The Year of the Patent?

2006 may be the year that the United States’s patent system rights some of its many wrongs. One can only hope.
There is always a bit of a time lag between when this column is written and when it goes to press, so I always run the risk of missing the target. However, in the case of United States patent law, I am pretty confident that we’ll see some significant changes in the next nine months.
Previously, I discussed legislative action being considered by the United States Congress (October 2005’s “Patent Reform, American Style”, available online at http://www.linux-mag.com/2005-10/docket_01.html). This month, I want to focus on more areas of activity that may well change the way patent law is interpreted and practiced in the U.S.: court cases and patent office practices.

Seeing the Supremes

For the first time in decades, the U.S. Supreme Court is hearing a case regarding patent law. In fact, the high court will be considering two cases in its current term. The first is the case of eBay, Inc., et al. v MercExhange, L.L.C. The second is Illinois Tool Works, Inc., et al. v Independent Ink, Inc.
The eBay case raises the issue of when courts must issue injunctions in patent infringement actions. The case is interesting because the U.S.Patent Act states that district courts “ may grant injunctions in accordance with the principles of equity” (35 U.S.C.§283). Note the word “may,” not the word “shall.” One would naturally assume that may is given its common permissive meaning and that injunctions aren’t mandatory. Thus, one would have reason to believe that district courts would apply the usual rules of equity and consider the normal factors that influence the granting of injunctive relief before granting such relief in patent cases. Not so, according to the Court of Appeals for the Federal District.
The Court of Appeals for the Federal District was created in 1982 and was assigned the responsibility for hearing appeals in all patent cases, thus giving it the benefit of legal expertise in the patent field. However, over the last decade, the Court of Appeals for the Federal District has demonstrated a degree of judicial activism that would likely not be tolerated in many other areas of law. In the eBay case, for instance, the court ruled that injunctive relief is mandatory in patent infringement cases — that is to say, if infringement is found, there is a presumption that monetary damages alone aren’t sufficient and an injunction must issue. While this decision may seem reasonable to patent holders in the field of pharmaceuticals where a single patent may be all that holds competitors at bay, most information technology companies view it as draconian, where hundreds if not thousands of patents may apply to a single product.
The outcome of the eBay case will be important to the open source community.
The second patent case, Illinois Tool Works, delves into the issue of the relationship of patent and antitrust law. Under the Sherman Act (the basis of U.S. antitrust law), tying the purchase of one product or service to another where the actor holds market power may be illegal. To prove its case, a plaintiff must establish that the defendant possessed market power. In Illinois Tool, the case involves the conditioning of the granting of a patent license on the licensee’s purchase of a non-patented good.
Here the Court of Appeals for the Federal District said that such market power, for purposes of the Sherman Act, may be conferred from the mere holding of the patent, since patents by their nature confer a (limited) monopoly. This relationship between patent and antitrust law has been of much interest in recent years, prompting a series of hearings by the Federal Trade Commission and the Department of Justice just a few years ago.
The outcome of this case will also be of interest, and again particularly so to the open source community, because of the presence of a certain large, proprietary software company that is still under a consent decree for violating U.S. antitrust laws.
(There is a third case of interest, Labcorp v Metabolite Laboratories. The Labcorp case places at issue the long-standing rule that bars patents on “laws of nature, natural phenomena, and abstract ideas.” Many view this case as providing some potential constraints on business method and software patents, but that remains to be seen.)

Better Practices

2006 may also see a shift in the activities of the USPTO, as it attempts to reform its own practices to improve the quality of the patents it issues. The USPTO has been actively engaging many industry sectors, including the open source community, to get feedback on actions that would improve patent quality. A public hearing on this topic is planned for February 2006 — an excellent opportunity for input. Suggestions advanced already include providing a database of open source code that can serve as prior art, allowing third parties to provide pre-issuance prior art, and placing greater requirements on applicants to help assure that all prior art is identified and disclosed.
As I said at the beginning, 2006 will be an interesting year for patent law in the U.S.

Mark H. Webbink is Deputy General Counsel for Red Hat.

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