Sunday, November 02, 2003

Patent Law and Policy : FTC Report : Bonito Boats v. Thunder Craft Boats : Selden Case : Eolas Case


FTC Report on Patent Law and Policy

Via The Cover Pages we were led to an FTC link and from thence to the PDF Text of the recent FTC Report on promoting innovation through the proper balance of competition and patent law and policy as well as the Executive Summary of that same report. We referred to this report in our previous blog posting.

A second forthcoming report by the FTC and the Antitrust Division of the Department of Justice (DOJ) will make similar recommendations for antitrust law.

BONITO BOATS, INC. v. THUNDER CRAFT BOATS, INC.

No. 87-1346 Supreme Court of the US, 489 U.S. 141; 109 S. Ct. 971; 103 L. Ed. 2d 118;

57 U.S.L.W. 4205; 9 U.S.P.Q.2D (BNA) 1847; 1989 U.S. LEXIS 629


The FTC Report linked above cites to Bonito Boats, Inc. v. Thunder Craft Boats Inc., a US Supreme Court case in which Justice O'Connor delivered an opinion for a unanimous Supreme Court on the issue of federal patent law. The holding and discussion in that opinion are important for an understanding of the future of patent law everywhere, also as regards the internet.

HOLDING

In Bonito Boats, the US Supreme Court held that a Florida statute [protective of the Florida boat industry] which prohibited the use of "the direct molding process" to duplicate unpatented boat hulls was pre-empted by the supremacy clause (Art VI (2)) and that federal patent law prevailed.

OPINION BY JUSTICE O'CONNOR

JUSTICE O'CONNOR delivered the opinion of the Court.


[This case is excerpted by LawPundit. The three-dot symbol ... means text in the decision has been omitted either by us or by the Court (in some text citations). Bracketed material [example] has been added by LawPundit. Sources in the decision have been put in bold text by LawPundit and articles within sources in italics.]
...

[THE PATENT CLAUSE of the US CONSTITUTION]
Article I, § 8, cl. 8, of the Constitution gives Congress the power "[t]o promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries." The Patent Clause itself reflects a balance between the need to encourage innovation and the avoidance of monopolies which stifle competition without any concomitant advance in the "Progress of Science and useful Arts." As we have noted in the past, the Clause contains both a grant of power and certain limitations upon the exercise of that power. Congress may not create patent monopolies of unlimited duration, nor may it "authorize the issuance of patents whose effects are to remove existent knowledge from the public domain, or to restrict free access to materials already available." Graham v. John Deere Co. of Kansas City, 383 U.S. 1, 6 (1966).
[FIRST US PATENT ACT (1790)]

From their inception, the federal patent laws have embodied a careful balance between the need to promote innovation and the recognition that imitation and refinement through imitation are both necessary to invention itself and the very lifeblood of a competitive economy. Soon after the adoption of the Constitution, the First Congress enacted the Patent Act of 1790, which allowed the grant of a limited monopoly of 14 years to any applicant that "hath ... invented or discovered any useful art, manufacture, ... or device, or any improvement therein not before known or used." 1 Stat. 109, 110. In addition to novelty, the 1790 Act required that the invention be "sufficiently useful and important" to merit the 14-year right of exclusion.... Section 2 of the Act required that the patentee deposit with the Secretary of State, a specification and if possible a model of the new invention, "which specification shall be so particular, and said models so exact, as not only to distinguish the invention or discovery from other things before known and used, but also to enable a workman or other person skilled in the art or manufacture ... to make, construct, or use the same, to the end that the public may have the full benefit thereof, after the expiration of the patent term." ...

The first Patent Act established an agency known by self-designation as the "Commissioners for the promotion of Useful Arts," composed of the Secretary of State, the Secretary of the Department of War, and the Attorney General, any two of whom could grant a patent. Thomas Jefferson was the first Secretary of State, and the driving force behind early federal patent policy. For Jefferson, a central tenet of the patent system in a free market economy was that "a machine of which we were possessed, might be applied by every man to any use of which it is susceptible." 13 Writings of Thomas Jefferson 335 (Memorial ed. 1904). He viewed a grant of patent rights in an idea already disclosed to the public as akin to an ex post facto law, "obstruct[ing] others in the use of what they possessed before." Id., at 326-327.
[SECOND US PATENT ACT (1793)]

Jefferson also played a large role in the drafting of our Nation's second Patent Act, which became law in 1793. The Patent Act of 1793 carried over the requirement that the subject of a patent application be "not known or used before the application." Ch. 11, 1 Stat. 318, 319. A defense to an infringement action was created where "the thing, thus secured by patent, was not originally discovered by the patentee, but had been in use, or had been described in some public work anterior to the supposed discovery of the patentee." Id., at 322. Thus, from the outset, federal patent law has been about the difficult business "of drawing a line between the things which are worth to the public the embarrassment of an exclusive patent, and those which are not." 13 Writings of Thomas Jefferson, supra, at 335.
[TODAY'S PATENT STATUTE - NOVELTY and UTILITY]

Today's patent statute is remarkably similar to the law as known to Jefferson in 1793. Protection is offered to "[w]hoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof." 35 U. S. C. § 101. Since 1842, Congress has also made protection available for "any new, original and ornamental design for an article of manufacture." 35 U. S. C. § 171. To qualify for protection, a design must present an aesthetically pleasing appearance that is not dictated by function alone, and must satisfy the other criteria of patentability. The novelty requirement of patentability is presently expressed in 35 U. S. C. §§ 102(a) and (b), which provide:

"A person shall be entitled to a patent unless --

"(a) the invention was known or used by others in this country, or patented or described in a printed publication in this or a foreign country, before the invention thereof by the applicant for patent, or

"(b) the invention was patented or described in a printed publication in this or a foreign country or in public use or on sale in this country more than one year prior to the date of application for patent in the United States ...."

Sections 102(a) and (b) operate in tandem to exclude from consideration for patent protection knowledge that is already available to the public. They express a congressional determination that the creation of a monopoly in such information would not only serve no socially useful purpose, but would in fact injure the public by removing existing knowledge from public use....
[TODAY'S PATENT STATUTE - ANTICIPATION BY PRIOR ART IN THE FIELD - NONOBVIOUSNESS] ...
In addition to the requirements of novelty and utility, the federal patent law has long required that an innovation not be anticipated by the prior art in the field. Even if a particular combination of elements is "novel" in the literal sense of the term, it will not qualify for federal patent protection if its contours are so traced by the existing technology in the field that the "improvement is the work of the skillful mechanic, not that of the inventor." Hotchkiss v. Greenwood, 11 How. 248, 267 (1851). In 1952, Congress codified this judicially developed requirement in 35 U. S. C. § 103, which refuses protection to new developments where "the differences between the subject matter sought to be patented and the prior art are such that the subject matter as a whole would have been obvious at the time the invention was made to a person of ordinary skill in the art to which said subject matter pertains." The nonobviousness requirement extends the field of unpatentable material beyond that which is known to the public under § 102, to include that which could readily be deduced from publicly available material by a person of ordinary skill in the pertinent field of endeavor. See Graham, 383 U.S., at 15. Taken together, the novelty and nonobviousness requirements express a congressional determination that the purposes behind the Patent Clause are best served by free competition and exploitation of either that which is already available to the public or that which may be readily discerned from publicly available material. See Aronson v. Quick Point Pencil Co., 440 U.S. 257, 262 (1979) ("[T]he stringent requirements for patent protection seek to ensure that ideas in the public domain remain there for the use of the public")....

The novelty and nonobviousness requirements of patentability embody a congressional understanding, implicit in the Patent Clause itself, that free exploitation of ideas will be the rule, to which the protection of a federal patent is the exception....
[PATENTS CASE LAW - COPYING OF UNPATENTABLE ARTICLES]

In our decisions in Sears, Roebuck & Co. v. Stiffel Co., 376 U.S. 225 (1964), and Compco Corp. v. Day-Brite Lighting, Inc., 376 U.S. 234 (1964), we found that publicly known design and utilitarian ideas which were unprotected by patent occupied much the same position as the subject matter of an expired patent....The Court stated [in Sears]:

"... An unpatentable article, like an article on which the patent has expired, is in the public domain and may be made and sold by whoever chooses to do so...." 376 U.S., at 231.

A similar conclusion was reached in Compco, where the District Court had extended the protection of Illinois' unfair competition law to the functional aspects of an unpatented fluorescent lighting system. The injunction against copying of an unpatented article, freely available to the public, impermissibly "interfere[d] with the federal policy, found in Art. I, § 8, cl. 8, of the Constitution and in the implementing federal statutes, of allowing free access to copy whatever the federal patent and copyright laws leave in the public domain." Compco, supra, at 237....
[FUTURE PATENT LAW IS THE JOB OF CONGRESS]

[The Florida Statute in question] ... enters a field of regulation which the patent laws have reserved to Congress. The patent statute's careful balance between public right and private monopoly to promote certain creative activity is a "scheme of federal regulation ..." Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230 (1947). Congress has considered extending various forms of limited protection to industrial design either through the copyright laws or by relaxing the restrictions on the availability of design patents. See generally Brown, Design Protection: An Overview, 34 UCLA L. Rev.1341 (1987). Congress explicitly refused to take this step in the copyright laws, see 17 U. S. C. § 101; H. R. Rep. No. 94-1476, p. 55 (1976), and despite sustained criticism for a number of years, it has declined to alter the patent protections presently available for industrial design. See Report of the President's Commission on the Patent System, S. Doc. No. 5, 90th Cong., 1st Sess., 20-21 (1967); Lindgren, The Sanctity of the Design Patent: Illusion or Reality?, 10 Okla. City L. Rev. 195 (1985). It is for Congress to determine if the present system of design and utility patents is ineffectual in promoting the useful arts in the context of industrial design.

By offering patent-like protection for ideas deemed unprotected under the present federal scheme, the Florida statute [in question] conflicts with the "strong federal policy favoring free competition in ideas which do not merit patent protection." Lear, Inc., 395 U.S., at 656. We therefore agree with the majority of the Florida Supreme Court that the Florida statute is preempted by the Supremacy Clause, and the judgment of that court is hereby affirmed...."

[End of the Supreme Court decision excerpted by LawPundit.]


THE SELDEN CASE and HENRY FORD

The FTC boxes the following text in its Executive Summary PDF:
"An Invalid Patent on an Obvious Invention Can Harm Competition.

In 1895, George Selden obtained a U.S. patent with a claim so broad that "it literally encompasse[d] most automobiles ever made." Yet the basic invention covered by that claim - putting a gasoline engine on a chassis to make a car - was so obvious that many people worldwide thought of it independently as soon as the most primitive gasoline engines were developed. The association that licensed the Selden patent collected hundreds of thousands of dollars in royalties - raising costs and reducing the output of automobiles - before Henry Ford and others challenged the patent, and the patent claim was judicially narrowed in 1911. See MERGES & DUFFY, PATENT LAW AND POLICY: CASES AND MATERIALS at 644-46."

We find strong parallels between the Selden case and the current Eolas patent claim on "embedding" various "engines" (plug-ins) on the "chassis" (architecture) of existing software.

How was the Selden patent case resolved?
See the account of events at Facts On File.

US Patent Reform Seems Necessary


Via The Locker Gnome I was directed to a link to The Register and an October 30, 2003 article by John Leyden entitled: "FTC calls for US patent reform".

Leyden reports that the Federal Trade Commission (FTC)

"has issued a report calling on the US Patent and Trademark Office to apply tougher standards in granting patents" and advises that "Congress should also establish a mechanism to permit companies to challenge patents more easily".

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