CONGRESS SHOULD STOP DIVERTING PTO FUNDS

It’s amazing how our elected officials continue simultaneously to tout technology and innovation as the keys to creating jobs and for the twenty-first century, and deny the PTO the ability to use the revenue the PTO generates to improve its systems. The news posted April 22 on the Director's Forum blog that as a result of Congress’ decision to continue to divert PTO funds, the PTO will need to delay implementation of procedures to expedite applications, again delay updating its outdated computer systems, scrap plans to open an office in Detroit, reduce training and eliminate overtime, can only be described as disheartening.

But this is nothing new. Fifty years ago, in Graham v. John Deere, 383 U.S. 1 (1966) Justice Clark wrote: “…the primary responsibility for sifting out unpatentable material lies in the Patent Office. To await litigation is---for all practical purposes—to debilitate the patent system…In this connection we note that the Patent Office is confronted with a most difficult task.” The Court expressed concern about the backlog of applications and observed that the President had appointed a task force to “develop more efficient administrative procedures and techniques that will further expedite dispositions and at the same time insure the strict application of appropriate tests of patentability.”

The PTO would have a better chance of achieving those goals if it were permitted to use the money it generates to take the actions it will now need to postpone.
 

LICENSING VERSUS SELLING YOUR SOFTWARE

Software, in particular, typically is equally amenable to licensing or sales models. In a word, control is typically the most compelling reason to license your IP rather than selling it. Freedom from ongoing duties to buyers is often a compelling reason to sell it. Video game makers, particularly those who make games for play on the Internet or otherwise among gaming “communities” seem increasingly have settled on the licensing model because they think it enables them to insure a level playing field for all of their customers. Inevitably, however, their customers feel, or at least want to feel that they own the software they purchased.

So what are the principal factors courts use to differentiate a license from a sale? Case law seems to be coalescing around three. Considering how one wants to address each may help individual IP owners decide whether licensing or selling works better for them.

The first seems obvious, what the agreement says. If it says it is a license, it more likely is.

The second is whether the IP owner significantly restricts users’ ability to transfer the software. In a recent Ninth Circuit case concerning the World of Warcraft game, the court held that restrictions prohibiting re-sale, restricting transfer to those who agreed to abide by the end user license agreement and requirements that the transferor delete all of its copies, evidenced a license rather than a sale.

The third is whether the IP owner imposes significant restrictions on the manner in which the software may be used. The court in the World of Warcraft case held that restrictions on the locations in which the software could be used , prohibitions on use with third-party software and reservation of a right to alter the game or suspend users evidenced a license.
 

DON'T COUNT ON GETTING ATTORNEYS' FEES IN PATENT CASES

It isn’t easy to recover attorneys’ fees from one’s adversary in patent cases, and it does not happen often. In the American system overall, the presumption is that each side pays its own attorneys’ fees. Patent cases are not really an exception, notwithstanding the fact that the Patent Law, 35 U.S.C. § 285, grants the court discretion to award attorneys’ fees in “exceptional cases.”

In two recent cases, Old Reliable Wholesale v. Cornell Corp. and iLOR v. Google, the Federal Circuit reiterated that the exceptional case standard is an “exacting” one. Absent misconduct in the course of the litigation or in securing the patent, sanctions may be imposed against the patentee only if both (1) the litigation is brought in subjective bad faith, and (2) the litigation is objectively baseless.” Brooks Furniture Mfg., Inc. v. Dutailer Int’l, Inc., 393 F.3d 1378, 1381 (Fed Cir. 2005).

Patent litigants are sometimes seduced by the prospect of recovering attorney’s fees, and sometimes threaten to seek fees in an effort to intimidate their opponents. But in patent litigation the costs and the stakes will inevitably be high for both sides, and it is more likely than not that the parties will bear their own costs.