Published in Winter 2001 edition of New Matter, the California State Bar Intellectual Property Section's quarterly journal
by Robert W. Payne and May Lin DeHaan
The Festo decision rendered by the Court of Appeal for the Federal Circuit in November, 20001 threatens the value and strength of many patents by requiring a more literal interpretation of patent claims which were amended during prosecution. The United States Supreme Court has granted certiorari of that decision, so the final outcome remains in doubt as of this writing.
Even if the Festo decision remains intact, however, a form of equivalents may yet survive, even as to amended claims. Although apparently not noted elsewhere in the current literature, the writers believe the American Inventor's Protection Act (AIPA), enacted almost at the same time as the announcement of the Court of Appeals decision, may provide a partial counterbalance. Under at least one circumstance, a literal interpretation of the patent may not be required even if the claim was amended during prosecution. That potentially arises when, under the AIPA, an application is published 18 months after filing where foreign patent protection will be sought or where voluntary publication is sought.
The AIPA: An Overview
The American Inventor's Protection Act of 1999 (AIPA) was signed into law on November 29, 1999. This resulted in some of the most significant legislative changes to United States patent law since the Patent Act of 1952. There are several major subtitles of the AIPA that will impact the inventors of today. The following briefly summarize the most significant provisions.
* Subtitle A of the AIPA is called the Inventor's Rights Act. This act provides a new measure to protect inventors against deceptive practices of invention promotion companies.
* Subtitle B is the Patent and Trademark Fee Fairness Act, which reduced the original filing fee, reissue fee, international application entering the national phase and the first maintenance fee.
* Subtitle C is the First Inventor's Defense Act. This provides a limited defense to infringers of "business method" patents for some prior users of those business methods. This is a defense for a party who in good faith reduced the claimed subject matter to practice at least one year prior to the effective filing date of the patent and commercially used the subject matter before that date. The first sale doctrine is also extended to include any useful end product of a patented method sold or disposed by a person entitled to assert this defense. This new defense is limited to methods of "doing and conducting business" which must be established by clear and convincing evidence.
* The Patent Guarantee Act is subtitle D. It guarantees a minimum 17-year patent term for diligent applicants, so that they are not penalized for certain PTO processing delays or for delays in the prosecution of the applications pending more than three years. The new statute removes the caps on the previously provided for adjustments for delays due to secrecy orders, interferences or successful appeals. This applies to patent applications other than design applications and applies only to applications filed on or after May 29, 2000.
* The Domestic Publication of Foreign Filed Patent Applications Act is subtitle E. As of November 29, 2000, certain patent applications will be published 18 months from the earliest claimed filing date. The applicant may request an earlier publication. No publication will occur if the application is no longer pending, subject to a secrecy order, is a provisional application or is a design application. The application will also not be published if an applicant makes a request upon filing, certifying that the invention disclosed in the application has not and will not be the subject of a foreign counterpart in a country or under a convention that requires publication eighteen months after filing. This request may be rescinded, if an applicant subsequently files a foreign counterpart in a country or under a convention that requires publication. The applicant must notify the PTO within 45 days of filing with the counterpart. Unless it can be shown that the delay in submitting the notice was unintentional, the United States application shall be regarded as abandoned. As will be discussed further below, after publication and notice, accrued royalty rights may arise for continued sales by another after notice that the prospective claims cover the "infringing" sales.
* Finally, Subtitle F provides for an optional inter partes reexamination process for reviewing patent validity and is called the Inter Partes Reexamination Procedure Act.
The AIPA: Accrual of Royalty Rights
If a patent applicant publishes the application as envisioned in the AIPA, pursuant to 35 U.S.C.§122, royalty rights may accrue under 35 U.S.C. §154(d). That section provides in relevant part:
(1) In general. – a patent "shall include the right to obtain a reasonable royalty from any person who, during the period beginning on the date of publication of the application for such patent under section 122(b)," or in the case of an application filed under the Patent Cooperation Treaty, "the date of publication of the application, and ending on the date the patent is issued – "(A)(i) Makes, uses, offers for sale, or sells in the United States "the invention as claimed in the published patent application or imports such an invention into the United States; or "(ii) if the invention as claimed in the published patent application is a process, uses, offers for sale, or sells in the United States or imports into the United States products made by that process as claimed in the published patent application; and "(B) Had actual notice of the published patent application…."
(2) Right based on substantially identical inventions. -- "The right under paragraph (1) to obtain a reasonable royalty shall not be available under this subsection unless the invention as claimed in the patent is substantially identical to the invention as claimed in the published patent application." (Emphasis added.)
The fact that the published application is included in a commercial database where it may be found is insufficient notice. The published applicant must give actual notice of the published infringer and explain which acts give rise to provisional rights.
The invention as claimed in the ultimately issued patent must be "substantially identical" to that in the published claims. The phrase is not unfamiliar to patent lawyers. Prior art anticipates the invention if it is substantially identical to the invention.2
This also brings into play the question of equivalency between the claims of the published application and as they appear in the final patent grant. It also brings into consideration the Festo decision of the Court of Appeal for the Federal Circuit.
The Festo Decision
The Federal Circuit's Festo decision held that any amendment which narrows the scope of a claim creates prosecution history estoppel, and bars the application of the Doctrine of Equivalents as to that claim. It expanded on the Warner Jenkinson v. Hilton Davis3 ruling to apply prosecution history estoppel even as to voluntary amendments, because the patentee is surrendering subject matter. To avoid this result, the patentee has the burden of showing that an amendment was made for some reason other than one related to patentability.
It has been widely noted that most issued patents and currently pending patent applications have involved or will likely involve some amendments in the course of prosecution. Therefore, the widely interpreted impact of Festo is to substantially limit infringement analysis to the issue of literal infringement, with far less frequent consideration of the application of the Doctrine of Equivalents.
How "Substantial Similarity" Works
Under the AIPA, an application must be published 18 months after filing where foreign patent protection will be sought or where voluntary publication is sought. In either case, the patent applicant gains a new right for the first time under the AIPA: even prior to issuance, a right to damages may accrue. Additionally, under the AIPA, the right to accrued royalties after publication need not be limited to accused products which are covered literally by the published claim. The AIPA provides provisional rights to patentees if others make, use, sell, or import the invention during the period between publication and grant. These provisional rights include the right to a reasonable royalty for such period only if actual notice of publication is provided and the issued claims are "substantially identical" -- not literally identical -- to the published claims.
What does this mean? Suppose a patent applicant files an application with a claim having elements A & B, and begins selling the product in the marketplace. A competitor begins to copy the product, prior to the issuance of the patent. At some point after filing, the applicant amends the application, either prior to publication, after publication or in both time frames. After the 18th month, the application is published, and the patent applicant notifies the competitor of its claims, warning that it may be held liable for royalties if it does not cease copying the product. The competitor nevertheless persists. Under Festo, there can only be a literal infringement analysis of the issued claims, once the patent issues.
Amendment Prior to Publication.
The simpler issue is where amendment only occurs prior to publication. In the usual course, the amendment process probably during this time frame. Thus, the application by the time of publication may show elements A & B1 instead of A & B (where B1 is substituted for B). After issuance of the patent, the patentee enforces against the competitor.
Suppose the competitor's product is not identical to any of the claims in the issued patent (i.e., does not read on claims A & B1). If it were, there would be literal infringement and there would be no issue of concern here. Instead, the product has elements A & B2. By hypothesis there is no literal infringement, and under Festo, there can be no infringement under the Doctrine of Equivalents, because it does not apply to claims in which voluntary amendments took place. However, assuming there is "substantial similarity" between the published B1 and competitor's B2, under the AIPA there may be liability for royalties accruing from the date of notification of the pending application until issuance.
Amendment After Publication
Suppose instead the patent applicant voluntarily amends the claim after publication. This we may characterize as resulting in a published claim of A & B and a later, unpublished claim with elements A & B1. Ultimately, the patent issues with elements A & B1 (or A & B2, if the resulting issued claim differs from the first post-publication amendment as a result of further amendments). In either case, the patent issues with a B element which differs from the published B element, potentially unlike the situation above, where the amendment is made prior to publication.
Suppose, as above, the competitor's product is not identical to any claim in the issued patent. Again, there is therefore no literal infringement, nor equivalent infringement under Festo.
Is the analysis under the AIPA different that amendment prior to publication? Assuming there is "substantial similarity" between the published B element or claim and the issued B element or claim, there would be liability for royalties accruing from the date of notification of the pending application until issuance. However, unlike the situation where amendment is made prior to publication, the published claims and the issued claims differ.
This raises the specter that liability can logically arise under the AIPA in certain circumstances where the competitor's "infringing" product is not literally the same as the issued patent, not equivalent under the Doctrine of Equivalents and only "substantially similar" to the claims of the issued patent. Yet, there is accruing liability. It will be enough, according to the statute, if the device reads upon published, "superseded" claims, substantially identical to issued claims. Such an interpretation clearly expands the scope of patent protection, of a sort, both temporally (prior to issuance) and functionally (beyond the claims of the issued patent), beyond the prior range of protection afforded by law.
A "New" Standard of Equivalence Under the AIPA?
The result is that, in certain circumstances, a new kind of equivalence analysis may apply to assist patent holders. It can become significant if the Federal Circuit's ruling in Festo is upheld.
One of the first questions a skeptic might pose is whether Festo limits the meaning of this statute. The answer is, probably not. Note that we are not dealing with the Doctrine of Equivalents as it has been judicially recognized. The Festo court focused only on the judicially created Doctrine of Equivalents, not on §4504 of the AIPA. The statute expressly approves damages for accused products which correspond to the published claims, and not necessarily to the issued claims. Thus, the statute addresses a different kind of equivalence than that addressed in Festo. The statute not only addresses equivalence directed to a different kind of claims (pre-issuance); it may also apply a different standard of equivalence ("substantial similarity" vs. the Graver Tank4 formulation). The logic behind the Festo decision (greater notice and predictability) is not threatened either. The very function of the publication which gives rise to the application of this de facto statutory equivalence standard is to give notice in advance of issuance. Finally, since the Court was not construing the AIPA statute, and since the Congress can mandate its own equivalence creatures independent of judicial construction, the Festo decision does not serve to immediately strike down the provisions of the statute.
It is worth noting that substantial similarity under the AIPA is a different animal from the Doctrine of Equivalents in several other ways as well. Temporally, it only operates before the patent issues; the Doctrine of Equivalents only operates after. The remedies afforded by the AIPA, moreover, are more limited (reasonable royalties, not damages) than that for patent infringement under the Doctrine of Equivalents.
The implications and strategies that this phenomenon suggests are varied and not widely noted. For one thing, this points out an obvious patent claiming and prosecution strategy. Publication creates some opportunities, potentially at the cost of others. Some factors may dictate against publication, such as protecting trade secrets during the pendency of the application or in the event the patent does not issue with adequate claims. However, voluntary publication of the patent application when amendments are made in prosecution should be considered. Indeed, contrary to prevailing current "Festo wisdom," perhaps a broad claiming strategy can be supported by a publication strategy. The broader the number of claims published, the broader the net prior to issuance for deterrence and accruing pre-issuance liability claims.
This may not always make sense of course, but perhaps in limited circumstances it can. Suppose significant, limiting amendments during prosecution appear to be in the offing, irrespective of publication concerns. Pre-amendment publication of the claims may provide more deterrent value for the patent applicant than the enforcement value of the eventually issued patents will. Yes, it will be for a limited time (prior to issuance), but that may be the time-critical period for the applicant in a fast-moving technology with fierce copycat competitors in the marketplace. This is especially so if the technology in question is one in which prosecution delays have worsened to the point of eviscerating a substantial part of the value of the later-issued patent in any case. In fact, it may provide the only possibility of recovery against a copycat, if the likely issued claims do not cover the imitator's product.
The AIPA also creates some potentially profound issues for patent applicants about reliance on trade secret protection. Before, that was the only possible game in town, prior to issuance. Now, publication when made requires the sacrifice of such rights in trading one form of protection for another. Which is more useful is a matter for case-by-case consideration.
Further complicating the equation for patent practitioners and perhaps litigators is the cloudy crystal ball they are forced to consult. If Festo survives in its present form, the impact of the AIPA's royalty-upon-publication rights may become immense and shape strategy in a significant way. But if Festo does not, the Doctrine of Equivalents may yet have a lively presence, diminishing thereby the impact or need of alternative schemes to expand coverage. Only time will tell.
Robert W. Payne is a partner in the law firm of LaRiviere, Grubman & Payne, LLP, Monterey, CA, and practices intellectual property litigation. He has authored over 25 articles on intellectual subjects, a sampling of which are located at the Publications page of the law firm's website at www.lgpatlaw.com. May Lin DeHaan is an associate patent attorney with the law firm.
1 Festo Corp. v. Shoketsu Kinzoku, etc. Ltd. (Fed.Cir. 2000) 234 F.3d 558. Throughout this article, references to "Festo" are to the November, 2000, Court of Appeal decision. 2 Smith v. ACME General Corp., 614 F.2d 1086 (6th Cir. 1986), citing In re Arkey, 455 F.2d 586 (CCPA 1972). 3 Warner Jenkinson Co., Inc. v. Hilton Davis Chemical Co., 520 U.S. 17 (1997). 4 Graver Tank Mfg. Co. v. Linde Air Prods. Co., 339 U.S. 605 (1950).
©2001 LaRiviere, Grubman & Payne, LLP