Perspectives bull Analysis bull Visionary Ideas

INTELLECTUAL PROPERTY AND TECHNOLOGY NEWS

wwwdlapipercomip_global | Issue 14 Q2 2012

AN INTERVIEW WITH THE HONORABLE ARTHUR J GAJARSA SENIOR JUDGE OF THE US COURT OF APPEALS FOR THE FEDERAL CIRCUIT

UNCERTAIN FUTURE PATENTABILITY OF GENE-BASED INVENTIONS IN THE US

WILL 2012 BE THE YEAR WE SEE ENTERPRISE-GRADE CLOUD DEALS

Attorney Advertising

YOURPATENTPORTFOLIOHOW MUCH IS IT WORTH AND WHAT ARE YOU GOING TO DO ABOUT IT

UNITED STATES

Our last issue of IPT News included an article from me on likely consequences of the America Invents Actrsquos new joinder provisions Well we didnrsquot have to wait very long for the Federal Circuit to weigh in On May 4 in In re EMC Corp it granted in part a writ of mandamus arising out of the denial of a motion to sever and transfer unrelated defendants

The EMC decision is interesting for several reasons First it addresses the appropriate test for joinder of unrelated defendants in patent cases filed before the Act took effect ndash significant because so many multi-defendant cases were filed on the eve of the Act The Federal Circuit rejected the lower courtrsquos ldquonot dramatically differentrdquo test explaining joinder was not appropriate when ldquodifferent products or processes were involvedrdquo And even when the ldquosamerdquo products were at issue there must be ldquoshared overlapping factsrdquo to satisfy the ldquosame transactionrdquo analysis Second the Federal Circuit noted that where joinder was inappropriate the court could still sever and consolidate unrelated defendants for pretrial matters This could result in a distinction without much difference from a single multi-defendant case except each severed defendant would have a separate trial Third the Federal Circuit explained that multi-district litigation (MDL) could resolve efficiency and consistency concerns I expect to see this language cited frequently as MDL becomes even more prominent in the patent case landscape

This quarter we address several other timely topics Our cover story by Craig Opperman explains the importance of patent valuation In addition we are pleased to share with you Aaron Fountainrsquos interview with the Honorable Arthur J Gajarsa

As always we look forward to your feedback How may we tailor IPT News to your interests

johnguaragnadlapipercom

In re EMC Corp ___F3d ___ 2012 WL 1563920 (Fed Cir May 4 2012)

EDITORrsquoS COLUMN

John M GuaragnaPartner Patent Litigation

The award-winning Intellectual Property and Technology News is now published in the United States Asia Pacific and EMEA regions Find all current and past editions of the IPT News here wwwdlapipercomipt_news

In support of our Global Sustainability Initiative this publication is printed on 100 recycled paper Please recycle this newsletter or share it with others

You are receiving this communication because you are a valued client former client or friend of DLA Piper The information contained in this newsletter is for informational purposes only and should not be construed as legal advice on any matter To unsubscribe from this mailing list send an email to communicationsdlapipercom or send your written request to DLA Piper Attention Marketing Department 401 B Street Suite 1700 San Diego California 92101-4297 USA Copyright copy 2012 DLA Piper llp (us) DLA Piper uk llp and other affiliated entities For questions comments and suggestions email us at IPTnewsdlapipercom or contact Diane Vislisel Senior Practice and Industry Marketing Manager T +1 619 699 3541 dianevisliseldlapipercom US Chair ndash Intellectual Property and Technology John Allcock T +1 619 699 2828 johnallcockdlapipercom Editor in Chief John M Guaragna T +1 512 457 7125 johnguaragnadlapipercomDirector Intellectual Property and Technology Licia E Vaughn T +1 619 699 2997 liciavaughndlapipercomDLA Piper llp (us) 401 B Street Suite 1700 San Diego California 92101-4297 USA

A Technology Privacy and Sourcing Blog

DLA Piperrsquos newest blog

Technologyrsquos Legal Edgetrade

addresses the global issues

facing companies in the

areas of e-commerce and

social media IT sourcing

outsourcing and privacy

and data security We offer

timely legal perspectives on

cutting-edge issues in these

dynamic areas of law

Contributing to the blog are

members of DLA Piperrsquos

leading global Technology

Sourcing and Commercial

practice Recent posts include

How tech startups can

protect IP ndash a Bloomberg

interview with Mark

Radcliffe

Australia reforms privacy

law ndash new legislation to be

presented to Parliament

FTC issues final privacy

report ndash sets forth

best practices calls for

legislation

We hope this blog will

become a practical resource

for your business

technologyslegaledgecom

TE

CH

NO

LOG

YrsquoS

L

EG

AL

ED

GE

trade

wwwdlapipercomip_global | 03

As I write this I sit in Shanghai after three days at the United States-China Intellectual Property Adjudication Conference in Beijing A truly historic event the conference drew more than 1000 people from the IP field The highest ranking US judges responsible for IP adjudication including Federal Circuit Chief Judge Randall Rader and a number of his colleagues appeared on many panels to discuss each countryrsquos approach to IP adjudication DLA Piper lawyers from Washington DC to Hong Kong and Shanghai attended

Most impressive was an en banc panel including seven judges from the US Federal Circuit and seven judges from Chinarsquos IPR Tribunal of the Supreme Peoplersquos Court Lawyers from both countries discussed all aspects of IP law including critical issues of IP rights enforcement in China I was fortunate to be on a panel on enforcement of patent judgments and learned much from my Chinese co-moderator as I hope he learned from me

Impressive and enlightening the conference highlighted for me what has been happening in China over the last few years Most notably one message that came through loud and clear is that innovation cannot happen without strong IP protection

We at DLA Piper have been helping clients in both China and the US to build strong intellectual property rights and to enforce and defend them We look forward to continuing to do so

johnallcockdlapipercom

HISTORIC IP CONFERENCE IN BEIJING

John AllcockPartner Global Co-Chair and US Chair Intellectual Property and Technology

IP INDUSTRIES SPUR US ECONOMYIP-related industries support at least 40 million jobs and contribute more than US$5 trillion of the US gross domestic product ndash that is about 35 percent of the GDP1

A new report from the US Commerce Department observes that the

most IP-intensive industries include semiconductors and other electronic

components pharmaceutical products computer and peripheral

equipment medical devices audio and video equipment and newspaper

and book publishing2 The report states that merchandise exports

by IP-intensive industries totaled US$775 billion in 2010 ndash more than

60 percent of total US merchandise exports3

In a related press release4 Deputy Commerce Secretary Rebecca Blank

said ldquoStrong intellectual property protections encourage our businesses

to pursue the next great idea which is vital to maintaining Americarsquos

competitive edgerdquo USPTO Director David Kappos added ldquoEvery job in

some way produces supplies consumes

or relies on innovation creativity

and commercial distinctiveness

America needs to continue

investing in a high quality

and appropriately

balanced intellectual

property system

that will promote

innovative open and

competitive markets

while helping to ensure

that the US private

sector remains Americarsquos

innovation enginerdquo

For the full report go to

wwwusptogovnews

publicationsIP_Report_

March_2012pdf

1 Deprsquot of Comm Intellectual Property and the US Economy Industries in Focus Executive Summary pp v - viii available at wwwusptogovnewspublicationsIP_Report_March_2012pdf2 Id3 Id4 Press Release Deprsquot of Commerce wwwusptogovnewspr201212-25jsp (Apr 11 2012)

04ensp |ensp IntellectualenspPropertyenspandenspTechnologyenspNewsenspndashenspUnitedenspStates

Recent press coverage will have you believe that this is the case Many of the blockers to the enterprise-grade uptake of cloud computing have related to FUD (fear uncertainty and doubt) and the perceived lack of relevance for customers in regulated sectors (such as pharma financial services or the public sector)

As we have seen however cloud vendors have been turning their attention to specific regulated sectors (for example the Salesforce offering last year which was compliant with HIPAA) and now it would seem that financial services organizations are moving from initial ldquotoes in the waterrdquo (virtualization and limited low-grade cloud solutions) to more serious adoption

The newswire was recently buzzing with the news that Spanish bank BBVA will replace its current corporate Intranet with the full suite of Google applications including email and calendars Some 110000 employees will be able to work jointly on internal memos and contracts using Google Docs and will have their own BBVA social network also housed on Google servers

Tech Europe (January 11) estimates this deal to be worth euro44 million per year (significantly more than the apocryphal typical cloud deal size thought currently to be in the region of only pound250000) based on a seat price of euro40

It is still interesting to read that the fears whether real or perceived persist so much

so that BBVArsquos director of innovation Carmen Herranz stressed (as reported by the BBC on 11 January 2012) that all customer data and other key banking systems would ldquostay in our own data centresrdquo and be completely separate from the cloud solution This need to head off likely criticism illustrates the continuing concerns regarding security and location of data

So could this be the start of a trend Or is this not really as newsworthy as it seems Will banks or other regulated entities really ever put themselves in a position where anything other than peripheral (perhaps communication) systems are in the cloud

It seems unlikely that a banking platform (for example) would be cloud based in the truest sense of the word

Certainly 2012 will see another shift in gears as cloud goes further mainstream The European Commissionrsquos recent Public Consultation Report published on 5 December 2011 by DG Information Society and Media thinks so The report concludes that the existing confusion (as to rights responsibilities data protection and liability model terms and service levels) could be resolved (in whole or part) by the public sector Key to this resolution would be certainty regarding security standards interoperability and data portability thus stimulating rapid deployment At a national level the rapidity of deployment is debatable but nonetheless the first OJEU process

for cloud services in the UK public sector continues The call to market closed recently with 500+ responses and the Cabinet Office in the UK is now faced with the task of assuring some 1300 individual service offerings The framework was due to commence by the end of January 2012 It will be interesting to see the extent to which the public sector embraces this new framework pushing the adoption of cloud in the UK (in a regulated sector) and thereby encouraging the financial services sector and other regulated industries to follow suit

A key determinant will be the terms and conditions on which cloud vendors are willing to sell and regulated customers are willing to buy The delta between these two camps still remains the battleground and unlocking this issue will be the only way to truly allow cloud computing to spread

Mark OrsquoConor is a partner in DLA Piperrsquos IPT group based in London He advises in all aspects of technology and sourcing particularly in cloud computing Reach him at markoconordlapipercom

Ed Corry is a Solicitor in DLA Piperrsquos IPT group based in London Reach him at edwardcorrydlapipercom

This article originally appeared in the EMEA edition of Intellectual Property and Technology News Q1 2012

by Mark OrsquoConor and Ed Corry

Rich de Bodo has for many years been extensively involved in pro bono service on behalf of Native Americans

Rich led the team representing the Native American Rights Fund (NARF) in Cobell v Salazar a class action against the federal government aiming to remedy the historic mismanagement of Indian trust account funds The case resulted in a precedent-setting US$32 billion settlement Rich and the Cobell team fought to ensure that NARF which devoted thousands of hours to the case over 15 years would receive a fair award of lawyerrsquos fees and costs

Rich also served as lead counsel in Native Village of Eyak et al v Locke (co-counseling with NARF and Alaska Legal Services) in which five Native villages in south-central Alaska sought to establish their aboriginal fishing and hunting rights on the Outer Continental Shelf entitling them to take part in commercial fisheries supervised by the US Secretary of Commerce

Rich has worked on this case since 2004 In 2008 he first-chaired the two-week trial in Anchorage which examined whether the villagersrsquo Chugach Native ancestors were fishing and hunting beyond the three-mile line when Western explorers entered Alaska in the 1700s In 2011 the case was heard en banc by an 11-judge panel of the US Court of Appeals for the Ninth Circuit Rich worked extensively to help NARF prepare for argument and f ile its post-argument sub- missions to the court A result is expected soon

FAIR TREATMENT ABORIGINAL RIGHTS FOR NATIVE AMERICANS

Richard de BodoCo-Chair Patent Litigation

wwwdlapipercomip_global | 05

For many years Patent Litigation partner Andrew Valentine has actively performed pro bono work in his community In 2011

Andrew took his service to Africa working through DLA Piperrsquos international pro bono arm New Perimeter to lead the Namibia Access

to Justice Project

Andrew notes ldquoThe Projectrsquos goal was to create a legal manual and training materials for Namibiarsquos volunteer paralegal workforce ndash who in a country with

few attorneys are the people providing most of Namibiarsquos legal advicerdquo

Working closely with the Namibia Paralegal Association and a group of DLA Piper lawyers and staff the participants in the Project outlined wrote and published the

Namibia Access to Justice Paralegal Manual a compendium of essential information about Namibian citizenship its courts its constitution and substantive law as well as advice on practical skills

Last spring Andrew visited the Republic of Namibia traveling throughout the country to meet with Namibian legal volunteers and learn first-hand how to improve the manual This spring Andrew returned to Namibia to present the manual at the Namibia Paralegal Associationrsquos three-day annual general meeting

Back home Andrew continues his pro bono work in his local community serving on the board of Community Legal Services in East Palo Alto (which he co-chaired for five years) and as a board member and secretary of Childrenrsquos Health Council

A LEGAL MANUAL

FOR NAMIBIA

L to R Lucas Kasera (President Namibia Paralegal Association) John Walters (Ombudsman of Namibia) Manfred Jacobs (Vice President Namibia Paralegal Association) Andrew Valentine (DLA Piper ndash Silicon Valley)

PRO

BON

O

YOURPATENT

PORTFOLIOHOW MUCH IS IT WORTH AND WHAT ARE YOU GOING TO DO ABOUT IT

By Craig P Opperman

In mid-April the media was full of reports about AOLrsquos US$1056 billion patent sale to Microsoft The following week brought news that Microsoft had flipped 650 of those properties to Facebook Next came news that Intel spent US$70 million buying patents from Aware

These transactions ndash coming on the heels of Nortelrsquos US$45 billion patent sale in mid-2011 ndash have certainly attracted significant media attention Beyond the hype however the sales illustrate a fundamental shift in the way companies and investors view patents and has significant corporate governance implications

$2000K

$2500K

$1500K

$1000K

$500K

FROM OBSCURE LEGAL INSTRUMENT TO VALUABLE ASSET

There is no doubt the corporate executive spotlight has swung onto the monetary value of patent portfolios No longer viewed as obscure dust-gathering instruments patents have vaulted into the corporate boardroom Both transaction sizes and the per-patent-property prices are making C-level executives and board members pay attention Not surprisingly everyone is talking about patent monetization and we have seen an uptick in requests for assistance with such projects

This trend is raising important questions What are patents worth and what drives that value Importantly what happens if executives think they have valuable patent properties and then discover they do not and what measures will they put in place to increase the odds of creating valuable patents Finally what effect will activist shareholders have

WHAT ARE PATENT PROPERTIES WORTH

Patent assets that are not worth much cannot be monetized or add to shareholder value So any discussion about monetization must start with a discussion about what the patents are worth Unfortunately patent prices ndash like those for art wine or real estate ndash are all over the map as shown in the chart here

This chart tracks per-patent property price for recent publicly announced sales Prices range from about US$130000 per property to nearly ten times that And these prices are for ldquovaluablerdquo patent portfolios Equally enlightening is the calculated average US patent value of US$780001 If this figure is correct and the high point per patent

is US$ 21 million then there are a lot of patents worth very little

Herein lies the challenge how do you determine what a patent is worth In wine terms how do you know whether you have a cellar of Two-Buck-Chucks or a cellar of fine Bordeaux As with wine setting values takes an expert For patents this means a professional valuation person working with someone who analyzes each patentrsquos claims onto a product in the market Despite what some ldquovaluation expertsrdquo say this exercise cannot be done automatically And like it or not the process is costly Fortunately once it is done properly a business will know what its patents are worth which to keep or sell and for those it keeps how each relates to its marketplace

And as with so many things buyers drive prices and strategic buyers pay a lot more than ldquofinancialrdquo buyers This is particularly well illustrated in the chart below All the high prices were strategic buys (Facebook AOL Google) the low prices paid were by financial buyers (ie those wanting to license the patents)

WHAT THIS MEANS FOR PATENT PORTFOLIO MANAGEMENT

With such a wide range in values it is inevitable that some CEOs will find their patent portfolios arenrsquot worth much or at best

contain few valuable properties I say inevitable because companies have been on a patenting binge over the past two decades yet studies show the underlying RampD protected by patent filings today is a fraction of what it was 15 years ago Add to that the fact that todayrsquos patent applications are put together in half the time they used be There will be a lot of disappointed CEOs

How will CEOs react Certainly some will force their patent departments to move away from the ldquospray and prayrdquo model of getting patents Some will insist their patent portfolios be built with articulated value in mind a seismic shift for the patenting process in most big companies today Some CEOs may even ask their patent counsel to justify each patent property

CORPORATE GOVERNANCE AND THE ACTIVIST SHAREHOLDER

These questions are exceptionally important from a corporate governance (and investoractivist shareholder) perspective Clearly one cannot expect to get paid a million dollars for a patent that is only worth 5 percent of that Equally clearly not all patents are worth a million dollars or even $100000 so one cannot expect to get paid Friendster-sized prices An only slightly less obvious conclusion is that if one has numerous low-value patents it makes no sense to keep paying attorney and maintenance fees on them Yet surprisingly many companies have piles of these low-value patents or worse cannot account for their individual assetsrsquo value Certainly CFOs are going to be taking a long hard look at existing assets and asking why they should be kept and not sold or abandoned

While CEOs and corporate boards are looking inward at patent portfolio management they will simultaneously have to watch out carefully for activist shareholders Some of the most recent patent property sales came after activist shareholders put pressure on company boards As Intellectual Asset Management magazinersquos blog has observed lsquo[T]his is an invitation for other investors in other companies to get interested in patents and how they are being usedrsquo2

How much activist shareholder activity are we going to see in the patent field Very likely a lot This must become a major concern for C-level executives They are the ones who will face the question ldquoHow much are my patents actually worthrdquo and they will have to deal with the fallout if a patent portfolio long touted as being important turns out to be worth very little

RISKY SITUATION

Disturbingly few companies with large patent portfolios know the actual value of their assets ndash a risky situation indeed in this day and age If your company owns an unvalued portfolio it is time to stand up and take action

Craig P Opperman is a partner in DLA Piperrsquos Silicon Valley Office who focuses on designing building and monetizing valuable patent assets You may reach him at craigoppermandlapipercom

1 James Bessen amp Michael J Meurer Patent Failure How JudgesBureaucrats and Lawyers Put Innovators at Risk 112 (2008)

2 See this post at httpbitlyHBjLWp

Avi

star

I

ntel

lect

ual V

ent

Inte

rDig

ital

U

nsol

d

Nor

tel

App

le e

t al

Mot

o M

ob

Goo

gle

Ada

ptix

A

caci

a

Rea

lNet

wor

ks

Int

el

Frie

ndst

er

Fac

eboo

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AD

C

HT

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MSF

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Fac

eboo

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MSF

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wwwdlapipercomip_global | 07

| PRICE PER PATENT PROPERTY (2010 ndash 2012) |

$2000K

$2500K

$1500K

$1000K

$500K

FROM OBSCURE LEGAL INSTRUMENT TO VALUABLE ASSET

There is no doubt the corporate executive spotlight has swung onto the monetary value of patent portfolios No longer viewed as obscure dust-gathering instruments patents have vaulted into the corporate boardroom Both transaction sizes and the per-patent-property prices are making C-level executives and board members pay attention Not surprisingly everyone is talking about patent monetization and we have seen an uptick in requests for assistance with such projects

This trend is raising important questions What are patents worth and what drives that value Importantly what happens if executives think they have valuable patent properties and then discover they do not and what measures will they put in place to increase the odds of creating valuable patents Finally what effect will activist shareholders have

WHAT ARE PATENT PROPERTIES WORTH

Patent assets that are not worth much cannot be monetized or add to shareholder value So any discussion about monetization must start with a discussion about what the patents are worth Unfortunately patent prices ndash like those for art wine or real estate ndash are all over the map as shown in the chart here

This chart tracks per-patent property price for recent publicly announced sales Prices range from about US$130000 per property to nearly ten times that And these prices are for ldquovaluablerdquo patent portfolios Equally enlightening is the calculated average US patent value of US$780001 If this figure is correct and the high point per patent

is US$ 21 million then there are a lot of patents worth very little

Herein lies the challenge how do you determine what a patent is worth In wine terms how do you know whether you have a cellar of Two-Buck-Chucks or a cellar of fine Bordeaux As with wine setting values takes an expert For patents this means a professional valuation person working with someone who analyzes each patentrsquos claims onto a product in the market Despite what some ldquovaluation expertsrdquo say this exercise cannot be done automatically And like it or not the process is costly Fortunately once it is done properly a business will know what its patents are worth which to keep or sell and for those it keeps how each relates to its marketplace

And as with so many things buyers drive prices and strategic buyers pay a lot more than ldquofinancialrdquo buyers This is particularly well illustrated in the chart below All the high prices were strategic buys (Facebook AOL Google) the low prices paid were by financial buyers (ie those wanting to license the patents)

WHAT THIS MEANS FOR PATENT PORTFOLIO MANAGEMENT

With such a wide range in values it is inevitable that some CEOs will find their patent portfolios arenrsquot worth much or at best

contain few valuable properties I say inevitable because companies have been on a patenting binge over the past two decades yet studies show the underlying RampD protected by patent filings today is a fraction of what it was 15 years ago Add to that the fact that todayrsquos patent applications are put together in half the time they used be There will be a lot of disappointed CEOs

How will CEOs react Certainly some will force their patent departments to move away from the ldquospray and prayrdquo model of getting patents Some will insist their patent portfolios be built with articulated value in mind a seismic shift for the patenting process in most big companies today Some CEOs may even ask their patent counsel to justify each patent property

CORPORATE GOVERNANCE AND THE ACTIVIST SHAREHOLDER

These questions are exceptionally important from a corporate governance (and investoractivist shareholder) perspective Clearly one cannot expect to get paid a million dollars for a patent that is only worth 5 percent of that Equally clearly not all patents are worth a million dollars or even $100000 so one cannot expect to get paid Friendster-sized prices An only slightly less obvious conclusion is that if one has numerous low-value patents it makes no sense to keep paying attorney and maintenance fees on them Yet surprisingly many companies have piles of these low-value patents or worse cannot account for their individual assetsrsquo value Certainly CFOs are going to be taking a long hard look at existing assets and asking why they should be kept and not sold or abandoned

While CEOs and corporate boards are looking inward at patent portfolio management they will simultaneously have to watch out carefully for activist shareholders Some of the most recent patent property sales came after activist shareholders put pressure on company boards As Intellectual Asset Management magazinersquos blog has observed lsquo[T]his is an invitation for other investors in other companies to get interested in patents and how they are being usedrsquo2

How much activist shareholder activity are we going to see in the patent field Very likely a lot This must become a major concern for C-level executives They are the ones who will face the question ldquoHow much are my patents actually worthrdquo and they will have to deal with the fallout if a patent portfolio long touted as being important turns out to be worth very little

RISKY SITUATION

Disturbingly few companies with large patent portfolios know the actual value of their assets ndash a risky situation indeed in this day and age If your company owns an unvalued portfolio it is time to stand up and take action

Craig P Opperman is a partner in DLA Piperrsquos Silicon Valley Office who focuses on designing building and monetizing valuable patent assets You may reach him at craigoppermandlapipercom

1 James Bessen amp Michael J Meurer Patent Failure How JudgesBureaucrats and Lawyers Put Innovators at Risk 112 (2008)

2 See this post at httpbitlyHBjLWp

Avi

star

I

ntel

lect

ual V

ent

Inte

rDig

ital

U

nsol

d

Nor

tel

App

le e

t al

Mot

o M

ob

Goo

gle

Ada

ptix

A

caci

a

Rea

lNet

wor

ks

Int

el

Frie

ndst

er

Fac

eboo

k

AD

C

HT

C

MSF

T

Fac

eboo

k

AO

L

MSF

T

Kod

ak

Val

uati

on

wwwdlapipercomip_global | 07

| PRICE PER PATENT PROPERTY (2010 ndash 2012) |

UNCERTAIN FUTURE PATENTABILITY OF GENE-BASED INVENTIONS IN THE US

First in Mayo Collaborative Services v Prometheus Laboratories1 the Court held that certain medical inventions are non-patentable calling into question the USPTOrsquos long-standing practice of recognizing the patentability of isolated gene and amino acid sequences and methods of their use In light of Prometheus the Court vacated the Federal Circuitrsquos judgment in Association for Molecular Pathology v Myriad Genetics that had confirmed the patentability of Myriadrsquos isolated gene sequences and methods remanding the case for further consideration

The Federal Circuitrsquos disposition of Myriad (and any subsequent Supreme Court appeal) could have a momentous impact on biotechnology patent rights and on the biotechnology industry

Myriadrsquos composition claims cover isolated genes associated with breast cancer (BRCA genes) The Association for Molecular Pathology (AMP) challenged these claims on the grounds that they cover products of nature The Federal Circuit disagreed confirming the patentability of the composition claims and applying the ldquomarkedly differentrdquo test set forth in Diamond v Chakrabarty found isolated DNA is ldquomarkedly differentrdquo from DNA found in nature

Myriadrsquos drug screening claim involves transforming cells with a cancer-causing BRCA gene and measuring the cellsrsquo growth in the presence and absence of potential therapeutics AMP challenged Myriadrsquos claims as being drawn to an abstract idea ndash the comparison of cellular growth rates and preempts a law of nature ndash the correlation between a slower rate and the efficacy of a potential therapeutic For this claim the Federal Circuit applied the ldquomachine or transformationrdquo test set forth in Bilski concluding Myriadrsquos drug screening method was patentable The court found the claimed steps were sufficiently transformative while holding that other claims relating to diagnosing predisposition to breast cancer failed the ldquomachine or transformationrdquo test and thus were non-patentable

Prometheus involves the patentability of claims drawn to methods of evaluating the dosing regimen of thiopurine by administering the drug determining its metabolite levels in a patientrsquos bloodstream and comparing those to levels identified in the claims as too high and too low The Supreme Court held that the claims are non-patentable finding they were drawn to a law of nature ndash the naturally occurring correlation between metabolite levels and therapeutic efficacy The Court concluded that any transformative steps in the claims

Two recent US Supreme Court rulings have led to speculation that the patentability of gene-based inventions may become uncertain

By Siegmund Gutman and Jordan Kushner

wwwdlapipercomip_global | 09

were insufficient to constitute a patentable application of that natural law finding the ldquoadministrationrdquo step simply refers to the ldquorelevant audiencerdquo The ldquodeterminingrdquo step the Court said involves nothing more than ldquowell-understood routine conventionalrdquo activities The Court also reasoned that public policy weighed against granting patents for such subject matter because laws of nature are ldquothe basic tools of scientific and technological workrdquo and patents for such laws would ldquoinhibit future innovationrdquo

On remand the parties in Myriad will have diametric views regarding the applicability of Prometheus AMP will interpret Prometheus broadly to mean all biotechnology claims are patentable only if there are differences between the claimed subject matter and underlying natural laws or phenomena that are not ldquowell-understood routine or conventionalrdquo Regarding Myriadrsquos composition claims AMP will likely argue that even if the claimed isolated genes are ldquomarkedly differentrdquo from naturally occurring genes the act of isolating those genes is routine Myriad in contrast will likely argue that Prometheus is inapplicable to its product claims because Prometheus involved only method claims and that application of the ldquomarkedly differentrdquo test confirms the patentability of those claims Myriad will also likely argue that even if Prometheus governs the patentability of its product claims isolation of the BRCA gene would have been impossible without the work that led to the identification of the gene sequence and its association with breast cancer ndash work which was not routine or conventional

Regarding Myriadrsquos drug screening method claim AMP will likely argue that the claim is analogous to the therapeutic claims at issue in Prometheus because the steps the Federal Circuit found to be transformative are well-established lab techniques Myriad will likely argue that those steps are not routine because the growth of cells transformed with a BRCA gene required the unconventional work that led to the first identification of the gene sequence To inoculate its claims from the policy

considerations in Prometheus Myriad will likely argue that its patent claims have not been obstacles to further research on the claimed genes

The Federal Circuitrsquos decision in Myriad (and any subsequent Supreme Court decision) will have a significant impact on patents covering biologic inventions Parties seeking to invalidate patent claims to such inventions may be able to argue they are non-patentable under the standards set forth in Prometheus and Myriad

These challenges will have an even greater impact in light of the Biologics Price Competition and Innovation Act of 2009 which is likely to dramatically increase patent litigation involving biosimilars and bioidenticals and may facilitate regulatory approval and market entry of competitive products and methods

Companies seeking to protect the markets for their biologic inventions may be forced to explore new strategies ndash most likely emphasizing in their patent claims the human manipulation and intervention that led to the inventions to adequately distinguish those inventions from products and laws of nature

The best strategies for protecting biologic inventions will depend greatly on a series of events the Federal Circuitrsquos Myriad remand decision2 any subsequent Supreme Court opinion and the way the Federal Circuit and district courts apply those decisions in the next few years

Siegmund Gutman a patent litigation partner based in Los Angeles has an advanced technical background in biology and chemistry and has been trial counsel in several noteworthy biologics patent litigations as well as in numerous Hatch-Waxman litigations Reach him at siegmundgutmandlapipercom

Based in Los Angeles associate Jordan Kushner focuses on patent litigation You may reach him at jordankushnerdlapipercom

1 Mayo Collab Svcs v Prometheus Labs Inc Case No 1150 566 US ___ (2012) slip op (Mar 20 2012)

2 At the time this article was sent for publication briefs had not yet been filed in the Myriad remand Oral argument before the Federal Circuit is currently scheduled for July 20 2012 To follow the case go to the Federal Circuit website (wwwcafcuscourtsgov) and search using the appeal number 2010-1406

THE WORLDrsquoS DATA PROTECTION LAWS NEW DLA PIPER HANDBOOK

The first edition of Data Protection Laws

of the World DLA Piperrsquos 20112012

Handbook is now available

The Handbook offers a high-level

snapshot of national data protection laws

as they currently stand in 58 jurisdictions

across the world It provides a quick

overview of data protection law often of

great practical significance to businesses

International data transfer restrictions

security obligations and breach

notification requirements are among

the topics covered

The Handbook also features a section

on enforcement ndash always an important

consideration in assessing regulatory risk

in any jurisdiction

Access your complimentary digital copy at

wwwdlapipercomworlddataprotection

March 2012

Data Protection Laws of the worLD

wwwdlapipercomip_global | 09

were insufficient to constitute a patentable application of that natural law finding the ldquoadministrationrdquo step simply refers to the ldquorelevant audiencerdquo The ldquodeterminingrdquo step the Court said involves nothing more than ldquowell-understood routine conventionalrdquo activities The Court also reasoned that public policy weighed against granting patents for such subject matter because laws of nature are ldquothe basic tools of scientific and technological workrdquo and patents for such laws would ldquoinhibit future innovationrdquo

On remand the parties in Myriad will have diametric views regarding the applicability of Prometheus AMP will interpret Prometheus broadly to mean all biotechnology claims are patentable only if there are differences between the claimed subject matter and underlying natural laws or phenomena that are not ldquowell-understood routine or conventionalrdquo Regarding Myriadrsquos composition claims AMP will likely argue that even if the claimed isolated genes are ldquomarkedly differentrdquo from naturally occurring genes the act of isolating those genes is routine Myriad in contrast will likely argue that Prometheus is inapplicable to its product claims because Prometheus involved only method claims and that application of the ldquomarkedly differentrdquo test confirms the patentability of those claims Myriad will also likely argue that even if Prometheus governs the patentability of its product claims isolation of the BRCA gene would have been impossible without the work that led to the identification of the gene sequence and its association with breast cancer ndash work which was not routine or conventional

Regarding Myriadrsquos drug screening method claim AMP will likely argue that the claim is analogous to the therapeutic claims at issue in Prometheus because the steps the Federal Circuit found to be transformative are well-established lab techniques Myriad will likely argue that those steps are not routine because the growth of cells transformed with a BRCA gene required the unconventional work that led to the first identification of the gene sequence To inoculate its claims from the policy

considerations in Prometheus Myriad will likely argue that its patent claims have not been obstacles to further research on the claimed genes

The Federal Circuitrsquos decision in Myriad (and any subsequent Supreme Court decision) will have a significant impact on patents covering biologic inventions Parties seeking to invalidate patent claims to such inventions may be able to argue they are non-patentable under the standards set forth in Prometheus and Myriad

These challenges will have an even greater impact in light of the Biologics Price Competition and Innovation Act of 2009 which is likely to dramatically increase patent litigation involving biosimilars and bioidenticals and may facilitate regulatory approval and market entry of competitive products and methods

Companies seeking to protect the markets for their biologic inventions may be forced to explore new strategies ndash most likely emphasizing in their patent claims the human manipulation and intervention that led to the inventions to adequately distinguish those inventions from products and laws of nature

The best strategies for protecting biologic inventions will depend greatly on a series of events the Federal Circuitrsquos Myriad remand decision2 any subsequent Supreme Court opinion and the way the Federal Circuit and district courts apply those decisions in the next few years

Siegmund Gutman a patent litigation partner based in Los Angeles has an advanced technical background in biology and chemistry and has been trial counsel in several noteworthy biologics patent litigations as well as in numerous Hatch-Waxman litigations Reach him at siegmundgutmandlapipercom

Based in Los Angeles associate Jordan Kushner focuses on patent litigation You may reach him at jordankushnerdlapipercom

1 Mayo Collab Svcs v Prometheus Labs Inc Case No 1150 566 US ___ (2012) slip op (Mar 20 2012)

2 At the time this article was sent for publication briefs had not yet been filed in the Myriad remand Oral argument before the Federal Circuit is currently scheduled for July 20 2012 To follow the case go to the Federal Circuit website (wwwcafcuscourtsgov) and search using the appeal number 2010-1406

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March 2012

Data Protection Laws of the worLD

AN INTERVIEW WITH THE HONORABLE

As the Federal Circuit heads into an era of transition marked by many new court members Judge Arthur J Gajarsa sat down with his former clerk DLA Piper associate Aaron Fountain to share his observations on the court and its interaction with Congress the Supreme Court and its practitioners Their wide-ranging conversation touched on topics from the courtrsquos role in a uniform patent law and pro bono work to fine Italian spirits

IPT What are some of the most important lessons you learned when you began your career as a judge

Gajarsa When I first came to the Federal Circuit I tried to resolve some of the issues I had identified in private practice as correctable by the court But I quickly determined that I could not correct every particular issue that I had thought was incorrect It takes time We have to decide the cases presented to us based on the facts and the law Thatrsquos how the common law is built ndash one case at a time If we try to move too quickly on particular issues we tend to create an imbalance that will probably need to be recalibrated later

IPT What are some of the most important lessons you have learned during your time on the bench

Gajarsa The lessons Irsquove learned from the bench are a continuation of lessons I learned as a practicing lawyer As an advocate you must be a strong representative of your clientrsquos position but you also have to be civil As a judge you have to be civil to the attorneys who appear before you and you have to respect that they are representing their clients to the best of their abilities Wearing a black robe does not make a person any different from a person who appears before the court Wersquore all officers of the court and we should act as such

IPT How have practitionersrsquo views of the Federal Circuit changed over the years

Gajarsa I believe they see a court more willing to systematize and rationalize the decisions that have been made in the past I believe they also see a court that will author decisions that will at least establish issues for the Supreme Court to review even if the Supreme Court might not particularly like or particularly agree with those decisions

ARTHUR J GAJARSA SENIOR JUDGE OF THE US COURT OF APPEALS FOR THE FEDERAL CIRCUIT

IPT Do you have any advice for identifying and presenting issues the court might be willing to rationalize en banc

Gajarsa Well there are a number of things to consider Conflicting panel opinions are published over a number of years The resolutions of conflicts are issues I think the court addresses once itrsquos confronted with the right case For instance Cybor1 issued back in 1998 deals with the matter of having the district courtrsquos judgment reviewed de novo for matters of claim interpretation Some people consider those matters to be factual determinations If in fact theyrsquore factual determinations then they should be decided by a jury and the district court and not by the court of appeals But we have taken the position that claim construction is a legal determination to be reviewed de novo Is that the correct approach I think eventually this court will revisit Cybor but in order to do it you need the right vehicle

IPT Have you observed any impact on the work of the court due to members retiring or taking senior status and new members being appointed

Gajarsa A number of us have taken the option of senior status because we believe the court should have some new blood We have four new judges which is the most change this court has had in years We now have a different court because the judgesrsquo backgrounds are different

The practice before the court has changed as well More lawyers are arguing patent cases who are not considered patent lawyers as such and they do a thoughtful and masterful job in presenting those cases So the specialization that was observed before is no longer present to the same degree

IPT Do you think itrsquos beneficial to have this moving away from a specialized focus on the subject matter of patent law

Gajarsa Personally I think itrsquos beneficial because you bring different perspectives on the issues I believe that once yoursquove tried several cases whether theyrsquore criminal law cases civil law cases water rights cases or even patent cases there is a certain degree of commonality in trying a case that runs throughout the presentation The appellate work even in the patent law shares this commonality

IPT Do you think the Federal Circuitrsquos limited subject matter jurisdiction affects its cognizance of those issues needing to be addressed en banc

Gajarsa Actually I think the Federal Circuit has a very broad jurisdiction Many people donrsquot understand that wersquore not just a patent court Right now patent cases are about thirty-five to forty percent of our total The balance consists of claims against the federal government appeals from the Merit Systems Protection Board and the Court of Appeals for Veterans Claims

IPT What would you like to say to an audience of intellectual property and technology practitioners on the subject of veterans cases

Gajarsa As lawyers you are officers of the court and you have an obligation to represent anyone who has a valid and reasonable appeal to be heard before the Federal Circuit Irsquove always advocated that individual lawyers who appear before this court should take the opportunity to represent veterans before this court pro bono giving them the experience of appearing before the Federal Circuit The attorneys should also take the opportunity to prepare and appear in cases before the CAVC because thatrsquos where the record is made

IPT One last question do you have any tips for selecting a nice grappa

Gajarsa I think you need a grappa that is aged for a minimum of 10 to 12 years in oak or cherry barrels

Please read our full interview with Judge Gajarsa at wwwdlapipercomthe-honorable-arthur-gajarsa

1 Cyber Corp v FAS Techs Inc 138 F3d 1448 (Fed Cir 1998) (en banc)

wwwdlapipercomip_global | 11

STRATEGIC FACT

The 20-year average contested win rate for patentees nationwide is 253 percent However the rates vary widely by court Below are the average patentee win rates in last yearrsquos most popular US districts for patent cases

423402372276256223217214186156

Eastern District of Texas

District of Delaware

District of New Jersey

District of Minnesota

District of Massachusetts

Northern District of Illinois

Southern District of New York

Central District of California

Northern District of California

Southern District of California

Contested win rate does not include consent and default judgments Rates are based on the period from 1991 ndash 2011

Source LegalMetric (used with permission)

20-YEAR AVERAGE PATENTEE WIN RATES

IPT Do you have any advice for identifying and presenting issues the court might be willing to rationalize en banc

Gajarsa Well there are a number of things to consider Conflicting panel opinions are published over a number of years The resolutions of conflicts are issues I think the court addresses once itrsquos confronted with the right case For instance Cybor1 issued back in 1998 deals with the matter of having the district courtrsquos judgment reviewed de novo for matters of claim interpretation Some people consider those matters to be factual determinations If in fact theyrsquore factual determinations then they should be decided by a jury and the district court and not by the court of appeals But we have taken the position that claim construction is a legal determination to be reviewed de novo Is that the correct approach I think eventually this court will revisit Cybor but in order to do it you need the right vehicle

IPT Have you observed any impact on the work of the court due to members retiring or taking senior status and new members being appointed

Gajarsa A number of us have taken the option of senior status because we believe the court should have some new blood We have four new judges which is the most change this court has had in years We now have a different court because the judgesrsquo backgrounds are different

The practice before the court has changed as well More lawyers are arguing patent cases who are not considered patent lawyers as such and they do a thoughtful and masterful job in presenting those cases So the specialization that was observed before is no longer present to the same degree

IPT Do you think itrsquos beneficial to have this moving away from a specialized focus on the subject matter of patent law

Gajarsa Personally I think itrsquos beneficial because you bring different perspectives on the issues I believe that once yoursquove tried several cases whether theyrsquore criminal law cases civil law cases water rights cases or even patent cases there is a certain degree of commonality in trying a case that runs throughout the presentation The appellate work even in the patent law shares this commonality

IPT Do you think the Federal Circuitrsquos limited subject matter jurisdiction affects its cognizance of those issues needing to be addressed en banc

Gajarsa Actually I think the Federal Circuit has a very broad jurisdiction Many people donrsquot understand that wersquore not just a patent court Right now patent cases are about thirty-five to forty percent of our total The balance consists of claims against the federal government appeals from the Merit Systems Protection Board and the Court of Appeals for Veterans Claims

IPT What would you like to say to an audience of intellectual property and technology practitioners on the subject of veterans cases

Gajarsa As lawyers you are officers of the court and you have an obligation to represent anyone who has a valid and reasonable appeal to be heard before the Federal Circuit Irsquove always advocated that individual lawyers who appear before this court should take the opportunity to represent veterans before this court pro bono giving them the experience of appearing before the Federal Circuit The attorneys should also take the opportunity to prepare and appear in cases before the CAVC because thatrsquos where the record is made

IPT One last question do you have any tips for selecting a nice grappa

Gajarsa I think you need a grappa that is aged for a minimum of 10 to 12 years in oak or cherry barrels

Please read our full interview with Judge Gajarsa at wwwdlapipercomthe-honorable-arthur-gajarsa

1 Cyber Corp v FAS Techs Inc 138 F3d 1448 (Fed Cir 1998) (en banc)

wwwdlapipercomip_global | 11

STRATEGIC FACT

The 20-year average contested win rate for patentees nationwide is 253 percent However the rates vary widely by court Below are the average patentee win rates in last yearrsquos most popular US districts for patent cases

423402372276256223217214186156

Eastern District of Texas

District of Delaware

District of New Jersey

District of Minnesota

District of Massachusetts

Northern District of Illinois

Southern District of New York

Central District of California

Northern District of California

Southern District of California

Contested win rate does not include consent and default judgments Rates are based on the period from 1991 ndash 2011

Source LegalMetric (used with permission)

20-YEAR AVERAGE PATENTEE WIN RATES

COVERING IP AROUND THE WORLD

Your business doesnrsquot stop at the border and neither do we To keep you up to date on the latest legal developments wherever you do business the award-winning Intellectual Property

and Technology News is now published in unique fresh editions in Asia Pacific and EMEA Find all current and past issues of the IPT News here wwwdlapipercomipt_news

When it matters to our clients it matters to us

wwwdlapipercomemsp |emsp DLAemspPiperemspLLPemsp(US)