Patent Baristas

Conducting an IP audit is a way for a firm to assess the nature and value of its intellectual property assets. Such assessments may be critical and more commonplace in certain industries, such as IT and pharmaceuticals.  However, in the wake of legislative changes and the current economic downturn, the potential value in conducting an IP audit may have become clearer in other industries as well.

Generally speaking, IP audits are either externally or internally driven. Externally driven IP audits are performed in response to triggers such as infringement litigation, bankruptcies, funding transactions, or transactions involving the sale of the business or certain assets.  Under this circumstance, IP audits are often performed under time constraints and are, by their nature, reactive.

Internally driven IP audits, on the other hand, are initiated as a pro-active business practice by the holder of the IP. Internally driven IP audits can be used to identify:

• New revenue streams related to proprietary products and licensing;
• New sources of capital and funding;
• Strategic positioning/repositioning opportunities;
• Business risks and opportunities related to IP such as patent, copyright, or trademark applications that should be filed, or securing certain IP rights from employees;
• Business process changes in R&D, Engineering, HR, or other areas; and
• Financial reporting disclosure items related to IP.

However, in the wake of the credit meltdown it may be hard to justify a “spend money to make money” philosophy. How does a firm measure the potential value of internally driven IP audits in relation to a tougher economy?

To find out, I spoke with Glenn Perdue, an IP valuation expert. Perdue, who leads Kraft Analytics, LLC, a valuation and litigation support consulting firm in Nashville, Tennessee, has more than 20 years of experience in business strategy, technology strategy, capital formation, valuation and litigation support.

Is performing an IP audit a good move in today’s business climate?

In any business climate, it makes sense to identify and understand those assets that allow a company to create economic value for customers and owners. In the industrial age, value-enabling assets were largely physical in nature. Today, value-enabling assets are more intangible. It’s a generally accepted belief that the majority of public company market value is not value identified on a company’s balance sheet. Instead, most value is attributed to intangibles assets – often intellectual property – that may not appear on the balance sheet at all. Therefore, companies that rely on IP to create economic value should catalog and understand these intangible assets so that their value can be better managed and optimized. An IP audit is often a good starting point in this process. However, an IP audit is one component of a more comprehensive IP management approach that may include the following:

1. IP Audit – The assessment component, which informs management as to the nature and value of their IP assets at a certain point in time.
2. IP Planning and Policy Development – Based upon information obtained through the IP audit, legal counsel, and business/industry research, management develops IP plans and policies in an informed manner.
3. Execution – After developing plans and policies, managers begin executing the plan through the implementation of business processes, licensing, enforcement, and other activities identified to optimize IP-related value creation.
4. Analysis and Reporting – This final step allows management to assess results and refine the process. In addition to internal reporting, the IP management process may also yield information needed for disclosure in external financial reporting.

What advice would you offer an attorney who was presenting the idea of conducting an IP audit to his client?

Making the case for conducting an IP audit is situational. Reasons might include:

• A prospective business purchase or sale that involves IP assets
• IP sale or licensing transactions
• Equity transactions in which investors, such as VCs, consider IP assets to be a critical component of the deal
• Debt and securitization transactions that rely upon IP as the underlying collateral
• Bankruptcy and restructuring
• Post-transaction accounting requirements (e.g. FAS 141)
• Management insight and planning as related to marketing, finance, risk assessment, and business strategy
• Legal and regulatory compliance

Given this broad range of motivations, an attorney’s recommendation to conduct an IP audit may be event-specific. In the case of transactions involving IP, the due diligence process is similar to an audit in many ways. If the audit is required, convincing the client may not be an issue. However, if the audit is being suggested for planning or compliance purposes, risk mitigation or profit optimization motives should be articulated to make the business case.

What is the danger of not understanding one’s IP holdings?

IP value is, first and foremost, contextual. The value of IP in the hands of one enterprise may be different than the value of the same IP in the hands of another enterprise. Access to the various means of exploiting IP assets is an important factor. Consider a drug patent held by a university. The university may hold the rights to an important piece of IP but lack the means of producing and marketing a major pharmaceutical product that embodies that patent and fully exploits its economic value. Since universities are not in the business of making products, they choose to license such inventions. Thus, the valuation issue faced by a university relates more to up-front, milestone, and royalty payments for the use of the IP by others. However, a pharmaceutical company that holds the same patent faces a broader decision as to whether it should (i) make and market the product itself, (ii) out-license the patent to another company that might be better-suited to optimizing the patent’s value, or (iii) use the patent in a more defensive manner. In this case, the pharmaceutical company might consider a valuation analysis as a basis for making this determination.

Tell me about the relation between IP audits and the Sarbanes-Oxley Act.

A broad view of Sarbanes-Oxley is that it requires corporate managers and directors to be better stewards of company assets – including IP assets – while providing greater transparency and accountability with respect to financial reporting. Given that IP assets are a predominant basis for value creation, particularly in science and technology-based companies, the duty of care imposed by Sarbanes-Oxley is considered applicable to IP assets by many. In light of this – and the fact that the value of these assets are typically not reflected in GAAP-based financial statements – many believe that IP assets, their economic value, and related risks must be accounted for elsewhere and disclosed if material. Thus, companies with material IP assets may be advised by counsel to conduct regular IP audits and valuations to maintain compliance with Sarbanes-Oxley.

Can you describe the need for IP audits in the non-profit sector?

I serve on several non-profit boards, including a research foundation board that performs the technology transfer function for a major university. I’ve witnessed first-hand how large non-profits are increasingly aware of accountability and transparency in their governance and financial reporting functions. I’ve also seen how this issue has affected non-profit hospitals. In the case of universities and private research institutions that generate IP, they may not be accountable to shareholders but they are certainly accountable to trustees, boards of directors, donors, and other stakeholders that place trust in them to be good stewards of the institution’s assets, in this case IP assets. Therefore, looking at it through this lens, such institutions may not be public companies and subject to Sarbanes-Oxley directly, but they may certainly be held to a similar standard of care and thus must be diligent in protecting and optimizing the value of their IP while also being mindful of the broader mission of their institution.

Sarbanes-Oxley regulates public companies. What about closely owned companies? Do you see much activity among them in your valuation practice?

Many lawyers I’ve spoken to about this issue contend that small growth companies considering an IPO or sale to a larger public company must move towards Sarbanes-Oxley compliance early on. However, even if an IPO or M&A transaction is not on the horizon, some attorneys suggest that the presence of outside investors in a private company can indirectly expose a company to Sarbanes–Oxley, which may be invoked as the basis for a standard of care that is owed the investors.

Is it wise for attorneys to suggest that experts be brought in to determine possible new product development, potential competitor infringement, etc.? If so, why?

In my work as an expert in IP-related litigation, I’m brought in by attorneys regularly to assist in cases. My experience with the attorneys I’ve worked with has been that they have a good sense of when and why outside experts need to be engaged. One of the primary factors to consider in this determination is the existence of internal expertise at the client company. The need for outside experts may be due to a lack of requisite expertise within the client company and/or the need to hire an outsider for purposes of objectivity. In the case of litigation or auditing, the objectivity of an outside expert is generally desired.

Today’s post is by Guest Barista Dawn Corrigan, who writes for IMS ExpertServicesâ„¢ – the premier expert witness delivery firm. This article was originally published in ipFrontline and subsequently appeared in BullsEye, the newsletter of IMS ExpertServices.

Indiana University’s Kelley School of Business last year started an online graduate level program, the Executive Certificate in the Business of Life Sciences (ECBLS).  George Telthorst, who helps run the program and is the Director of Business Development at the School’s Center for the Business of Life Sciences, wants us to help “spread the word” about it.

The ECBLS is a five course program in the business of life sciences.   The program defines life sciences as companies whose products require regulatory approval to be sold and the companies that support them. The courses cover core business skills (i.e., value chain, accounting, finance, organizational and human resource management, marketing) and have been tailored to incorporate industry specific cases, content and examples.

In order to be convenient for those already working in the industry, four of the five courses are offered online and the fifth is a week-long in residence experience here in Indiana. Course credits are transferable to several online masters programs at Kelley and San Diego State University.  The program has been designed for technical professionals interested in breaking out of their “silos” as well as individuals new to the industry.

The program kicked off last September. The first cohort has 26 students from 14 companies. Students were drawn from industry leaders in pharma, diagnostics and orthopedics, as well as smaller firms and start-ups.   Most of the students are currently in production, quality, research & development, or regulatory roles and have work experience ranging from 4 to 25 years.  Two are from one company (Eurand) with operations in Ohio. Two are based outside of the continental United States. The next cohort will start in September 2009.

More information about the program is available in the attached ECBLS brochure and at its website.

Lawline.com is celebrating their 10 year anniversary of offering online Continuing Legal Education programs by implementing a new “Go Green” approach to our business.  Their Clean Law Initiative is aimed at reducing overall waste and increasing energy efficiency and sustainability.

According to Lawline, accessing CLE online is by nature environmentally friendly.  Attorneys save millions of pieces of paper by viewing online videos and reading downloadable written materials.  Attorneys no longer have to travel to programs or purchase CDs or DVDs, reducing their individual carbon footprint.

They have now turned the Lawline headquarters into a Green office.  For 2009, their goal is to educate attorneys and law firms on how to run their offices in a more environmentally friendly manner.

Also see their blog series, entitled Clean Lawyer: An Attorney’s Guide to Going Green, which has tips on efficient legal practice

The Federal Trade Commission has filed a complaint in federal district court challenging agreements by Solvay Pharmaceuticals, which paid generic drug makers Watson Pharmaceuticals and Par Pharmaceutical Companies to delay launching generic versions of Solvay’s brand name testosterone-replacement drug AndroGel, a prescription pharmaceutical with annual sales of more than $400 million.

According to the Commission’s complaint, filed in the United States District Court for the Central District of California, Watson and Par, through its partner Paddock Laboratories, each sought regulatory approval from the FDA to market generic versions of AndroGel. In their FDA filings, both companies certified that their products did not infringe the only patent Solvay had relating to AndroGel, and that the patent was invalid. The complaint charges that Solvay agreed to pay the generic companies to abandon their patent challenges and agree not to bring a generic AndroGel product to market for nine years, until 2015.

The court action seeks to promote competition between Solvay and generic drug makers that had sought to introduce generic versions of the branded prescription drug AndroGel. AndroGel, Solvay’s second highest selling pharmaceutical product, is a pharmaceutical gel containing synthetic testosterone. It is approved for testosterone replacement therapy in men with low testosterone levels, which often are associated with advancing age, certain cancers, and HIV/AIDS, among other conditions.

The complaint alleges that Solvay acted unlawfully to eliminate generic competition by paying Watson and Par a share of its AndroGel profits to abandon their patent challenges and agree to delay generic entry until 2015 (known as “reverse payments“). As a result, the complaint states that the defendants are cooperating on the sale of AndroGel and sharing the monopoly profits, rather than competing.

According to the Commission’s complaint, defendants’ agreements to eliminate generic AndroGel competition were, and continue to be, unfair methods of competition that violate Section 5(a) of the FTC Act. The FTC says that such payments, also called “exclusion payment settlements,” hinder the intent of the Hatch-Waxman Act of 1984.

The Commission is seeking a final court judgment declaring that Solvay’s agreements with Watson and with Par and Paddock violate Section 5(a) of the FTC Act, and injunctive relief restoring competitive conditions and barring the defendants from engaging in similar or related conduct in the future.

Today, senior Senate Judiciary Committee members Herb Kohl (D-WI) and Chuck Grassley (R-IA) unveiled The Preserve Access to Affordable Generics Act to prohibit brand-name drug manufacturers from using reverse payment agreements to keep generic equivalents off the market.

Sen. Herb Kohl (D-Wis.) had proposed a bill last year along with Sens. Dick Durbin, D.-Ill., and Charles Grassley, R.-Iowa; and now-President Barack Obama.

See the Civil Complaint [Public Version]

An English version of the current Examination Guidelines for Patent and Utility Model is available on the website of the Japan Patent Office (JPO).

The document specifies the requirements for patent applications, giving detailed examples on issues such as “clarity” or “unity of application” according to the Japanese law.  These guidelines carry a lot of weight in patent examining before the JPO.

The Examination Guidelines also cover the patent applications relating to specific technical fields, e.g.  computer-software, biological and medicinal inventions.  Below, we set out some of the guidelines from the Biotechnology section:

Scope of Claim

Genes

A gene may be described by specifying its nucleotide sequence.
A structural gene may be described by specifying an amino acid sequence of the protein encoded by the said gene.

Example:  A gene encoding a protein consisting of an amino acid sequence represented by Met- Asp-･･････-Lys-Glu.

A gene may be described by a combination of the terms “substitution, deletion or addition” or “hybridize” with functions of the gene, and if necessary, origin or source of the gene in a generic form as follows (provided that the claimed invention is clear and the enablement requirement is met (See 1.1.2.1 below)).

Example1: A gene encoding a protein of (a) or (b) as follows:

(a)     a protein whose amino acid sequence is represented by Met-Tyr-･･････-Cys-Leu
(b)     a protein derived from the protein of (a) by substitution, deletion or addition of one or several amino acids in the amino acid sequence defined in (a) and having the activity of enzyme A.

Example 2: A gene selected from the group consisting of:

(a)    a DNA whose nucleotide sequence is represented by ATGTATCGG･･･TGCCT
(b)    a DNA which hybridizes under stringent conditions to the DNA, whose nucleotide sequence is complementary to that of the DNA defined in (a) and encodes the human protein having the activity of enzyme B.

Note:  “Stringent conditions” are described in the detailed description of the invention.

A gene may be described by specifying functions, physiochemical properties, origin or source of the said gene, a process for producing the said gene, etc. (provided that the claimed invention is clear and the enablement requirement is met.

Transformants

A transformant may be described by specifying at least one of (1) its host and (2) the gene which is introduced (or the recombinant vector) (provided the that the claimed invention is clear and enablement requirement is met.

Example 1:  A transformant comprising a recombinant vector containing a gene encoding a protein whose amino acid sequence is represented by Met-Asp-･･････Lys-Glu.

Example 3: A transgenic non-human mammal, having a recombinant DNA obtained by linking a structural gene encoding any protein to the regulatory region of a gene involved in the production of milk protein, and secreting the said protein into milk.

Enablement Requirement

Genes, vectors or recombinant vectors

A process for producing a gene, a vector or a recombinant vector should be described by respective origin or source, means for obtaining a vector to be used, an enzyme to be used, treatment conditions, steps for collecting and purifying it, or means for identification, etc.

If genes are claimed in a generic form and a large amount of trials and errors or complicated experimentation are needed to produce those genes beyond the reasonable extent that can be expected from a person skilled in the art, the detailed description of the invention is not described in such a manner that enables a person skilled in the art to make the product.

For example, in cases where a claimed invention includes the gene actually obtained and many of genes whose identity is extremely low to the said gene obtained and is specified by their function and that as a result, many of genes which do not have the same function as the said gene obtained are included in the genes whose identity is extremely low, a large amount of trials and errors or complicated experimentation are generally needed to select the genes with the same function as the said gene obtained among the genes whose identity is extremely low beyond the reasonable extent that can be expected from a person skilled in the art, and therefore, the detailed description of the invention is not described in such a manner that enables a person skilled in the art to make the product.

Example:  A gene selected from the group consisting of:
(a) a DNA whose nucleotide sequence is represented by ATGTATCGG…TGCCT
(b) a DNA whose nucleotide sequence has more than X% identity to that of (a) and which encodes the protein having the activity of enzyme B.

Note:  A protein encoded by the DNA (a) has the activity of enzyme B. X% represents extremely low identity.

Explanation:  Genes whose identity is extremely low to the gene actually obtained are included in the (b), although (b) is specified by its function. In case that ” A DNA whose nucleotide sequence has more than X % identity to that of (a)” includes many of genes which do not have the activity of enzyme B, a large amount of trials and errors or complicated experimentation are generally needed to select the genes with the activity of enzyme B beyond the reasonable extent that can be expected from a person skilled in the art. Therefore, the detailed description of the invention is not described in such a manner that enables a person skilled in the art to make the product.

Unity of Application

A single application may be filed for a set of claims describing inventions shown in the following examples.

Example 1:

(1)  An invention of a chemical substance produced with the use of a transformant (referred to as the “specified invention”)
(2)  An invention of a structural gene
(3)  An invention of a recombinant vector containing the structural gene
(4)  An invention of a transformant containing the structural gene

Explanation:  A structural gene has an inherent function of determining the amino acid sequence of a specific chemical substance. Therefore, in providing the specific chemical substance, inventions of a structural gene, a recombinant vector containing the structural gene and a transformant containing the structural gene have a very close relationship with the chemical substance. Thus, since it may be considered that the inventions of the structural gene, the recombinant vector and the transformant provide means to obtain the specific chemical substance, these inventions and the invention of the chemical substance produced with the use of the transformant are considered to solve the same problem. Accordingly, the specified invention and inventions above meet the relationship under Section 37(i) of the Patent Law.

In such a case, a claim directed to a process for producing the structural gene, the recombinant vector, or the transformant having the relationship provided in Section 37(iii) of the Patent Law with the inventions (2) to (4), for instance, may be included in a single application in accordance with the provision of Section 37(v) of the Patent Law.

Example 2:

(1) An invention of a parent cell (specified invention); and
(2) An invention of a fused cell prepared from the parent cell

Explanation:  Since a fused cell contains, in general, the characters of its parent cell as a part of its characters, the substantial part of the matters being to be stated in the claim of both inventions is considered to be the same. Accordingly, the specified invention and the invention (2) above meet the relationship under Section 37(ii) of the Patent Law.

Example 3:

(1) An invention of a transformant (specified invention)
(2) An invention of a process for manufacturing a chemical substance using the transformant

Explanation:  An invention of a process for producing a chemical substance using a transformant falls within the “invention directed to a process using the product” provided in Section 37(iii) of the Patent Law, because it utilizes functions and characteristics of the transformant.

Example 4:

(1) An invention of a gene (specified invention),
(2) An invention of a process for producing a recombinant vector using the said gene; and
(3) An invention of a process for producing a transformant using the said gene

Explanation:  The invention (2) and invention (3) above fall within the “invention of a process using the product” under Section 37(iii) of the Patent Law, because it utilizes functions and characteristics of the gene.

See more details at the Japan Patent Office.

On December 27, 2008, the Standing Committee of People’s National Congress approved amendments of the Chinese Patent Law. This third amendment aims at enhancing the innovation ability and enforcing protection of patent rights. Here’s a summary of the amendments most relevant to foreign clients:

Direct Foreign Filing Available (A20)
Now inventions/creations completed in China can be filed for patent protection in a foreign country without a Chinese filing first. Also, all inventions/creations for foreign filing are now subject to a security clearance before SIPO. The clearance procedure will be written into the Implementing Rules.

Patentability: Absolute Novelty Requirement (A22, A23)
The “prior art” is now explicitly defined as the state of the art known worldwide to the public prior to the application/priority date. This raises the bar of the novelty requirements.

In addition, the so-called “conflicting patent application” now includes a patent application for the same technology, filed before SIPO prior to the application/priority date and published thereafter by any person/entity, as opposed to any person/entity other than the applicant of a patent application in question, thereby rounding up all scenarios for the same creation/invention legally.

Inventions/Creations Relying on Genetic Resources (A5, A26.5)
Any inventions/creations mainly relying on genetic resources, for which said genetic resources are illegally obtained, are not to be patented. For this purpose, source of the involved genetic resource must be provided and stated in the specification.

Compulsory License for Patented Drugs (A48 ~ A58)
Provisions that were in the Implementing Rules are now included in the Patent Law. In addition, SIPO may grant a compulsory license, “where the public health interest so requires”, for manufacturing and exporting drugs patented in China to designated countries or regions, which include least-developed countries, or WTO member countries or regions with no or insufficient capacity to manufacture the patented drug.

Protection of Patent Rights (A62 ~ A69)
– Prior art defense is allowed in infringement lawsuits (new A62)
– Administrative measures for patent counterfeiting acts are outlined (new A64)
Specifically, patent authorities’ rights in collecting evidence and imposing administrative fines
– Calculation of compensation for infringing acts is included in law (new A65)
In particular, the right owner’s expenses in stopping infringing acts are included in the compensation.
– Injunctive measures and seizure of evidence are written into law (new A66 and A67)
– Parallel imports are now legal (new A69)
– Bolar Exemption is legalized (new A69)

Provisions Related to Design Patents
– Added right of “offer for sale” to design patent owners (A11)
– Absolute novelty requirement (A23)
– Designs mainly for identifying planar printing materials are no longer patentable (A24)
– Similar designs of a product may be filed in one application (A31). This article can greatly benefit designers in fees and application procedures.

Double Patenting (A9)
The amendment has written the provision for preventing double patenting into the Law. But in the meantime, the practice of filing patent applications of invention and of utility model on the same date is reinforced, which encourages the use of the utility model patent as an effective tool for quick granting of rights.

The amended Patent Law is set to come into effect on October 1, 2009.

Today’s Guest Barista post is by Ming & Sure Intellectual Property Office, a leading intellectual property law firm in China with over seventy dedicated members providing a full range of intellectual property legal services, from procuring and securing rights with the broadest scope possible to enforcing rights through litigation and administrative measures, and other matters such as appeals, licensing, due diligence and portfolio management.

For more updates on intellectual property matters in China, please visit their web site.  Contact:  7 Shangdi Fifth Street, Haohai Building, 5th Floor, Haidian District, Beijing 100085, P.R. China.  TEL: +86-10-8289-6186; FAX: +86-10-8289-6187; Email: mail@mingsure.com

In response to suggestions from the intellectual property (IP) community that the USPTO adopt some form of a deferred examination procedure, the Patent Office will conduct a public roundtable discussion on the topic on Thursday, February 12, 2009, from 9 a.m.-12:30 p.m. at the agency’s headquarters in Alexandria, Virginia.

The goal of the roundtable is to obtain public input on deferred examination from diverse sources and differing viewpoints. A limited number of representatives will be able to participate in the roundtable discussion but anyone who is interested in the topic may attend the event. The public may also access the event via a live webcast.

The USPTO has in place an optional deferred examination procedure that was adopted as part of the rule making to implement eighteen-month publication of patent applications.  This deferral of examination procedure permits deferral of examination for up to three years from the earliest filing date. The deferral of examination procedure set forth in 37 CFR 1.103(d), however, has been used in fewer than two hundred applications since its inception on November 29, 2000.

Does it really help an organization swamped with work to put off things for later?  Or, like those “Buy Now, Pay Later” plans, does it just create an even bigger problem later?

There would seem to me two major risks to this plan:

First,  the plan assumes that a large portion of the applications being filed currently will be abandoned.  Statistics show that many applications are ultimately abandoned.  Will that necessarily change the workload by deferring examination?  It is entirely possible that those same applications will merely remain on file until ultimately subjected to search and examination.  Many applicants will not abandon their plans until confronted with final rejections (fairly based or not).  Therefore, the deferral may not make any substantial difference in the Office workload.

Second, a deferred examination system may actually give rise to even more work.  How so?  Like it or not, there are those who will take advantage of a system where patent applications are published but not examined — a de facto registration system.  Applicants will be tempted to flood the patent office with many more iffy patent applications just so that they get published, which will cause competitors to hesitate before investing millions of dollars in a new product line.  Deferred applications — hovering in suspended animation — will remain a threat of some ultimate allowance. All the additional published application noise will add substantially to the burden in the marketplacein terms of increased costs of determining freedom to operate.

What other effects? These deferred applications will inherently go abandoned many years later than they would have otherwise.  Subject matter that was disclosed and would have been long since dedicated to the public years earlier will not remain tied up in “parked” applications.  Further effort could be required as multiple applications on the same invention all publish, each with a slightly different disclosure and claims, that would normally have been weeded through interference proceedings.

What’s your take?

Earlier, the United States Patent and Trademark Office (USPTO) opened the patent examination process for online public participation. With the consent of the inventor, the Peer-to-Patent: Community Patent Review pilot, developed by the New York Law School Institute for Information Law and Policy in cooperation with the USPTO, enables the public to submit prior art and commentary relevant to the claims of pending patent applications in Computer Architecture, Software, and Information Security (TC2100).

The Center for Patent Innovations at New York Law School has now unveiled a new program, the Post-Issue Peer to Patent project.  Post-Issue elicits previously unidentified prior art that may invalidate or narrow the claims of issued patents – all parties are invited to request posting of patents to Post-Issue for review.  We caught up with Professor Mark Webbink, the Executive Director of this new public-sector initiative, to ask him about the project.

Q: You are currently the executive director for the Center for Patent Innovations at New York Law School, which manages the Peer to Patent and Post-Issue Peer to Patent projects. Can you tell me a little about yourself and how you got involved with these projects?

I am attaching a short bio that should provide work background.  At the end of August 2007 I retired from Red Hat with the full intention of doing some part-time teaching and consulting.  In February 2008 Beth Noveck called me.  The Peer-to-Patent project was growing, and NYLS had decided to look for a professional manager to come in and run it.  Red Hat had been one of the sponsors of P2P, and Beth and I had met before, but I think the suggestion of getting me involved came from Dave Kappos and Manny Schecter at IBM.

Q: The Peer to Patent project is operated by New York Law School in conjunction with the U.S. Patent and Trademark Office. Is Post-Issue Peer to Patent also being operated in conjunction with the U.S. Patent and Trademark Office?

Since Post-Issue is focused on already issued patents, there is no association with the USPTO.  Some of our steering committee members believed there was a logical step to be taken from building a community to help find prior art to support the examination efforts of the USPTO to tapping into that same community to help find prior art relevant to issued patents that may contain claims of questionable merit.  Open Invention Network was certainly interested from the perspective of the Linux environment, but they also agreed the platform needed to be neutral and be available to all.  To date our focus has been on so-called software patents.

Q: The Peer To Patent pilot was launched with the support from big technology companies and patent holders such as GE, HP, IBM, Microsoft and others. Are there tech companies backing the current Post-Issue Peer to Patent project?  What about the claim that these public interest projects are being used to help defend these large corporations when they are perfectly capable of paying their own way?

We have received financial support for Post-Issue from the technology sector.  Are primary condition, mentioned above, was that we have the freedom to make the platform vendor and technology neutral.  Our financial sponsors have recognized the benefit of that approach and have supported it.  While some of the initial patents posted are being asserted against major technology companies like Microsoft and Google, to some extent they are the canary in the coal mine.  Because they are wealthy companies, litigious patent holders believe them to be an attractive target.  However, the patents being asserted are likely to apply to many other (smaller) technology companies.  The best time to address the validity of the patent claims is when they are first being asserted (or even before they are asserted) not after the patent holder has already obtained a judgment against one party.

Q: How does the Post-Issue Peer to Patent project work? I mean, there are over 7 million issued patents. Do you plan to have all of them peer reviewed or do you intend to have a system to identify those in need of review? Any successes so far?

Other than the amount of server space, there is no practical limit to what we could maintain.  That said, not every patent is going to be perceived to be of questionable validity or is being actively asserted against others.  So we are starting with those of greatest interest (either to us or to another party) and working from there.  On each of the patents posted to date the community has identified at least some prior art.

Q: Do you think the current scenario — where interested parties can look for art and bring the art before the Patent Office through re-examination — fails to provide an adequate system for weeding out “weak” patents? If not, how could it be improved so that the Post-Issue Peer to Patent project would not be necessary?

One of the things Post-Issue is intended to support is reexamination (not just litigation), so I don’t view Post-Issue as addressing the merits of re-examination one way or the other.  Post-Issue is about identifying prior art that (a) is relevant and (b) was not considered during the examination process.

Q: Do you think the Post-Issue Peer to Patent project will encourage a lot of non-interested parties to find marginally relevant references after the patent is out of the patent office just to hamper competitors? What about the concern that such projects unfairly imply that Patent Office is incompetent?

To the extent that the community identifies prior art that is of marginal relevance, I think parties wishing to use that prior art will be dubious about doing so and parties against whose patents such prior art may be asserted will likely be able to dispense with it easily.  One of the things we are contemplating is how we bring the same system of peer ranking to Post-Issue that we use in Peer-to-Patent.  We at the Center have certainly never taken [the position that such projects unfairly imply that Patent Office is incompetent].  In fact, all evidence is that the examiners, when provided with all relevant prior art, do a good job.  The problem is not in the examiners, it is in their ability (by rules, by knowledge, etc.) to get to good, relevant, non-patent prior art.

Q: What do you say to those that claim these projects are more about getting the public to do the examiner’s job than about getting better quality patents?

With respect to Post-Issue, such a claim has no merit since patent examiners are not asked to find prior art relevant to issued patents.  With respect to Peer-to-Patent, the claim amuses me.  Patent examiners, investors, and others would always (at least in theory) make perfect decisions if they had perfect information.  But perfect information does not exist in capital markets and it doesn’t exist in the patent examination process.  When, as in the patent process, we (the public) are prepared to hand an inventor a 20-year monopoly, we should want to be as certain as reasonably possible that the inventor has actually created something new and non-obvious.  To the extent patent examiners cannot get to all of the best, relevant prior art, we have a significant gap between the ideal (perfect information) and the actual.  It is in everyone’s interest to help close this gap.  To the extent citizen-experts are willing to do so, then Peer-to-Patent makes a contribution.

Bonus Q: Are we going to see any other projects from your group?

There are a couple of other things cooking.  One is a project called Open Patent, which has received an NSF grant, to test whether patent databases could be improved and made more accessible through the use of tagging and visualization technology.  A second has to do with a further expansion of Peer-to-Patent that we will likely announce in early June.

You can view more about the project at the Community Patent Blog.

Mark Webbink is a Visiting Professor of Law and Executive Director of the Center for Patent Innovations at New York Law School.  Webbink has also served as an Adjunct Professor at NCCU Law School and a Senior Lecturing Fellow at Duke Law School.  From 2000 to 2007 Webbink served in various capacities with Red Hat, Inc., including General Counsel, Deputy General Counsel for Intellectual Property, Senior Vice President and Secretary. Webbink has written and spoken extensively on the subjects of open source software, software patents, and patent reform, including testimony before the U.S. House of Representatives Subcommittee on Courts, the Internet, and Intellectual Property, the Federal Trade Commission and Department of Justice, and the National Academy of Sciences.  You can view his blog at Walking with Elephants.