November 1, 2014

Mr. Patent Meet Mr. Copyright

The American Institute of Physics and two publishers have sued four law firms for copyright infringement claiming that their scientific journal articles have been improperly used in patent applications and that the firms have earned profits from creating intellectual property rights for their clients while infringing the intellectual property rights of scientific journal publishers. The plaintiffs’ claim that they “publish, sell and distribute journals, and license the copyrighted content contained in them for precisely these types of uses . . . Nevertheless, defendants have not acquired any of the licenses necessary to make their copying and distribution of plaintiffs copyrighted articles lawful.”

The four complaints are almost identical in content. Using the complaint against Chicago based McDonnell Boehnen Hulbert & Berghoff LLP as an example of plaintiffs claims, plaintiffs allege that, as part of its patent prosecution practice, the firm “made and/or distributed to the USPTO . . . unauthorized copies of copyrighted articles from plaintiffs’ journals ” and that the firm made copies of other works for internal use that “were cited” in the patent applications, or were considered but not cited in the patent applications. (Click here for a copy of the complaint). The complaint also charges that “McDonnell has charged its clients for the copies it has made of plaintiffs’ copyrighted works, and thereby made a direct profit as a result of its infringement.” Finally, according to the complaint, plaintiffs remain willing to offer licenses to defendants, but defendants have not taken plaintiffs up on their offers.

In an introductory statement to its answer, McDonnell casts plaintiffs’ complaint in apocalyptic terms as threatening the entire patent prosecution system by changing long established practices in fulfilling legal obligations under the Patent Law and Regulations requiring practitioners to disclose prior art to the USPTO: “Such a result would undermine the Patent Office’s ability to get full disclosure of relevant prior art to the detriment of our patent system and, thus, to innovation in general.” The statement goes on to state that by attempting to introduce such a costly requirement in the patent prosecution process will “undermine the full disclosure requirements of the USPTO and interfere with access to the constitutionally mandated patent system.” Defendant further notes that the USPTO has publicly taken the position that copying and submitting non-patent literature by patent applicants in order to satisfy disclosure requirements is protected “fair use.” Accordingly, “[a] adverse judgment against McDonell would harm not just McDonell, but all firms who practice in this area, and interfere with the federal government’s interest in promoting an inexpensive and efficient patent system whereby prior art is appropriately disclosed. Plaintiffs’ allegations, thus, fit squarely within the parameters of what the Copyright Act deems a fair use.”

The USPTO, in the position paper cited by McDonnell concludes that the use of non-patent literature (NPL) in the patent examination process is protected by the copyright doctrine of fair use. (Click here for a copy of the paper). The USPTO began by noting that each applicant is under a duty to disclose to the USPTO all information “material to patentability” and applicants fail this duty by submitting Information Disclosure Statements and that an IDS might include copyrighted NPL.

Section 107 of the Copyright Act offers four non-exclusive factors to determine fair use: “(1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes; (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and (4) the effect of the use upon the potential market for or value of the copyrighted work.”

With regard to the purpose and character of the use, the USPTO claimed that the case for fair use under this factor is strengthened by the requirement that the applicant is required by law to submit the NPL to the patent office. “Although the entity (applicant or law firm) submitting the NPL might be a for-profit entity, that does not mean that the submission of the NPL to the patent office to satisfy a legal requirement is a ‘commercial use.’” The USPTO claims that the applicant is not “exploiting” the work without paying for it and “are instead merely submitting it, pursuant to a legal requirement based on its factual, rather than its expressive, content, the first factor weighs heavily in favor of fair use.” Finally, the USPTO also argues that the use is transformative, because the USPTO, and the applicant, by extension, is using the work for a new and different purpose than for what it was created – to determine whether the “applicants’ claims are already in the prior art, or are obvious in view of the prior art.”

As to the next three factors, according to the USPTO, the analysis is identical to whether the USPTO’s use of the copyrighted materials is fair use, which they concluded that it is. In addition, the USPTO asserts that the second factor, “the nature of the copyrighted work” also favors a finding of fair use. This factor examines whether the work is fiction and whether the work is published or not. Since, the NPL is factual and has been published, it is entitled to less protection. According, the USPTO believes that this factor weighs in favor of fair use.

The USPTO claims that the third factor, which looks at the “amount and substantiality of the portion used,” is neutral, because copying less “than the entire work is often not an option for purposes of imparting the necessary information” to the USPTO.

The USPTO also argues that the fourth factor, “the effect of the use upon the potential market,” also weighs in favors of a finding of fair use. When analyzing this factor, courts usually conduct a two-pronged inquiry: (1) whether the allegedly infringing use would materially impair the marketability of the work; and (2) whether the allegedly infringing work would act as a market substitute for the original. The USPTO claims that the unauthorized use by the applicant would not impair the marketability of the copyrighted prior art. “NPL that law firms typically submit to the USPTO have been obtained through legitimate, licensed databases, and thus already have been paid for once. The copyrighted holder has already been compensated for that use (which would not typically have occurred but for the legal requirement imposed by the patent system); that fact would presumably be relevant to any analysis of whether the applicant’s use of the copyrighted work harmed the market for the copyrighted work.”

Based on an understanding that three of the factors favor fair use and the fourth is neutral, the USPTO concludes that “it is fair use for an applicant to make copies of the NPL during examination in an IDS.” The USPTO, however, qualifies its conclusion by stating that “the USPTO takes no position on whether additional copies of the NPL made during the course of patent prosecution (e.g., for the client, for other attorneys, for the inventor, or the law firm’s future reference) qualify as fair use.”

Plaintiffs’ actions raise a number of interesting issues about the applicability of fair use. As an initial matter, defendants’ assertions that requiring applicants to obtain an additional license to the NPL would result in the downfall of the entire patent prosecution system seems to be a bit overstated at best. Patent prosecution is a relatively expensive process and while, plaintiffs do not state how much licenses would cost, it is unlikely to raise the cost of patent prosecution materially. It is hoped that if the parties do settle this matter that the settlement distinguishes between small and large patent applicants. Individuals and other small entities, already have found it difficult to pay the costs of patent prosecution. They may find it even more difficult if the costs were significantly increased due to having to obtain an expensive NPL license.

It is also interesting to note, contrary to defendants’ claims, that the USPTO has blessed the practice of prosecutors, the USPTO has, in fact, not taken a position on whether applicants making multiple copies is fair use. The USPTO stated that the submission of a single licensed copy of prior art to the USPTO is a fair use, however, it took “no position” on whether additional copies of the NPL made by the applicant during the prosecution process is fair use.

We will carefully follow these cases and post updates on any developments.

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