Royal University of Law and Economics RULE

Slide 1:Royal University of Law and Economics (RULE) and Handong International Law School (HILS) Conference on Intellectual Property

January 22-27, 2007 Phnom Penh, Cambodia . Harold L. Novick Adjunct Professor of Law, HILS & NATH LAW GROUP PLLC Alexandria, Virginia, USA

Slide 2:Harold L. Novick hnovick@novick.com Rules of the Road A. JOBS 1. Your Job: Listen 2. My Job: Lecture 3. You finish 1st, tell me B. Questions: Required, at any time, PLEASE

INTRODUCTION information Technology age

Slide 3:DAY 1: INTRO TO PATENT LAW (US AND INTERNATIONAL)

A. What is Intellectual Property B. Brief Discussion of IP Philosophy and Economics C. Requirements for a Patent (US, European, and Japanese 1. Patentable Subject Matter (Utility) 2. Prior Art 3. Novelty 4. Unobviousness D. Patent Application 1. Disclosure Requirements 2. Written Description 3. Best Mode E. Examples of Inventions in Complex Technologies 1. Methods of Doing Business 2. Biotechnology Inventions and the patenting of live animals and plants

Slide 4:HYPOTHETICAL EXAMPLE

If a web site physically located on a computer in Korea offers the Amazon.com one-click purchase method and a buyer, physically located in California, purchases a product (e.g. flowers) on that web site, could the company hosting the web site be successfully sued for patent infringement in the United States? It is a very complex question, but surprisingly the answer may very well be yes.

Slide 5:HYPOTHETICAL EXAMPLE

What are the legal Intellectual Property matters involved with planning, building, setting up, and operating a drinking water bottling plant in Cambodia.

Slide 6:What is Intellectual Property?

Patents Utility Design Plant Copyrights Trademarks Trade Dress House Marks / Designations of Origination Trade Secrets Know How Semiconductor Chip Masks

Slide 7:Patents

1. A National or state granted right to stop others from making, using, selling, offering for sale, or importing the patented invention. 2. The protection begins when granted and lasts for 20 years beginning with the first filing date. 3. Protects: Utility Patents – Processes, Machine, Manufacture, Compositions Design – Any new and ornamental articles of manufacture (and computer icons) Plant – Any new asexually reproducible plant 4. The initial owner is the human being that invented the inventon.

Slide 8:Trademarks

For marks that serve to indicate the singleness of the source of product or service Examples of trademarks are words (CLOROX), logos (Samsung's circle), 3D (roof on IHOP), items, colors (pink for Owens Corning insulation), smell, music, etc Term: Renewable 10 year

Slide 9:Copyrights

Term: 95 years from “publication” or author’s life + 70 years Examples Books, artistic and technical drawings, Software code, music, movies, etc. The initial owner of copyrights in the US is the author, which could be the employer of the creator if Work for Hire

Slide 10:Trade Secrets

The term is indefinite and a trade secret lasts until “publicly known” processes, customer lists, business plans, business methods Initial owner is the one who has created it.

Slide 11:Know How

Know how is the important technology of how to do something. What temperatures do you use in a process; how tight do you screw on a bolt; what strength materials do you use and the combination of sizes do you use to built an article of manufacture; how fast can a machine operate and how often must you lubricate it are but a few examples.

Slide 12:Brief Discussion of IP Philosophy and Economics

History of Patents Reasons Why Companies Get Patents Some Economic Statistics

Slide 13:History of Patents

It has been written by the ancient Greek writer Athenaeus over 2,500 years ago that a city in Ancient Greece set up an incentive based system that gave any cook who invented an excellent dish the exclusive right to make this dish for one year “in order that others might be induced to labour at excelling in such pursuits”

Slide 14:HISTORY OF PATENTS

The first true patent was written in Renaissance Florence Italy in 1421 for a ship. England passed the statute of Monopolies in 1474. In the US, the Constitution contained a clause that was passed unanimously without debate.

Slide 15:Reasons why companies apply for patents

Royalties Cross-Licensing Prestige Reward employees Defensive Publications (e.g. Kodak) Company Assets (particularly startups) Improve company salability and valuation Provide collateral for loans Improve stock salability

Slide 16:U.S. Patent Statistics

184,051 U.S. patents were granted in 2001. 46.4 percent of U.S. patents went to non-U.S. inventors in 2001. Top 5 receivers of US patents in 2003: IBM Canon Hitachi Matsushita Hewlett-Packard Sources: U.S. PTO, Chicago Sun-Times

Slide 17:Licensing – Universities as the Source

Name R&D (millions) # of patents # of start-ups U of Washington $528 34 25 MIT $713 134 17 Stanford $391 64 15 Univ of CA. System $1,580 206 13 Penn.State $353 19 9 Cal. Tech. $153 40 9 Rutgers $154 25 7 Univ of Minnesota $247 66 6 * Courtesy of AUTM

Slide 18:Licensing – University royalties per year

Michigan State University, $160 million, two cancer-related patents (Blumenstyk 1999) University of Florida $37 million, Gatorade Iowa State University $27 million, fax machine algorithm Stanford University, $143 million, recombinant DNA gene-splicing patent, Odza 1996 UCLA gets over $100 million for its patent for the “patch” that is used to help people quit smoking

Slide 19:Benefits of IP for Pharmaceutical Industry

The pharmaceutical industries of many countries have seen impressive benefits since those nations adopted international patent law: In South Korea, local firm market share increased two percentage points and nation is now exporter of modern pharmaceutical technology. In Mexico, research-based pharmaceutical companies have tripled their investments. In China, the pharmaceutical market has grown 17 % annually and the number of joint ventures has increased.

Slide 20:C. Requirements for a Patent A. Patents in the U.S.

Legal Standards Constitution Patent Statute (35 U.S.C.) PTO Regulations (17 C.F.R. 1.) PTO Practice (MPEP) Court Mandated Requirements

Slide 21:C. Requirements for a Patent (Con’d) 1. Constitutional Standards

On Wednesday, September 5, 1787, James Madison and Charles Pinckney proposed that Congress shall have the power: “[t]o promote the Progress of Science and useful Arts by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.” This provision passed unanimously without debate and became Clause 8 of Section 8 of Article 1 (powers of Congress).

Slide 22: C. Requirements for a Patent (Con’d)2. Statutory Standards

Patentable subject matter In the U.S. (35 USC '101) an inventor (i.e. a human being) can get a patent invented by that inventor for any new and useful invention (constitutional test) that meets the other statutory requirements of novelty and unobviousness In EPO countries and many more, an owner (i.e. a company) of an invention can apply for a patent if the invention is new and inventive.

Slide 23:C. Requirements for a Patent (Con’d)2. Statutory Standards – Useful/Utility  a. Patentable Subject matter Categories

1) Processes Includes methods and is any ordered set of steps to accomplish subject matter that has utility. 2) Machine Computer related inventions are often framed as for machines, using, for example, ``means plus function'' language to define the machine's elements. In re Alappat, 33 F.3d 1526, 31 USPQ2d 1545 (Fed. Cir. 1994)

Slide 24:a. Patentable Subject matter Categories (Con’d)

3) Manufacture The residual class encompassing all man-made items not found in substantially the same form in nature that are neither machines nor compositions of matter. It includes kits of interrelated parts and thus could include computer programs as being comprised of a series of interrelated modules.  4) Composition of matter This is the classical chemical claim of a substance, such as NaCl for sodium chloride or common table salt.   5) Any new use of the foregoing

Slide 25:Requirements for a Patent (Con’d) 2. Statutory Standards – Useful/Utility  a. Patentable Subject matter European Standards

European patents shall be granted for any inventions which are susceptible of industrial application, which are new and which involve an inventive step. The following shall not be regarded as inventions: (a) discoveries, scientific theories and mathematical methods (b) aesthetic creations (c) schemes, rules and methods for performing mental acts, playing games or doing business, and programs for computers; (d) presentations of information

Slide 26:Patentable Subject matter1. Tests a. Utility

Brenner v. Manson (Sup. Ct. 1966) Claim: a process for preparing a steroid Prior art: steroids had similar structure Specification: no utility was given Court: practical utility is required to justify a patent, not just an object for further research Nelson v. Bowler (CCPA 1980) Pharmaceutical activity is sufficient practical utility; specific therapy is not required to be shown Ex parte Aggarwal (BOA 1992) Utility is not shown unless there is substantial activity in a screen accepted as predictive of human activity for the type of compound used

Slide 27:a. Patentable Subject matter1. Tests

b. Test for patentable subject matter in computer software (i.e. mathematical algorithms):  1) Supreme Court has interpreted Section 101 of the statute expansively. In Diamond v. Chakrabarty, 447 US 303, 309, 206 USPQ 193 (1980), the court asserted that when man genetically alters bacteria it was a patentable subject matter. The court cited with approval the legislative history of the Patent Act which stated that patentable subject matter includes, Aanything under the sun that is made by man.@

Slide 28:a. Patentable Subject matterTests (Con’d)

2) The Federal Circuit Court of Appeal, which hears all patent appeals, in the now famous State Street Bank case, held not only that methods of doing business were patentable subject matter, but also revised the test for determining the patentability of computer programs. a) The invention was entitled a “Data Processing System for Hub and Spoke Financial Services Configuration” and utilized computer software. The spokes were mutual funds that were pooled so as to increase their economic advantage.

Slide 29:Patentable Subject matterTests (Con’d)  2) State Street Bank Case

b) The hub was an investment portfolio organized as a partnership. c) The investment configuration provides the administrator of a mutual fund with the advantageous combination of economies of scale in administering investments coupled with the tax advantages of a partnership.

Slide 30:Patentable Subject matterTests (Con’d)  2) State Street Bank Case (Con’d)

d) The court held that it was a practical application of a mathematical algorithm to transform data, representing discrete dollar amounts, by a machine through a series of mathematical calculations into a final share price. e) The court in State Street said that a claim encompasses statutory subject matter if it focuses on the essential characteristics of the subject matter, in particular, its practical utility.

Slide 31:Patentable Subject matterTests (Con’d)  3) AT&T case

3) The Federal Circuit clarified the statement of patentable subject matter and gave a workable test in AT&T v. Excel Communications. a) Excel had challenged AT&T’s patent entitled “Call Message Recording for Telephone Systems,” and asserted that the patent did not physically transform any subject matter from one state to another. AT&T’s invention added a Primary Inter-exchange carrier (PIC) indicator to a telephone message record. The indicator then assisted long-distance carriers with their billing treatment for customers who called persons with the same or different long-distance carrier. Thus, the invention used Boolean algebra to translate data into useful information.

Slide 32:Patentable Subject matterTests (Con’d)  3) AT&T v. Excel case (Con’d)

b) The Court held that in order for a process which includes the use of a mathematical algorithm to be patentable, the claimed process as a whole must be used for an industrial process. c) The AT&T invention was used for an industrial process and the court rejected Excel’s argument that a physical transformation is a requirement for the claim to be patentable. d) The court stated that so long as the claimed invention performs a function which the patent laws were designed to protect, then the claim contained patentable subject matter.

Slide 33:Requirements for a Patent (Con’d)2. Statutory Standards - Useful  a. Patentable Subject Matter i. Limits

Three categories are not patentable subject matter, as stated in Diamond v. Diehr, 450 US 175, 209 USPQ 1 (1981) : 1) “Laws of Nature;” 2) “Natural phenomena;” and 3) “abstract ideas.” As stated in State Street Bank, “Certain types of mathematical subject matter, standing alone represent nothing more than abstract ideas until reduced to some type of practical application.”

Slide 34:Requirements for a Patent (Con’d) 1. Patentable Subject Matter (Con’d) c. US PTO Guidelines (Con’d) 

i. PTO Examination Guidelines for Computer Related Inventions 1) Determine what application has invented and is seeking to patent 2) Search Prior Art 3) Determine if statutory subject matter (35 USC 101) 4) Complete examination

Slide 35:C. Requirements for a Patent (Con’d) 1. Patentable Subject Matter (Con’d) c. US PTO Guidelines (Con’d) 

b. Non-statutory if: 1) A natural phenomenon (e.g. energy) 2) Neither performs independent physical acts nor manipulates data representing physical objects OR activities to get practical application AND merely manipulates abstract idea or solves a purely mathematical problem without any limitation to a practical application

Slide 36:Requirements for a Patent (Con’d) 1. Patentable Subject Matter (Con’d) c. US PTO Guidelines (Con’d) 

c. Statutory if: 1) A series of steps to be performed on a computer and the process: a) Performs independent physical acts or manipulates data representing physical objects OR activities to get practical application AND does not manipulate merely ideas nor solve a purely mathematical problem; b) a specific machine or manufacture or process

Slide 37:Requirements for a Patent2. Prior Art

a. Varies country by country. b. In US is very complicated and divided into 3 categories based on dates: date of invention; date of filing application; and no date. c. US gives you a 1 year grace period to file application if invention is invented before the prior art of a publication; known or used; patented d. Most other countries give no grace period. e. Filing date of the patent application for a U.S. patent is the effectiveness date of the US patent

Slide 38:C. Requirements for a Patent 3. Novelty

Each and every limitation of the claim in the proper order not in one item of prior art And not subject to one of the statutory bars against patentability, e.g. sales and/or publication(s)

Slide 39:C. Requirements for a Patent 3. Nonobviousness

In the US, no combination of prior art (i.e. references) render the claims obvious; there must be a significant difference from the prior art (but not necessarily better). You must protect against the hindsight reconstruction of two prior art references. In a European Patent, it is where there is an INVENTIVE STEP, Problem-Solution approach

Slide 40:C. Requirements for a Patent 3. Nonobviousness (Con’d)

The Graham v. John Deere case, 383 US 1 (1966) (The trilogy) “Under 103, the scope and content of the prior art are to be determined; differences between the prior art and the claims at issue are to be ascertained, and the level of ordinary skill in the pertinent art are to be ascertained, and the level of ordinary skill in the pertinent art resolved. Against this background, the obviousness or nonobviousness of the subject matter is determined.” “Such secondary considerations as commercial success, long felt but unsolved needs, failure of others, etc., might be utilized to give light ot the circumstances surrounding the origin of the subject matter sought to be patented. AS indicia of obviousness or nonobviousness, these inquiries may have relevancy.”

Slide 41:C. Requirements for a Patent 3. Nonobviousness (Con’d)

The invention in the Graham case was for a spring clamp which permits plow shanks to be pushed upward when they hit obstructions in the soil. The invention is basically a hinge. The prior art included 5 patents that showed all of the claimed mechanical elements. “If free flexing as petitioners now argue is the crucial difference above the prior art, then it appears evident that the desired result would be obtainable by not boxing the shank within the confines of the hinge. …Certainly a person having ordinary skill in the prior art, given the fact that the flex in the shank could be utilized more effectively if allowed to run the entire length of the shank, would immediately see that the thing to do was what Graham did, i.e., invert the shank and the hinge plate.”

Slide 42:C. Requirements for a Patent 3. Nonobviousness (Con’d)

Note that the Supreme Court did not cite any teaching in any of the references to combine them. This is the present controversy in a present case just recently argued before that court. In essence, in mechanical cases, (e.g. Anderson-Black Rock) there must be a synergistic effect if two known mechanical elements are combined for the result to be nonobvious.

Slide 43:D. Patent Application1. Disclosure Requirements

To get a patent one must first file a detailed application in the U.SPTO. The application must fully describe the application for which the applicant seeks a patent in such full and complete manner so as to permit one skilled in that art to which the invention is most closely related to make and use the invention Wands factors (In re Wands, Fed. Cir. 1988) Predictability vs. undue experimentation; Examples and guidance in specification; State of prior art; Breadth of claims. .

Slide 44:D. Patent Application 2. Written Description

35 U.S.C. Sec. 112, first paragraph requires that “the specification shall contain a written description of the invention and of the manner and process of making and using it” The written specification and drawings are considered to determine “with reasonable clarity to those of ordinary skill that [the inventor] had in fact invented the catheter recited in those claims.” Vas-Cath Inc. v. Mahurkar, 935 F.2d 1555 (Fed. Cir. 1991)(a case in which the validity of the claims of a later filed utility patent for a double lumen catheter could find support and thus claim the earlier filing date of an earlier filed design patent.)

Slide 45:Patent Application2. Written Description

Amgen v. Chugai (Fed. Cir. 1991) Requires mental picture of the structure, isolation. Merely defining biological properties is not enough. Fiers (Fed. Cir. 1993); Lilly (Fed. Cir. 1997) Conception of a DNA fragment requires ability to envision the chemical structure and how to obtain it; i.e. an actual DNA sequence is required. Fiddes v. Baird (BPAI 1993) Knowing the amino acid sequence of a protein and the general genetics of amino and nucleic acids DOES NOT establish possession of the gene encoding for the protein.

Slide 46:D. Patent Application3. Best Mode

The patent application must also disclose the best mode of carrying out the invention known to the inventor at the time of filing the patent application. In a contract between the government and the inventor, in return for getting the exclusive use of the patented claimed invention, the inventor must full disclose the best was of carrying out the invention.

Slide 47:E. Examples of Inventions in Complex Technologies  1. Methods of Doing Business

a. The State Street decision discussed above looked at a financial type of business. However, nowhere in the decision is there a definition of what a method of doing business is. b. The USPTO White Paper (about March, 2001 and available from the PTO web page, www.uspto.gov) discusses financial apparatus and method as being methods of doing business. 1) It states that such patents date back to the beginning of the US patent laws in 1790, and were largely paper-related products and methods. The first financial patent was granted on March 19, 1799, to Jacob Perkins of Massachusetts for an invention for "Detecting Counterfeit Notes."

Slide 48:1. Methods of Doing Business (Con’d)

c) The White Paper says that class 705 (of the patent classification system) in which patents for business methods are located has a definition for patents to be classified therein as follows: 1) Machines and methods for performing data processing or calculation operations, where the machine or method is utilized in the 1) practice, administration, or management of an enterprise, or 2) processing of financial data, or 3) determination of the charge for goods or services.

Slide 49:1. Methods of Doing Business (Con’d) a.. PTO White Paper & Class 705

d). Class 705 is a collection of twenty plus financial and management data processing areas: such as Insurance, Stock/Bond Trading, Health Care Management, Reservation Systems, Postage Meter Systems (Computerized) as well as more general enterprise functions such as Electronic Shopping, Auction Systems, and Business Cryptography. e). The four largest groupings in Class 705 are those directed to the general business operations of: Determining Who Your Customers Are, and The Products/Services They Need/Want; Operations Research - Market Analysis; Informing Customers You Exist, Showing Them Your Products & Services, and Getting Them to Purchase; and Advertising Management

Slide 50:E. Complex Technologies (Con’d) 2. Biotechnology Inventions and the patenting of live animals

In the 1980’s in the US the courts, including the Supreme Court discussed whether a genetically-altered living organism was patentable subject matter. The controversy began in the famous case of Diamond v. Chakrabarty, 447 US 303 (1980) in the US Supreme Court said that a man-made bacteria that ate oil and was used to clean up oil spills in the ocean was patentable, and that in fact “anything under the sun that was made by man is patentable subject matter.”

Slide 51:Complex Technologies (Con’d)2. Biotechnology Inventions and the patenting of live animals (Con’d)

U.S. Pat. No. 5,696,092 to Dr. Michael Manyak Abstract: Methods and compositions that prevent or inhibit metastases of cancers of epithelial origin, especially human prostate cancers

Slide 52:Example of Modern Biotech patent

Slide 53:Example of Claim of Modern Biotech patent

Claim 1: A method for preventing or inhibiting metastasis of a cancer of epithelial cell origin, comprising the step of administering uteroglobin to an organism suffering from a cancer of epithelial cell origin wherein the uteroglobin inhibits arachidonic acid release by cells of said cancer and where the step of administering is by a route and in an amount effective to inhibit or prevent metastasis of said cancer without administering anti-angiogenesis agents

Slide 54:F. CONCLUSION

We have discussed the hows of legal protection of computer software and methods of doing business. Computer software can be protected by patents, copyrights and trade secrets; and methods of doing business can be protected by patents and to some degree by trade secrets. The law however is still actively developing both as to what types of computer software and methods of doing business are protectable, and the extent of that protection. Stay tuned to your local Internet Channel and if invited would love to do a sequel. Remember, the questions in this area do not change. ONLY THE ANSWERS CHANGE. Thank you very much for being here and for your attention. I will be happy to discuss this further at the appropriate times.

Slide 55:THANK YOU FOR THE HONOR OF ALLOWING ME TO PARTICIPATE INTHIS MOST WONDERFUL, TIMELY AND FRUITFUL CONFERENCE.

Slide 56:BYE