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A pivotal year for patent reform.

Since I'm writing this month's column in the depths of December, it seems like an appropriate time for a "year in review" retrospective. For corporate and IP counsel, 2014 was the year of patent reform, as the landscape shifted from good ideas into practical actions. Those actions are still taking shape, and it's unclear how comprehensive, effective and sustainable they will be. Nevertheless, legislative and regulatory patent reform was finally in play.

Patent quality

The Supreme Court decision in Alice Corp. v. CLS Bank tightened the definition of software patent eligibility and subsequent district court and Federal Circuit decisions have confirmed that a higher standard is being used. Since Alice, there have been 22 decisions adjudicating challenges to claims covering computer-implemented inventions and business methods and 17 have been upheld. This is a step forward in the effort to wring low-quality patents out of the system.

Claim clarity

In Nautilus v. Biosig, the Supreme Court set a new and stronger standard for the degree of ambiguity that is acceptable in a valid claim. Previously, a claim had to be shown to be not "amenable to construction" and "insolubly ambiguous" to be invalidated. The Nautilus decision described a sharper test for definiteness that requires a claim "[to] inform those skilled in the art about the scope of the invention with reasonable certainty" at the time the patent was issued. This higher bar for claim clarity may well prevent additional low-quality patents from being asserted by plaintiffs.

Fee shifting

In two decisions in April--Octane Fitness v. ICON Health and Fitness and Highmark v. Allcare Health Management System--the Court ruled that the existing standard for defining an "exceptional case" in which fee shifting is an appropriate remedy was found to be too restrictive. In essence, the Court returned a fuller measure of discretion to district court judges to award attorneys' fees.


The Federal Trade Commission recently announced a proposed settlement with MPHJ Technology Investments, LLC after determining that it sent demand letters to more 16,000 businesses. This particular settlement can't be seen as a positive development for supporters of patent reform. The settlement includes no penalties for MPHJ's past actions and few measurable constraints on future behavior. Optimists might point out that after some initial actions by the state attorneys' general, this is the first real engagement by a government regulator to curb this type of behavior, but it remains to be seen whether regulators will increase efforts to limit predatory licensing by these kinds of mass-market patent assertions.

The mid-term elections

With Republicans soon to control Congress, observers are expecting patent reform legislation designed to limit the cost and frequency of patent infringement litigation. Those in the corporate suite will be watching to see how much of a priority patent reform will be in 2015.

However the new Congress proceeds in 2015, the progress of the past year has been encouraging, but also a reminder that the systemic problems of the patent system can't be conclusively solved solely through focusing on one avenue.

Even Alice has only targeted patents that claim "abstract ideas," a relatively small percentage of patents overall. Any effort to eliminate bad patents is good for the system and will reduce risk for operating companies, but there will always be hundreds of thousands of well-written, technologically sound and arguably infringed patents in circulation that get asserted for demands far beyond the value of the invention.

Solving the problem of an inefficient patent system will require both market-based and governmental remedies. The good news is that after a pivotal 2014, we can expect to see both types of solutions make progress toward a more rational and cost-effective patent environment.

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Title Annotation:IP: IP Trends
Author:Yen, Mallun
Date:Jan 1, 2015
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