bilski appealed to the CAFC.

Among the issues that the CAFC will consider in its rehearing of the case are: whether the claim at issue is not patent-eligible due to it having a mental process or abstract idea; when does a claim containing mental and physical processes become patent eligible; whether a method or process needs to be tied to a machine or involve a transformation of matter to be patent-eligible; and whether State Street Bank, 149 F.3d 1368 (Fed. Cir. 1998), and AT&T v. Excel Communications, 172 F.3d 1352 (Fed. Cir. 1999), should be reconsidered and possibly overruled in any respect.

The rehearing is scheduled for May 8, 2008, at 2:00 pm. The CAFC's order listing all five questions to be considered may be found here, while the claim at issue is reproduced below.

1.  A method for managing the consumption risk costs of a commodity sold by a commodity provider at a fixed price comprising the steps of:

(a) initiating a series of transactions between said commodity provider and consumers of said commodity wherein said consumers purchase said commodity at a fixed rate based upon historical averages, said fixed rate corresponding to a risk position of said consumer;

(b) identifying market participants for said commodity having a counter-risk position to said consumers; and

(c) initiating a series of transactions between said commodity provider and said market participants at a second fixed rate such that said series of market participant transactions balances the risk position of said series of consumer transactions.

China's Patent Law entered into force in 1984 and has since then been revised twice, in 1992 and 2000. In 2008, the Chinese State Intellectual Property Office is expected to finalize the draft of a third revision, which will affect several aspects of the Chinese Patent Law.

First, the draft amendment provides for several situations where a compulsory license for a patent may be granted by the SIPO. Article 48 of the amendment allows the grant of a compulsory license when a patentee is determined to be abusing his intellectual property rights in order to prevent or restrict competition. Articles 49 and 50 allow for the grant of a compulsory license in order to treat or prevent an epidemic in China, or when a developing country needs to import a pharmaceutical product from China for the same purposes.

Other articles affect the treatment of prior art in litigation: Article 62 states that in a judicial or administrative proceeding for patent infringement, an alleged infringer would be held as not infringing if he can provide sufficient evidence showing that the patented subject matter falls within the scope of the prior art. Article 63 prohibits litigation in bad faith, stating that where a patent owner brought an action against another party knowing that his patented technology is prior art, the owner will be held liable to the alleged infringer for damages caused by the allegations.

Article 74 proposes to add parallel importation as an exception to infringement: if a product patented in China is sold outside of China and then imported into the country by another, the Chinese patent rights are deemed to be exhausted. Furthermore, Article 74 provides another exception to infringement that is similar to the Bolar exception in the United States, allowing the use of a patented invention without the patentee's permission if the use is related to providing information required to obtain regulatory approval. Effectively, this would allow generic drug manufacturers to put their products on the market right after a pharmaceutical patent expires.

As they serve to limit the rights and interest of patent holders, Articles 49, 50 and 74 are perhaps the most controversial and the ones of most interest to foreign corporations doing business in China, especially those involved in the medical and pharmaceutical industries.

The summary judgment hearing in Tafas v. Dudas took place on February 8, 2008. During the two-hour-long oral arguments, the parties argued that the validity of the new USPTO rules may depend on whether the rules are substantive or procedural. As case law has held that the USPTO has no substantive rulemaking authority, a finding that the new rules are substantive would render them beyond the scope of the PTO's power and therefore void. The rules are substantive, GSK argued, as they change the law and affect existing rights.

The U.S. attorney argued that the core issue is not whether the rules are substantive or procedural but rather whether Congress delegated authority to the PTO to issue the rules; 35 U.S.C. § 2(b)(2)(A) states that the director may issue rules which govern the conduct of proceedings in the PTO. The new rules, according to the U.S. attorney, fall into this category.

The judge presiding over the hearing took the case under advisement, stating that he needed more time to make a decision.

Monsanto Corporation is the manufacturer of RoundUp pesticides, which function by inhibiting the function of the enzyme EPSP synthase, which is necessary for a step in the synthesis of amino acids by the plant. The company also distributes seeds that are resistant to its pesticides though the insertion of a patented chimeric gene sequence that enables the plants to grow in the presence of the pesticide.

Monsanto v. David dealt with infringement of the gene patent due to David's practice of saving seeds from previous harvests, in violation of their mutual agreement. On appeal from a judgment for Monsanto, David argued that, as the Monsanto patent claims a gene sequence and not a seed or plant variety, it is limited to the gene sequence and not to the seed containing the gene. The CAFC disagreed with such a limitation on the utility patent, stating that if a seed contains the patented gene, planting that seed is an infringing act. The court also reiterated its decision in Monsanto v. McFarling, 302 F.3d 1291, that while the Plant Variety Protection Act permits farmers to save seeds of registered plants, such an exemption does not apply to a seed under a utility patent.