Overview of the Changing Patent Landscape

1. David J. Dykeman, Esq.Patent Attorney & Shareholder Greenberg Traurig, LLP One International Place Boston, MA  02110 (617) 310-6009 dykemand@gtlaw.com Overview of the Changing Patent Landscape

2. Changing Patent Landscape • AGENDA • U.S. Supreme Court Decisions • Congressional legislation • USPTO Rule Reforms

3. Current Patent System • Complaints about current patent system: • Poorly suited for modern economy • Involves increased litigation and costs • Facilitates inventors and companies that patent incremental advances in technology solely to sue for damages when those patents are infringed • Deviated from healthy balance between promoting innovation and spreading the benefits of technological advances

4. I. Supreme Court Weighs In • U.S. Supreme Court has issued far-reaching opinions having dramatic impact on patents: • eBay v. MercExchange • Medimmune v. Genentech, Inc. • KSR v. Teleflex • Riegel v. Medtronic, Inc.

5. eBay v. MercExchange • U.S. Supreme CourtDecided on May 16, 2006 • “Infringement Injunctions”

6. eBay v. MercExchange • Federal Circuit Status Quo: • Absent extraordinary circumstances, injunctions should issue upon finding of infringement. • Supreme Court Holding: • Permanent injunction should be issued only after federal court weighs four-factor test for considering whether to award injunctive relief.

7. Impact • Represents a big loss for patent owners • Bargaining power has shifted • Decreases incentives to license or settle lawsuit eBay v. MercExchange

8. Medimmune v. Genentech, Inc.U.S. Supreme Court Decided on January 9, 2007 • “Patent Licensing”

9. Medimmune v. Genentech, Inc. • Issue: Whether licensee can establish “actual case or controversy” when it continues to maintain its license? • Holding: Patent licensee does not have to breach or terminate patent license agreement before bringing action challenging scope or validity of licensed patent.

10. Medimmune v. Genentech, Inc. • Existing License Agreements Licensees: • Increased freedom to challenge validity and little risk of losing license • Increased bargaining power to renegotiate • Licensors: • Greater risk of litigation

11. Medimmune v. Genentech, Inc. • Review existing license agreements to determine: • Susceptibility to challenge validity • Ability to terminate • Designated forum for any validity charge • Possibility of renegotiation • Likelihood of success on merits • Other patents for leverage • Costs/risks of litigation

12. Medimmune v. Genentech, Inc. • Future License Negotiations • Licensees: • More likely to license first and sue second • Licensors should request: • Higher Royalties • Up front payments • Including termination provisions, forum selection clauses, pre-suit notifications and differing royalty rates

13. KSR v. Teleflex • U.S. Supreme CourtDecided on April 30, 2007 • “Patent Obviousness”

14. KSR v. Teleflex • Issue: What is proper analysis to determine whether patent is invalid due to obviousness? • Holding: Reaffirmed holding from 1966 Graham v. John Deere case taking an expansive and flexible approach to determining obviousness and stating that several factors must be analyzed to consider obviousness.

15. KSR v. TeleflexApplying the Graham Obviousness Analysis • Factors to consider: • Scope/Content of prior art • Difference between prior and pertinent art • Level of skill in pertinent art • Secondary factors to consider: • Commercial Success • Long felt but unsolved needs • Failure of others

16. KSR v. Teleflex Impact • Easier to invalidate patents based on obviousness. • More patent applications will be rejected on obviousness grounds. • Greatly affects technology that combines several established techniques or elements and technology that utilizes incremental modifications to existing inventions.

17. Riegel v. Medtronic, Inc. • U.S. Supreme Court Decided on February 20, 2008 • “Limiting Liability”

18. Riegel v. Medtronic • Tougher to sue medical device makers • State tort actions are preempted for FDA approved medical devices • End of story? According to Representatives Ted Kennedy and Henry Waxman legislation is on the way . . .

19. 2. Congress Considers Major Patent Reform • Major changes from April 2007 legislation introduced in both chambers of Congress. • Indicators point to patent reform passing in 2008.

20. IT Industry has wanted patent reform for many years Biotech & Medical Device industries has argued against any weakening of the current patent system Opposite Sides of the Fence

21. Congressional Patent ReformPatents Will Become Harder to Get and Easier to Challenge • Switch from first-to-invent to first-to-file system • Post-grant opposition review • Capping patent infringement damage awards

22. Potential Impact of Congressional Legislation • Filing patent applications faster and often prematurely without understanding the technology’s full capabilities • Lack of adequate compensation from patent infringers • Longer and more costly process

23. 3. New Rules Proposed or Implemented by the USPTO • The USPTO is advancing its own version of patent reform by proposing and implementing new rules that alter patent filing, prosecution and licensing strategies • Certain rules were to become effective November 1, 2007 • Implementation of the rules was enjoined by courts on October 31, 2007

24. Goals of USPTO • Stop abuse of current system • Clear increasing backlog of pending patent applications

25. New Patent Rules from USPTO • Curtail use of continuation patent applications • Effective November 1, 2007 - STAYED • Limit number of claims receiving initial examination and new requirements regarding applications disclosing “overlapping subject matter” and having “patentably indistinct” claims • Effective November 1, 2007 - STAYED • Change Information Disclosure Statement (IDS) requirements for citing prior art references • Effective in 2008??? • 4. Accelerated examination of patent applications • Effective August 24, 2006 and becoming more popular

26. Implementation of the New Rules is Enjoined • USPTO sued by Tafas, Smithline Beecham Corp. and Glaxo Group Ltd. • Smithkline and Glaxo sought a preliminary injunction to stop the implementation of the new rule set • At least three motions to file amicus curiae briefs have been filed and granted • American Intellectual Property Law Assoc. • Roskamp Institute • Tikvah Therapeutics

27. Plaintiffs Arguments Regarding Rules • New rules are substantive and exceed Patent Office’s statutory authority to promulgate rules • New rules violate plain language of Title 35 • New rules are retroactive • ESD requirements are unconstitutionally vague

28. Patent Office’s Arguments • Rules are procedural, not substantive and provide for administrative efficiency • No real limit on number of continuations or RCE’s because petition practice is available • No “property rights” in patent applications, thus retroactivity is not an issue • Plaintiff’s cannot bring a vagueness challenge because patent applications do not confer “property rights”

29. Take Away Messages • Perfect Storm of Patent Reform • Supreme Court, Congress & USPTO offering own solutions, but not talking to each other • Savvy patent counsel can help weather the storm

30. David J. Dykeman, Esq.Patent Attorney & Shareholder Greenberg Traurig, LLP One International Place Boston, MA  02110 (617) 310-6009 dykemand@gtlaw.com Overview of the Changing Patent Landscape