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Patenting in the cloud

In the field of distributed computing, user devices with limited computing power may be connected to a remote computing system where the main purpose of the user device is to receive commands from the user and to display processed data provided by the remote computing system. The main computational processing takes place at the remote computing system, typically formed by a “cloud” of network-connected computer resources. As the computational processing is shifted from the user device to the remote computing system, it is possible to provide the user with computing services that are typically not available in a stand-alone user device due to factors such as cost, computational power and licensing issues. This provides an opportunity to completely rethink how and where to place your company’s computing resources. It also allows you to decide whether you should upgrade your internal servers or outsource the computational power and storage to an external provider.

Accordingly, a new service-based business model is made available, which however introduces problems in regards to how to handle the intellectual property of the software providing the service. The main concern typically relates to the possibility of geographically positioning the servers in another country than in which the user is active. Geographical distribution of for example patented software, in different countries and jurisdictions put an undesirable spin on the enforceability of patent rights. It is easy to see how this could potentially allow a wilful infringer to position servers in a country or jurisdiction that provides good bandwidth and accessibility, but where no patent rights are enforceable.

However, based on fairly recent case law (e.g. Football Dataco & others v Sportradar GmbH & another (Case C-173/11) as well as NTP, Inc. v. Research-in-Motion, Ltd. (RIM), 418 F.3d 1282, 75 U.S.P.Q.2d 1763 (Fed. Cir. 2005)), it has been made clear that the courts generally try to look to where the beneficial use of the invention is obtained. This provides at least some relief in view of the above identified geographical disparity between servers running patented software and the possibility of patent enforcement.

This is however only half of the truth. The fact is that the courts (i.e. in relation to the RIM case) prefer to look at patent infringement from a “system” perspective, i.e. where the beneficial use of a system may be obtained even though servers are placed in one country and the users in another. It is a different story with method claims where it for example has been determined that each step of the process must be performed within the same country (i.e. the USA) in order to be seen as infringing.

Based on the above, care must thus be taken in crafting your intellectual property strategy when deciding to protect, for example, new computational and/or social media related software-based methods having the possibility to be executed within the cloud, where geographical disparity between user devices and the computing system is apparent. Obviously, it is of great importance to conduct a general review of the possibility of including patent claims from all different perspectives (providing they are considered patentable). This means including both device and method claims drafted from the perspective of the different computing nodes, the system including both the computing node(s) and the user device, as well as from the perspective of the user/user device.

In addition, the choice of where to file patent applications may differ slightly from the normal filing strategy (where filing a patent application in the USA is typically the first priority for software related inventions). Accordingly, it may be a good idea to also consider filing patent applications in countries where it may be suitable to place computer servers.  An example of such a country is Sweden, where for example Facebook at present builds a 28 000 m2 server farm, their first outside of the USA. The reason for placing the server farm in Sweden is in this case due to the high reliability in regards to electricity and network connectivity.

To summarize, achieving a desired level of patent protection for cloud-based inventions is more complicated than for a physical object where the provision (manufacture and/or sale) of the object as well as the use generally take place in a single jurisdiction at any given time. The same, of course, applies where all steps of a patented method are performed by a single user in a single location. It is therefore essential to review your intellectual property strategy taking into account possibilities with regard to claim construction as well as the choice of countries in which to file patent applications.

Magnus Nilsson, European Patent Attorney

Design just as important as technical issues in Apple vs. Samsung verdict

The dispute between Apple and Samsung on smartphones and tablets has received much public attention. Recently, a landmark verdict was reached when a California based court decided in Apple’s favour. Samsung now has to pay at least one billion US dollars to Apple, who also has sought a sales ban in the USA on a number of the Samsung products involved.  A preliminary injunction hearing is scheduled on September 20, 2012.

The court held that Samsung had infringed several of Apple’s utility patents for user interface related functions in both smartphones and tablets, including one utility patent relating to the now well known “bounce-back feature”. However, what is more interesting; the court considered that Samsung had infringed a number of design patents, for example relating to the appearance of the physical device as well as the design of its graphical user interface. This kind of intellectual property dispute normally tends to be dominated by technical patent issues, thus it’s an interesting and exciting development to see that protection of design has had such a great impact on the court’s decision.

Evidence in the court proceedings included an email from Google to Samsung, pointing towards that Samsung’s “P1” and “P3” tablets (Galaxy Tab and Galaxy Tab 10.1) were “too similar” to the iPad and demanding “distinguishable design vis-à-vis the iPad for the P3”. Additionally, Apple presented an internal Samsung technical development report where Samsung’s team of engineers compared the Samsung prototype with an iPhone.

So, is this the end for Samsung’s Android based smartphones? Most likely not. It should be fairly easy for Samsung’s engineers to design around Apple’s patents and design protection, however at the cost of losing some of the features nowadays generally expected when buying a Samsung smartphone. In any case, we may see a shift from Android based smartphones towards the use of the Windows Phone operating system. This is most likely well received by Microsoft, having a planned release of Windows Phone 8 later this year.

Magnus Nilsson, European Patent Attorney

Changes in the Taiwanese Patent Act

Further to our information relating to the Taiwanese Trademark Act, the Legislative Yuan on November 29, 2011, passed the draft amendment to the Patent Act proposed by the Executive Yuan. The date on which this Act takes effect will be decided by the Executive Yuan. It is estimated this Act will come into force one year after ratification of the President.

The main points further improving the Taiwanese patent system are summarized below. 

  1. The applicant can claim a grace period of six months prior to the filing date, due to own disclosure through printed publication.
  2. It will be possible to apply for reinstatement if the applicant unintentionally failed to claim priority, pay issue fee, or pay annuity fee within the statutory time.
  3. The applicant may file a divisional application within 30 days from when the notice of allowance is rendered.
  4. It will be possible to apply for a compulsory license to produce pharmaceuticals and export them to developing countries to solve their public health problems.
  5. Additionally, it will be possible for an applicant to file an invention patent application and a utility model application at the same time. However, TIPO will ask the applicant to select one of the applications when the patent application is allowed, and the unselected one does not exist ab initio.

The amendment to the Patent Act is aimed at encouraging and protecting inventions and creations in order to promote the development of various industries. This includes the encouragement of invention patents, utility model patents and design patents.

Magnus Nilsson, European Patent Attorney

When will the Marketing Director and the Board start evaluating trademarks in actual money?

When will the Marketing Director and the Board start evaluating trademarks in actual money?

Hopefully very soon, since the two main obstacles have been erased.

The previous lack of standards for valuation methods is now history by introduction of the new ISO 10668 Monetary Brand Valuation.

An uncertainty amongst management and Board Directors on how to assess trademark valuations due to lack of experience will be viped away by the national adaption of the international IFRS rules on accounting and in Sweden also by introduction of new national rules from FAR, the Swedish Accountants Association. From 2012 all Swedish companies, except the smallest ones, are obliged to value at least all aquired IP being part of the goodwill. This will undoubtably increase the understanding of trademark valuation.

By measuring market activities and aquired trademark positions in actual money, marketing in Swedish companies will be enhanced and actively adding value to the company.

Since I have argued for putting the trademark value on the balance sheet for the last 20 years, I sincerely hope that a financial evaluation of trademarks now finally will be adopted by all companies that are proud of their trademarks.

Stefan Hjelmqwist, Attorney at Law, Awapatent

Recent Trends in Chinese IP enforcement

As has previously been mentioned on this blog, Schneider Electric Low Voltage (Tianjin) Co. Ltd., a joint venture of Schneider Electric, was ordered in 2007 to pay record damages of 334.8 million yuan (approx. € 36 million) to its Chinese competitor Chint Group (”Chint”) for infringement of a Utility Model Patent held by Chint. The validity of the Utility Model Patent was challenged by Schneider Electric before the Chinese Intellectual Property Office (SIPO), but the Utility Model Patent was found to be valid. This decision was appealed by Schneider Electric to the Beijing No. 1 Intermediate People’s Court, which in March 2009 issued a decision agreeing with the SIPO’s decision, upholding the validity of Chint’s Utility Model Patent.

The Chinese court case, which ended in the record damages was part of a series of patent disputes in different jurisdictions between Schneider Electric and Chint. This series of patent disputes was brought to an end through a settlement between Schneider Electric and Chint that was concluded on 15 April 2009. According to the settlement, Schneider Electric agreed to pay Chint 157.5 million yuan (approx. €17 million).

The originally awarded damages are still by far the highest yet in a patent dispute in China. However, the number of IP cases in Chinese courts and the average damages ordered are increasing rapidly.

To handle the ever increasing number of IP cases, the new Implementing Regulations of the Chinese Patent Law to come into effect on 1 October 2009 provide for a more decentralized handling of IP related cases by allowing local administration to handle IP cases.

Furthermore, according to the new Implementing Regulations, SIPO will be allowed to handle major patent disputes, such as issues related to patent infringement and invalidation, upon request by local patent administration departments.

Hopefully, at least the latter of these measures will lead to a more uniform handling of patent cases in China. Anyway, this certainly seems to be the intention of the Chinese government, which has additionally launched an initiative to compile an IP related case law based on 100 typical IP cases from the past 30 years.

Finally, it should be mentioned that arbitration by the China International Economic and Trade Arbitration Commission is becoming an increasingly popular way of handling IP related disputes in China, especially in cases involving foreign parties, in which the arbitration can be bilingual or in English.

Daniel Fritsche, European Patent Attorney

EPO’s fight against divisional applications

EPO is seeking to limit the submission of divisional applications, which would be a severe blow to small, newly started technical companies in particular. Although a stop was put to their latest proposal by the Committee on Patent Law, it is highly likely that despite this setback we will see a modified version put before the Administrative Council meeting in March.

EPO’s proposal
EPO has proposed limiting the option of submitting divisional applications to a period of 24 months following either a first order from the Examining Division or a first notification that the parent application lacks unity of invention. The proposal represents a significant limitation of the possibilities allowed to applicants under current rules, which enable divisional applications to be submitted for as long as the basic application remains valid.

The proposal is intended in part to limited alleged misuse of the submission of divisional applications. Based on the figures presented by EPO, it is estimated that alleged misuse occurs in fewer than one in a thousand applications.

However, the proposal is very far-reaching. If it is passed, it will no longer be possible to submit a divisional application in connection with oral proceedings. At present, this method can sometimes be the only way to ensure that an applicant has the possibility to obtain protection for patentable material contained in the submitted application. In cases where the patent application is rejected during the course of the proceedings, under current rules the applicant has the option of pursuing other lines of retreat through divisional applications, but under the proposed change in the rules divisional applications must be submitted at an early stage.

Small players hit hardest
EPO’s line will particularly hit small, newly started technical companies, which often lack both the economic resources and a precise knowledge of the position of the technology. At the same time, the innovation which forms the basis of such a newly started company often includes a number of inventions for which the company may be totally dependent on being granted strong protection.

Given that a company may often lack the resources to submit a large number of patent applications during the start-up phase, it has to rely on one or two broader-based applications. But due to a lack of the resources needed to fully protect the position of the technology beyond the basic idea behind the invention, as formulated in the applicant’s principal requirements, it often becomes necessary to utilise the option of divisional applications.

As the application is scrutinised, any changes to a principal requirement are defended in a rejoinder. Under EPO’s proposal, where the rejoinder does not have the desired effect, the time limit for submitting divisional applications would meantime have expired. Consequently the applicant must, at the time of submitting the rejoinder, already submit divisional applications for the set of inventions that can be identified by the applicant, in the event that an umbrella claim contained in the basic application is not approved. Given the fact that this entails a significant increase in procedural costs for a regular applicant, for a start-up company this option becomes prohibitively expensive. The proposal is therefore hostile to start-up companies of the type which EU common market policy otherwise claims to support.

The industry’s position
Against this background, Swedish and European industry together with representative associations are strongly opposed to EPO’s proposal, and a majority of the national delegates who spoke at the CPL meeting were also responsive to the concerns of the industry and the representative associations’ misgivings. The original proposal failed to muster support, subsequent to which a revised proposal was put forward whereby the option of submitting a divisional application would have to be justified and receive the approval of the Examining Division. This proposal also failed to gain sufficient support.

I would like to see a limitation introduced which would simply establish an exception in the case of divisional applications whose submission constitutes clear misuse of the regulatory system. The issue is whether EPO continues to pursue its hard line against divisional applications and whether this will gain resonance at the Administrative Council meeting in March.

Nils Ekström, European Patent Attorney

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Swedish Court of Patent Appeals remits cases to the Swedish Patent Office for further prosecution

OMX Technology AB, who i.a. owns and runs the Stockholm Stock Exchange, filed Swedish patent application 0201756-4 on 10 June 2002
which subsequently was refused 12 March 2004 on the basis of lacking technical character and thereby being considered not to be regarded as an invention in accordance with 1 § PL, i.e. the Swedish Patent Act (cf. Article 52(2) and (3) EPC). The Swedish Patent Office (PRV) considered that the subject-matter defined in the patent application basically comprised an administrative method implemented on plurality of computers.

The invention defined in the application relates to a computer architecture for real time order matching in an automated stock exchange system. The gist of the architecture is that one computer handles the order matching, thereby controlling the processing of incoming orders, while a further computer executes computations considered more complex and stores the result in a memory accessible by the order matching computer. Allegedly, use of a second computer for computing data to be used in the order matching process, and a memory where the order matching computer can fetch data computed by the second computer, is novel and inventive in that the computational load resulting from real time operation is reduced.

EasyContact AB filed Swedish patent application 0203167-2 on 25 October 2002 which subsequently was refused 30 January 2004, also on the basis of lacking technical character and thereby being considered not to be regarded as an invention in accordance with 1 § PL. The Swedish Patent Office (PRV) considered that the subject-matter defined in the patent application basically comprised a computer implemented business method.

The invention defined in the application relates to a telephone network comprising mobile telephones communicating via the network with a server. The mobile phones comprises various means for inputting data and transferring data, while the server comprises memory means, means for receiving and comparing data, means for selecting an object up for sale, and means for establishing a connection between a mobile phone used for buying an object and a mobile phone used for selling said object. Allegedly, the network facilitates trading of goods and services. Prior art systems in the field of electronic trading of goods and services require powerful, and thus costly, mobile phones.

In both the OMX case (04-059) and the EasyContact case (04-075), the PBR unsurprisingly concluded that the respective invention presented a technical character and thus should be regarded as an invention in accordance with 1 § PL. Hence, it is up to the PRV to continue prosecution of the applications.

An office action objecting to lack of inventive step has been issued for the respective application. It remains to be seen whether the applications will be refused on the ground of lacking inventive step or not.

The PRV refused both applications on the grounds that the respective independent claims defined subject-matter not being regarded as inventions under 1 § PL. However, as can be seen in the above, the PBR considered said subject-matter to indeed exhibit technical character and remitted the respective application to the PRV for continued prosecution.

In both the OMX and the EasyContact case, the PBR asserts that the respective invention defined by the independent claims obviously requires technical considerations, thereby also having technical character. Although no particular piece of case law is referred to in direct connection to the conclusion of the PBR in the respective case, the reasoning partly appears to rely on – as well as partly lending its wording from – the EPO Board of Appeal case T769/92 (Sohei), which holds that an invention comprising functional features implemented by computer programs is not excluded from patentability if technical considerations concerning the solution of the problem solved by the invention are required to carry out the invention. In the OMX case, T769/92 is generally summarized along with a plurality of other EPO Board of Appeal cases.

In any case, the reasoning of the PBR is more in line with EPO case T1173/97 than it is with case T258/03.

T1173/97 (IBM) states in its headnote that a computer program product is not excluded from patentability under Article 52(2) and (3) EPC if, when it is run on a computer, it produces a further technical effect which goes beyond the “normal” physical interactions between program (software) and computer (hardware).

T258/03 (Hitachi), on the other hand, states in headnote I that a method involving technical means is an invention within the meaning of Article 52(1) EPC.

Question 2a of pending referral G3/08 to the EPO Enlarged Board of Appeal touches upon this discrepancy.

Should the PBR have reasoned along the lines of T258/03 for remittance to the PRV, it would have sufficed to establish the fact that all independent claims – apparatus claims as well as method claims – actually do comprise technical means (such as e.g. a computer in the OMX case and mobile telephones in the EasyContact case), whereas now they had to motivate that technical considerations had to be made, which must be said to be a somewhat more subjective standard of determining technical character.

In the light of these two Swedish second instance decisions, the future G3/08 decision of the EPO Enlarged board of Appeal is awaited.

Magnus Nordin, European Patent Attorney and member of the Awapatent software team

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Federal Circuit revises its decision in the “Comiskey case”

On January 13, 2009 the United States Court of Appeals for the Federal Circuit (CAFC) published an amended decision in the Comiskey case, revising its original decision from 2007. The Comiskey patent application claims a method and system for mandatory arbitration involving legal documents such as wills or contracts.

In the original decision the CAFC considered the method to be an abstract idea (processes of human thinking) and thus not patentable subject matter under 35 U.S.C. §101. The system, which generally describes the same process but includes a plurality of “modules”, was on the other hand considered patentable subject matter based on the addition of the modules. However, the CAFC regarded the modules to be a routine addition of modern electronics to an otherwise unpatentable invention, thus creating a prima facie case of obviousness.

Consequently, the USPTO was remanded to determine whether the mere addition of modern computers and communication devices would be obvious, not taking into account the system as a whole but only the actual system modules. This separation of the system between the process steps and the system module when considering obviousness (35 U.S.C. §103) created uncertainty regarding if computer implemented business methods, such as in the area of e-commerce, would be considered patentable.

However, in the revised decision the CAFC applies a more liberal interpretation of the system modules, thereby opening up for the Comiskey system to be seen as a specialized machine implementation that taken as a whole including the process steps and the functionality of the system modules could be patentable under §101. On the other hand, the CAFC did not make any judgment as to whether the system should be considered patentable under §101, but rather once again leave that to the USPTO to decide.

As a result, the case has been remanded back to the USPTO for determining whether §101 is satisfied. In its future decision the USPTO will possibly consider the recent Bilski decision for determining if the system according to Comiskey passes the machine-or-transformation test.

If you would like to read the revised Comiskey decision it can be found here.

Magnus Nilsson, Patent Attorney and member of the Awapatent software team

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The Bilski decision is here! State Street Bank is out.

Yesterday (October 30, 2008), United States Court of Appeals for the Federal Circuit (CAFC) closed the door on the State Street Bank decision from 1998, a decision stating that it would be enough in regards to patentability under 35 U.S.C. § 101 if an invention produces “useful, concrete, and tangible result”.

In the decision from yesterday, the CAFC instead made use of the so called machine-or-transformation test, where either a specific machine with specific ties to the claimed process or the specific transformation of a physical entity to another must be present for the invention to be patentable. Thus, an invention, such as the Bernie Bilski invention, which is not tied to any specific machine or apparatus for any of its process steps nor is limited to any particular transformation, is not patentable.

The machine-or-transformation test has been applied before, for example in relation to Gottschalk v. Benson (1972). However, in the Gottschalk v. Benson case, the claimed process was still held to be ineligible subject matter, even though it operated on a machine such as a digital computer, since the claim’s tie to the machine were not specific enough. Accordingly, an algorithm implemented on a general purpose computer, such as a PC, was in this case not enough for reaching patentability.

On the other hand, a case where the court ruled the machine to be specific enough when applying the machine-or-transformation test, was in relation to Diamond v. Diehr (1981), where the Arrhenius equation was used for deciding when a process for curing rubber in a mould was completed. In this case, the machine had means for both the curing of the rubber as well as the computation of the Arrhenius equation (i.e. means for installing rubber in a press, closing the mold, constantly determining the temperature of the mold, constantly recalculating the appropriate cure time through the use of the Arrhenius equation and a digital computer, and automatically opening the press at the proper time).

Accordingly, for not failing the machine-or-transformation test it seems that one has to be very specific when drafting an application in this area, such that the ties between a claimed process implemented on a machine are made obvious.

On the positive side the CAFC noted that there will be no implementation of the so-called “business method exception” (as well as in relation to software), which they rather state would be unlawful. Accordingly, business method and software claims are still in as long as they fulfil the machine-or-transformation test.

If you would like to read the whole decision it can be found here:
Magnus Nilsson, European Patent Attorney

New Patent Law in China

Everybody knows that China (PRC) is the most populous country in the world. Most are probably also aware of the fact that the Chinese economy is steadily growing by about 10% each year, and that China has a foreign exchange reserve of stunning 1,600 billion dollars to be compared with the national debt of the USA, which is about 5,000 billion dollars.

What may be a little less known is that only the American and Japanese patent offices receive more patent applications than the Chinese patent office (SIPO). In 2007, almost 250,000 applications for invention patent were filed with the SIPO, which can be compared with the about 140,000 patent applications filed with the European Patent Office (EPO). In addition to the 250,000 invention patent application, about 180,000 utility model patent applications were filed with the SIPO. Since utility model patent applications are not examined with respect to novelty and inventive step, practically all of the utility model applications that are filed result in registered IP rights with a time lag of about 1 – 1.5 years.

Of this total of 430,000 patent applications, less than 100,000 were filed by foreign (mainly Japanese) applicants, indicating that Chinese enterprises are very actively developing and protecting technology.

This trend of growing economy, an increased level of domestic technological development and IP awareness can be said to have been embodied by last year’s famous Chint vs. Schneider decision, where the People’s Court of Wenzhu ordered the Chinese (joint venture) subsidiary of French multinational Schneider Electronic to pay Chinese competitor Chint Group 330 million Yuan (about 33 million Euro) for infringing a utility model patent held by Chint. Since Schneider has appealed the decision to the next instance, the award of the record-breaking damages is not the end of the story, but still marks a new situation where a Chinese company is on the winning side of an infringement case.

Considering these recent developments, there are more reasons than ever before for learning more about China in general, and the Chinese IPR-system in particular.

Since the first Chinese patent law was put into force in 1985 based on the German patent law, it has been revised twice, in 1992 and in 2000. Currently, the third revision is being processed by the People’s Congress and is expected to come into force early 2009.

With this new revision, some important aspects of Chinese patent law will change. One of these changes is that the current relative novelty standard will be replaced with the absolute novelty standard which already applies in most other patent laws and conventions, including the US patent law and the European patent convention.

According to the Chinese patent law currently in force, disclosure by other means than publication, such as exhibition, sale, use etc, that takes place outside China cannot be used against a Chinese patent application. That means that an invention can receive a valid patent protection in China even if it had already been made public outside China prior to the filing/priority date of the Chinese application for an invention patent or a utility model patent.

One practical implication of the current patent law is that it is possible for enterprises to obtain patent protection in China for products already on the market outside China. The other side of this is that less scrupulous parties may obtain patent protection in China for inventions conceived and disclosed by others. These patents will not be validly obtained, because the applicant has no right to file the application, but will be very difficult, if not impossible, to invalidate due to difficulties in proving the non-entitlement.

With the new law, both of these possibilities (threats) will seize to be possible, which should, on the whole, be positive to foreign companies.

You may, however, want to check whether your enterprise has any inventions/technical solutions which have been disclosed outside China, but not yet through (written) publication, and consider whether to take this final opportunity to file applications in China. In particular, the Chinese utility model patent protection could be considered for relatively simple “structural” inventions because of the relatively cheap and simple procedure required for obtaining such rights.

Daniel Fritsche, European Patent Attorney