The U.S. Patent Office is Forgiving about Small Entity Status

Small entity status gives individuals and companies substantial discounts on many government fees associated with patent filings.

In the mid-1990s, there were district court decisions in which a patentee faced negative legal consequences for erroneously or improperly claiming small entity status. See (1) Haden Schweitzer Corp. v. Arthur B. Myr Industries, Inc., 901 F. Supp. 1235, 36 U.S.P.Q.2d 1020 (E.D. Mich. 1995) (failure to pay maintenance fee in the correct amount results in intervening rights under 35 U.S.C. 41(c) 2)); and (2) DH Technology, Inc. v. Synergstex International, Inc., 937 F. Supp. 902, 40 U.S.P.Q.2d 1754 (N.D. Cal. 1996) (failure to timely pay issue fee in the correct amount results in patent lapse under 35 U.S.C. 151).

In light of the uncertainty that existed in the mid-1990s concerning the consequences of erroneously claiming small entity status, the Office advised applicants and patentees at that time that they could avoid this uncertainty by not claiming small entity status unless it was absolutely certain that the applicant or patentee is entitled to small entity status (i.e., resolving any doubt, uncertainty, or lack of information in favor of payment of the full fee). See Changes to Patent Practice and Procedure, 62 FR 53131, 53135 (Oct. 10, 1997).

However, in 1998, the U.S. Court of Appeals for the Federal Circuit (Federal Circuit) reversed the district court’s decision in DH Technology and held that an applicant may correct an erroneous payment of patent fees in the small entity amount under 37 CFR 1.28 without penalty, such as patent lapse, as long as small entity status was established in good faith and the small entity fees were paid in good faith. See DH Tech. v. Synergystex Int’l, 154 F.3d 1333, 1343, 47 U.S.P.Q.2d 1865, 1872 (Fed. Cir. 1998). Thus, subsequent to 1998 and the Federal Circuit’s decision, the only patent applicants or patentees who face negative legal consequences from erroneously claiming small entity status are those applicants who have no basis for making a good faith claim to small entity status.

37 C.F.R. 1.317 provides the following, “If the issue fee paid is the amount specified in the notice of allowance, but a higher amount is required at the time the issue fee is paid, any remaining balance of the issue fee is to be paid within three months from the date of notice thereof.”

37 C.F.R. 1.28(c) states: “[i]f status as a small entity is established in good faith, and fees as a small entity are paid in good faith, in any application or patent, and it is later discovered that such status as a small entity was established in error, or that through error the Office was not notified of a loss of entitlement to small entity status as required by Sec. 1.27(g)(2), the error will be excused upon compliance with the [requirements of 37 CFR 1.28(c)].”

Accordingly, the U.S. Patent Office is pretty forgiving as to procedures and at least as to paying fees once a patent has issued. The policy behind the leniency is to allow patent owners to focus on the substance of their patents, and not on the procedures to keep patents viable. If you have questions about the requirements for small entity status, please see a patent attorney.

What Makes Claims Patent Eligible? “Significantly More” Explained

On August 15, 20014, the Federal Circuit decided the appeal in I/P Engine, Inc. v. AOL Inc., et al., case No. 11-CV-0512 from the Eastern District of Virginia and gives guidance on claim drafting in the computer arts.

At trial, I/P Engine brought an action against AOL Inc., Google Inc., IAC Search & Media, Inc., Gannett Company, Inc., and Target Corporation alleging infringement of U.S. Patent Nos. 6,314,420 and 6,775,664. A jury returned a verdict finding that all asserted claims were infringed. Claim 26 of the ‘664 patent is illustrative of all claims at issue:

26.A method for obtaining information relevant to a first user comprising:
searching for information relevant to a query associated with a first user in a plurality of users;
receiving information found to be relevant to the query by other users;
combining the information found to be relevant to the query by other users with the searched information; and
content-based filtering the combined information for relevance to at least one of the query and the first user.

The Federal Circuit in this opinion reverses and rejects the claims as obvious in its de novo review of the patent claims. Obviousness is a purely legal question. On p. 8 of the opinion, the court states that “no reasonable jury could conclude otherwise,” and that therefore the ‘420 and ‘664 patents must be held to be obvious. The court finds that the claims of ‘420 and ‘664 patents merely recite a combination of “content-based and collaborative filtering,” two well-known Internet search techniques known at the time that the patent applications were filed. Accordingly, the prior art, viewed as a whole, renders the asserted claims obvious. Op. at pp. 9-10.

Judge Mayer entered a concurring opinion in which he discusses what claim limitations could qualify to meet the “significantly more” standard first mentioned in Alice Corp. (Alice Corporation, v. CLS Bank Int’l, 573 U.S. ___, 134 S. Ct. 2347, 2359 (2014)) to ensure claims express patent eligible subject matter consistent with today’s interpretation of 35 U.S.C. § 101. He states that difficult cases include those “where it is uncertain whether the claims are sufficiently ‘technological’ to warrant patent protection.” In these types of cases, subject matter eligibility “will often turn on whether the claims describe a narrow inventive application of a scientific principle, or instead simply recite steps that are necessarily part of the principle itself.” See Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S. Ct. 1289, 1297 (2012). He gives a bit of judicial history about the “technological question” that can help a court decide which claims should survive a 101 challenge.

Judge Mayer notes the need for specificity “is particularly acute in the software arena, where claims tend to be exceedingly broad, development proceeds at breakneck speed, and innovation often occurs despite the availability of patent protection rather than because of it.” He states, “most importantly, the technological arts test recognizes that there has to be some rough correlation between” the extent of patent monopoly granted to the inventors and the amount of knowledge gained by society. Applicants “who make little, if any, substantive contribution to the existing body of scientific and technological knowledge should not be afforded broad monopoly rights that potentially stifle future research and development.” Sounds like a policy argument for strengthening the 101 inquiry.

In this case, according to Judge Mayer, the I/P Engine patent claims fail the test for patentable subject matter. The “asserted claims simply describe the well-known and widely-applied concept that it is often helpful to have both content-based and collaborative information” about an area of interest. The “complexity of the implementing software or the level of detail in the specification does not transform a claim reciting only an abstract concept into a patent-eligible system or method.” See Accenture Global Servs., GmbH v. Guidewire Software, Inc., 728 F.3d 1336, 1345 (Fed. Cir. 2013). The claimed system of I/P Engine is “merely an Internet iteration of the basic concept of combining content and
collaborative data.” It merely relies for implementation on “a generic computer to perform generic computer functions.” Judge  Mayer cites to the record and notes an analogy for these claims: A person who plans “to visit London, for example, might consult a guidebook that would provide information about particular museums in London (content data) as well as information about what other people thought of these museums (collaborative
data).” The claims of the patents at issue appear to be nothing more than this.

Judge Mayer continues, “the scope of the claimed invention is staggering, potentially covering a significant portion of all online advertising . . . I/P Engine’s asserted claims fall
outside section 101 because their broad and sweeping reach is vastly disproportionate to their minimal technological disclosure.”

The Supreme Court has dictated that the subject matter eligibility analysis must precede the obviousness inquiry. In re Comiskey, 554 F.3d 967, 973 (Fed. Cir. 2009) (“Only if the requirements of § 101 are satisfied is the requirements for patentability, such as novelty under § 102 and . . . non-obviousness under § 103;” citing to Parker v. Flook, 437 U.S. 584, 593 (1978)). Judge Mayer takes a practical perspective and states, “there are clear advantages to addressing section 101’s requirements at the outset of litigation,” so as to “spare both litigants and courts years of needless litigation.”

Accordingly, Judge Mayer would add a robust Constitutional requirement that patent claims must recite “something more” than what is already known in the art combined with an ordinary computer. This is a warning to patent claim drafters and litigators that courts are not ignorant that patents should “promote . . . rather than . . . [impede] scientific progress and technological innovation,” as indicated by Judge Mayer in his dissent.

Federal Food, Drug, and Cosmetic Act does not Preempt the Lanham Act

On 12 June 2014, the U.S. Supreme Court (USSC) issued an 8-0 opinion (PDF) expounding the intersection of two federal statutes including the Lanham Act in POM Wonderful v. Coca Cola, 571 U. S. ___ (2014). This opinion concerns the alleged preclusion of a cause of action under one federal statute by the provisions of another federal statute. Pre-emption principles are instructive insofar as they are designed to assess the interaction of laws bearing on the same subject.The Lanham Act, which governs trademarks, permits one competitor to sue another for unfair competition arising from false or misleading product descriptions. 15 U. S. C. §1125.The Federal Food, Drug, and Cosmetic Act (FDCA) prohibits the misbranding of food and drink. 21 U. S. C. §§321(f), 331.

The USSC reversed and remanded the Ninth Circuit decision. The result is that POM Wonderful may bring suit against Coca Cola.The USSC held that competitors may bring Lanham Act claims alleging unfair competition based on false or misleading product descriptions on food and beverage labels regulated by the FDCA even though the FDCA exclusively controls what appears on packaging.

The syllabus of the opinion, from which I borrow liberally, presents a succinct summary of the opinion. The Food and Drug Administration (FDA) has promulgated regulations regarding food and beverage labeling including one concerning juice blends. Unlike the Lanham Act, which, relies in large part for its enforcement on private suits brought by allegedly injured competitors, the FDCA and its regulations give the United States nearly exclusive enforcement authority and do not permit private enforcement suits. The FDCA also pre-empts certain state misbranding laws.

Neither the Lanham Act nor the FDCA, in express terms, forbids or limits Lanham Act claims challenging labels that are regulated by the FDCA. The absence of such a textual provision when theLanham Act and the FDCA have coexisted for over 70 years is “powerful evidence that Congress did not intend FDA oversight to be theexclusive means” of ensuring proper food and beverage labeling. See Wyeth v. Levine, 555 U. S. 555, 575 (2009). Both statutes touch on food and beverage labeling, but the LanhamAct protects commercial interests against unfair competition, while the FDCA protects public health and safety.

Petitioner POM Wonderful LLC, which produces, markets, and sells, inter alia, a pomegranate-blueberry juice blend, filed a Lanham Act suit against respondent Coca-Cola Company, alleging that the name, label, marketing, and advertising of one of Coca-Cola’s juice blends mislead consumers into believing the product consists predominantly of pomegranate and blueberry juice when it consists predominantly of less expensive apple and grape juices, and that the ensuing confusion causes POM to lose sales.

The Coca-Cola product only contains 0.3% pomegranate juice and 0.2% blueberry juice. Alleging that the use of that label is deceptive and misleading, POM sued Coca-Cola under §43 of the Lanham Act. 60 Stat. 441, as amended, 15 U. S. C. §1125. That provision allows one competitor to sue another if it alleges unfair competition arising from false or misleading product descriptions. The Court of Appeals for the Ninth Circuit held that, in the realm of labeling for food and beverages, a Lanham Act claim like POM’s is precluded by a second federal statute, the FDCA. The USSC reverses this holding.

The Lanham Act creates a federal remedy “that goes beyond trademark protection.” POM Wonderful at slip op. 10, citing to Dastar Corp. v. Twentieth Century Fox Film Corp., 539 U. S. 23, 29 (2003). The broader remedy is at issue between POM Wonderful and Coca-Cola.

The USSC states that the FDCA and the Lanham Act are complementary and have separate scopes and purposes. The greater specificity in the FDCA would matter only if the Lanham Act and the FDCA cannot be implemented in full at the same time. See RadLAX Gateway Hotel, LLC v. Amalgamated Bank, 566 U. S. ___, ___ (2012) (slip op., at 5–7). But neither the statutory structure nor any empirical evidence indicates to the USSC that there should not be any difficulty in fully enforcing each statute according to its respective terms. In fact, the FDA explicitly encourages manufacturers to include material on their labels that is not required by the regulations. 58 Fed. Reg. 2919.

Coca-Cola and the United States asked the Court to elevate the FDCA and the FDA’s regulations over the private cause of action authorized by the Lanham Act. But USSC states that the FDCA and the Lanham Act complement each other in the federal regulation of misleading labels.

The primary lesson from this opinion is that trademark and unfair competition regulations are separately enforced from other federal and state provisions such as the FDCA. The Lanham Act should be separately considered from other laws such as product labeling. Individuals and businesses should consult with a knowledgeable trademark and trade dress practitioner if they have questions or concerns about trademark and unfair competition regulations in relation to products and services for sale.

U.S. Supreme Court Confirms Patents Cannot Claim Abstract Ideas

On 19 June 2014, the U.S. Supreme Court (USSC) issued a significant decision (PDF) on patent-eligible subject matter in Alice Corp. Pty. Ltd. v. CLS Bank International et al. This case particularly addresses how certain abstract subject matter may be claimed in a patent. Alice Corp. is a unanimous decision relating to the relevant patent statute, 35 U.S.C. 101.

Since reading the opinion, I have been mulling over the impact of this decision and contemplating how to apply it because I often work with computer-centric and abstract subject matter in patent claims. The U.S. Patent and Trademark Office (USPTO) has already given the Examining Corps guidance (PDF) based on this opinion. The guidance is quite specific and provides further insights on how the USPTO and everyone associated with the judiciary should apply this decision.

Alice’s patents included claims directed to a method for exchanging financial obligations, a computer system configured to carry out such method, and computer-readable media containing program code for performing such method. (An exemplary method claim is shown following these remarks.) The USSC found it unnecessary to define the “precise contours of the ‘abstract ideas’ category.”

The Alice Corp. opinion follows Mayo Collaborative Services v. Prometheus Laboratories, Inc, 566 U.S. ___ (2012), an earlier Supreme Court case. In Mayo, the USSC held that the recitation of a computer in the method claims was “‘nothing significantly more’ than an instruction to apply the abstract idea of intermediated settlement using some unspecified, generic computer.” The USSC likewise held those claims not to be drawn to statutory subject matter under 35 U.S.C. § 101.

Section 101 defines the subject matter eligible for patent protection: “Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.” The USSC has historically held that this provision contains an important implicit exception: “Laws of nature, natural phenomena, and abstract ideas are not patentable.” (citations omitted)

The USSC indicated that the “system and [computer-readable] media claims add nothing of substance to the underlying abstract idea” found in the method claims.The USSC cautioned that there is a need to “tread carefully” when addressing the abstract idea doctrine “lest it swallow all of patent law.” I have to agree. After all, human language is imprecise and we have to live with some amount of abstractness in order to provide some justice to those seeking to ride the intellectual coat tails of technical pioneers. This balance of fairness is at the heart of patent law where we want to reward those persons who advance civilization.

In Alice, the USSC observed that “an invention is not rendered ineligible for patent simply because it involves an abstract concept.” Justice Sotomayor and two other Justices issued a concurring opinion to state a belief that any patent claim that merely describes a method of doing business is patent-ineligible.

The USSC applied a two-part test that it introduced in Mayo – the same test that led to the Federal Circuit’s fractured en banc opinion issued earlier in this dispute. Under that two-part test, the USSC found (1) that the claims were drawn to the abstract idea of “intermediated settlement,” which is a “fundamental economic practice long prevalent in our system of commerce,” and (2) that “the mere recitation of a generic computer cannot transform a patent-ineligible abstract idea into a patent-eligible invention.”

The USSC fails to directly address several of the questions surrounding the two-part Mayo test, such as how to determine whether a claim is directed to an abstract idea and how much “more” is required to make such a claim patent-eligible. While I get the concept of “don’t try to patent abstract ideas,” I was left with the feeling of eating a big batch of cotton candy – lots of tasty opinion without a lot of practical substance about how to make the determination in other cases. Nevertheless, the Alice decision provides some guidance on how to view claims in view of section 101.


The parties agree that claim 33 of U.S. Patent No. 5,970,479 is representative of the method claims. Claim 33 recites:

A method of exchanging obligations as between parties, each party holding a credit record and a debit record with an exchange institution, the credit records and debit records for exchange of predetermined obligations, the method comprising the steps of:

(a) creating a shadow credit record and a shadow debit record foreach stakeholder party to be held independently by a supervisory institution from the exchange institutions;

(b) obtaining from each exchange institution a start-of-day balance for each shadow credit record and shadow debit record;

(c) for every transaction resulting in an exchange obligation, the supervisory institution adjusting each respective party’s shadow credit record or shadow debit record, allowing only these transactions that do not result in the value of the shadow debit record being less than the value of the shadow credit record at any time, each said adjustment taking place in chronological order, and

(d) at the end-of-day, the supervisory institution instructing on[e] of the exchange institutions to exchange credits or debits to the credit record and debit record of the respective parties in accordance with the adjustments of the said permitted transactions, the credits and debits being irrevocable, time invariant obligations placed on the exchange institutions.


Here are the claims in dispute from the relevant cases:

CLAIM IN ALICE CORP (2014) (not allowed)

A method of exchanging obligations as between parties, each party holding a credit record and a debit record with an exchange institution, the credit records and debit records for exchange of predetermined obligations, the method comprising the steps of:

(a) creating a shadow credit record and a shadow debit record foreach stakeholder party to be held independently by a supervisory institution from the exchange institutions;

(b) obtaining from each exchange institution a start-of-day balance for each shadow credit record and shadow debit record;

(c) for every transaction resulting in an exchange obligation, the supervisory institution adjusting each respective party’s shadow credit record or shadow debit record, allowing only these transactions that do not result in the value of the shadow debit record being less than the value of the shadow credit record at any time, each said adjustment taking place in chronological order, and

(d) at the end-of-day, the supervisory institution instructing on[e] of the exchange institutions to exchange credits or debits to the credit record and debit record of the respective parties in accordance with the adjustments of the said permitted transactions, the credits and debits being irrevocable, time invariant obligations placed on the exchange institutions.


CLAIM IN FLOOK (1978) (not allowed)

1. A method for updating the value of at least one alarm limit on at least one process variable involved in a process comprising the catalytic chemical conversion of hydrocarbons wherein said alarm limit has a current value of
Bo + K
wherein Bo is the current alarm base and K is a predetermined alarm offset which comprises:
(1) Determining the present value of said process variable, said present value being defined as PVL:
(2) determining a new alarm base B1, using the following equation:

B1 = Bo (1.0 – F) + PVL (F)

where F is a predetermined number greater than zero and less than 1.0;

(3) determining an updated alarm limit value which is defined as B1 + K; and, thereafter
(4) adjusting said alarm limit to said updated alarm limit value.


CLAIM IN DIEHR (1981) (allowed)

1. A method of operating a rubber-molding press for precision molded compounds with the aid of a digital computer, comprising:

providing said computer with a data base for said press including at least, natural logarithm conversion data (ln), the activation energy constant (C) unique to each batch of said compound being molded, and a constant (x) dependent upon the geometry of the particular mold of the press,
initiating an interval timer in said computer upon the closure of the press for monitoring the elapsed time of said closure,
constantly determining the temperature (Z) of the mold at a location closely adjacent to the mold cavity in the press during molding,
constantly providing the computer with the temperature (Z),
repetitively performing in the computer, at frequent intervals during each cure, integrations to calculate from the series of temperature determinations the Arrhenius equation for reaction time during the cure, which is

ln(v)=CZ+x
where v is the total required cure time,

repetitively comparing in the computer at frequent intervals during the cure each said calculation of the total required cure time calculated with the Arrhenius equation and said elapsed time, and
opening the press automatically when a said comparison indicates completion of curing.