1 Winds of Change in Patent Law by William W. Cochran Cochran Freund & Young LLC An Intellectual Property Law Firm by William W. Cochran Cochran Freund & Young LLC An Intellectual Property Law Firm 2026 Caribou Drive, Suite Arapahoe Avenue, Suite Caribou Drive, Suite Arapahoe Avenue, Suite 100 Fort Collins, CO 80526Boulder, CO Fort Collins, CO 80526Boulder, CO 80303

2 Purpose of Patent System  Encourage Innovation by providing exclusive rights to inventors Art. 1, Sec. 8, U.S. Constitution Art. 1, Sec. 8, U.S. Constitution  Based on Contract Theory of Patents

3 Patent System has Become Stronger Since Early 1980’s  Coincidentally, so has the U.S. Economy  U.S. has the strongest patent system

4 Public Sentiment has been Pro-Patent for Many Years Public Sentiment is Beginning to Change Based on: 1. Belief that there are many unworthy 1. Belief that there are many unworthy patents issued by USPTO patents issued by USPTO 2. Costs of litigation are too high. 2. Costs of litigation are too high. 3. Patent Trolls have unduly pressured 3. Patent Trolls have unduly pressured companies into paying license fees. companies into paying license fees.

5 Who is Proposing Changes? Congress Congress U.S. Patent Office U.S. Patent Office U.S. Supreme Court U.S. Supreme Court Patent Professional Societies Patent Professional Societies - AIPLA, IPO, etc.

6 What are these Changes?  Congress – Patent Reform Act

7 Patent Reform Act 1. Change First to Invent to First to File Problems will be created for one-year grace period Problems will be created for one-year grace period Foreign Countries (Except Canada and Philippines) have absolute novelty bar One-year grace period is one of the strengths of the U.S. Patent System Many more derivation proceedings will result if U.S. goes to first to file Puts universities, sole inventors and small companies at disadvantage to large companies  Less money to win race to Patent Office

8 Post Grant Oppositions 1.Way to Challenge an issued patent in Patent Office inexpensive compared to Federal Court file within one year wording is so loose that opposition can really be filed anytime 2.Validity becomes much easier to challenge. 3.Patentees will be faced with constant challenges to validity when they try to enforce their patents. 4.The Presumption of Validity (35 USC § 282) will have little meaning.

9 Limitations on Compensatory Damages Royalties to be based on the new and non- obvious features of invention Not on product as a whole Not on product as a whole Greatly reduce damage awards

10 Limits on Enhanced Damages from Willful Infringement Raises standard to prove willful infringement Current standard Infringer knew of infringement, and Did not have an opinion of non- Did not have an opinion of non- infringement to rely upon infringement to rely upon

11 U.S. Patent and Trademark Office Changing Rules making it harder to get adequate protection Adding Restraints to Prosecution Refusing to Recognize Established Doctrines of Patentability

12 Rule Changes by USPTO Limitations on Continuations and Divisional Applications Continuations – only one Divisionals – can only file during pendency of Patent Application - Retroactive

13 USPTO Rule Changes Limitation on Number of Claims 10 representative claims will increase pendency because of will increase pendency because of piecemeal prosecution piecemeal prosecution

14 Court Decisions Supreme Court eBay v. Merc Exchange, 126 S.Ct (2006) limits injunctions in patent cases must show irreparable harm and that monetary damages are inadequate to compensate for the injury Effect of Decision Universities, sole inventors and small companies that are not disposed or do not have funds to make products cannot get an injunction Exclusive licensing will be difficult since patentee is not manufacturing Court imposed licensing will result Settlement will be difficult if the threat of an injunction is not available Aimed at Patent Trolls

15 Supreme Court Medimmune v. Genentech, 81 USPQ 2d 1225 (U.S. 2007) 427 F.3d 958 (S.Ct. 2007) Lear v. Adkins, 395 U.S. 653 (1969) repudiated the doctrine of Licensee Estoppel Licensee Estoppel prevents a patent licensee from challenging the validity of a patent In Gen-Probe v. Vysis, 359 F.3d 1376 (Fed.Cir. 2004), the Federal Circuit said that the validity of a patent cannot be challenged unless the licensee stops paying royalties (materially breaches license agreement). Federal Circuit said important not to allow a licensee to hide behind license agreement (not breach license agreement) and still challenge the validity of the licensed patent Supreme Court overturned the Federal Circuit. Result Easier for licensees to challenge validity of patent since licensees do not have to breach license agreement No consequences for challenging validity Ideas Put termination clause in agreement if validity challenged Put clause in license that increases royalties if validity is unsuccessfully challenged Put clause in license that increases royalties if validity is unsuccessfully challenged

16 Supreme Court KSR v. Teleflex Challenges standards of patentability established by Federal Circuit Test established by Federal Circuit to show that an invention is obvious is that there must be: teaching suggestion, or motivation to combine the prior art references. This test eliminates hindsight if you already know the answer, then it is usually obvious KSR argued that the test is too hard and that too many unworthy patents are being issued Amicus Brief no other test eliminates hindsight test is not too hard if used properly changing test will not eliminate unworthy patents – that is a USPTO funding problem

17Conclusion  Many changes are in the works  Going on for many years  Weakening of the Patent System has been present in many forms Harmonization with foreign patent laws Improper subject matter for patents software living organisms business methods Fear of patent trolls Antitrust challenges based on monopolization  Disbelievers in Patent System Large Companies Cross-license other large competitors to neutralize patents Steamroll over smaller competitors with market power Politicians that are funded by large corporations Judges that either do not understand or believe in the economic benefits of: economic benefits for small companies and startups that raise money based upon patent protection Technology advancements provided by small companies, sole inventors, and Universities

18 Conclusion U.S. is most inventive country in the world U.S. has a rich history of small business becoming successful and leading the world in technology advancement U.S. has protected small companies against large companies All of this is the result, at least in part, due to a strong patent system in the U.S.

19 William W. Cochran Cochran Freund & Young LLC 2026 Caribou Drive, Suite Arapahoe Avenue, Suite 100 Fort Collins, CO 80526Boulder, CO (970) (303)