Recounting a talk he gave in Brazil inwhich an audience memberclaimed that the patent system no

longer works, Judge Randall Rader of theCourt of Appeals for the Federal Circuit yes-terday dubbed such patent creatures“Skeptisauri,” whoseunderstanding of IPis “outdated.”

Rader deliveredhis lively address to aroom filled to capac-ity at yesterday’sluncheon talk, titled“Trolls and OtherCreatures of theNight!”

He said that so-called Skeptisauritend to misunder-

stand the patent system as “an exclusive, lim-iting legal doctrine,” but that this view is out-dated, since the time has long since passedwhen any one entity can monopolize a par-ticular technology. “Everyone is informednow and inventing,” said Rader.

While theSkeptisaurus of hisstory argued that thepatent system isdamaging anddestructive tonations withoutadvanced economiessuch as Brazil, Radercountered that “theone hope for Brazil isIP.”

Encouraging an

SATURDAY EDITION

DAILYREPORT

PUBLISHED BY

AIPLAmanagingip.com AIPLA ANNUAL MEETING, WASHINGTON DC, SATURDAY OCTOBER 17 2009

Alan Kasper revealshis Presidential prioritiesProfile: Page 8

Judge T. John Wardon how a clockchanged patent litigation Profile Page 10

Trademark owners have just overone month left to make their voic-es heard in the debate over

ICANN’s plans for new generic top leveldomains, speakers warned yesterday.

“We have to make sure ICANN’s feet areheld to the fire,” said Marc-AnthonySignorino, Director, Technology Policy forthe National Association of Manufacturers.

Signorino said that he started trying tolobby ICANN to ensure trademark rightsare protected when the new gTLDs areintroduced, but that attending meetings ofthe organization was difficult at first. “It’sreally like going to a Star Trek convention –everyone there speaks Klingon,” he said.

In 2008 ICANN’s Board agreed to allowan unlimited number of entities to apply tooperate gTLDs as part of its mission to pro-mote choice on the internet. But trademarkowners are concerned that the latest draftapplicant guidebook for new generic top-level domains does not do enough to protectIP rights.

Earlier this year ICANN appointed anImplementation Recommendation Team

(IRT) to suggest measures to protect IPrights. However, most of these were notincluded in the third draft, which was pub-lished earlier this month.

In particular, the draft does not include aglobally protected marks list. Margie Milam,senior policy counselor for ICANN, said thiswas not included “based on reaction to theIRT proposal and public commentreceived.” She added that other proposalsnow open for public comment include intro-ducing a trademark clearinghouse – a data-base of centralized trademark rights thatcould be used for the sunrise stages of newgTLDs.

Other IRT proposals include a rapid ver-sion of the UDRP process for domainnames that are clearly registered in badfaith. Jeffrey Neuman, director of law andpolicy for Neustar and a member of theIRT, said that the rapid process, which isonly optional under the latest draft, needsto be made compulsory for all registries:“Brand owners think this is one of the mostcritical items.”

Neuman also said he was disappointed

that ICANN has removed itself from thePost-Delegation Dispute Resolution Policy,which is intended to deal with bad-faith reg-istry operators. Trademark owners will nowhave to pay to have these disputes dealt withby a third party. “ICANN has some explain-ing to do as to why they have amended thisproposal,” he said.

All the speakers encouraged the atten-dees to comment on the latest proposals

before the deadline of November 22. “It’snot a done deal – you still have an opportu-nity to make your voice heard so pleasemake those comments,” said Neumann.After receiving the comments, ICANN isexpected to publish a final guidebook forapplicants next February. However, thattimetable could slip.

Earlier in yesterday’s session TimBourne, a partner of Ridout and Maybee,looked at the international nature of trade-mark and domain name disputes. He saidthat people registering domain names oftenuse proxy servers, which make it difficult todiscover information about the domainowner and “put the complainant at a disad-vantage” in any dispute.

Bourne also drew attention to the largesums that cybersquatters and speculators aremaking out of the system at present. He usedthe example of Steven McDonald whobought the domain name qsd.com for $620and then sold it a few weeks later for$12,000. In total McDonald made $325,000from trading in domains in 2008. He was stillin High School.

Why brand owners need to learn Klingon

■ October 4 2009: Third draft ofapplicant guidebook published■ October 25-30 2009: ICANNMeeting in Seoul, Korea■ November 22 2009: Deadline forsubmissions■ February 2010: Final applicantguidebook and application form dueto be published■ Spring 2010: First applicationsexpected■ 2011: First batch of new gTLDscould go live

Towards new gTLDs

Beware theSkeptisaurus

Continued on page 2Judge Randall Rader

Last night's after-dinner entertainment includeda tribute to Frank Sinatra by NYC Swing

“W e don’t care so muchwhy they’re doing it, wecare what effect it’s hav-

ing,” said US District Judge KathleenMcDonald O’Malley of the SupremeCourt’s recent interest in taking patentcases. Judge O’Malley spoke yesterdayduring a session on what lies ahead for theSupreme Court’s take on Federal Circuitdecisions, and what the impact will be onpractitioners.

Since 2006, the Supreme Court hasreversed the Federal Circuit’s holding onsubstantive issues in cases such as eBay vMercExchange, MedImmune v Genentech,KSR International v Teleflex, Microsoft vAT&T and Quanta v LG.

Federal Circuit Chief Judge Paul Michelsaid, while he has no evidence, his theory isthat the increase might be due to the influ-ence of a combination of four differentstreams of thought: 1) the Federal TradeCommission’s 2003 report on the properbalance of IP and competition; 2) theNational Academy of Science’s 2003 reporton the patent system; 3) the Congressionalhearings on patent reform since 2005; and4) the Wall Street Journal.

Seth Waxman of WilmerHale, formerSolicitor General of the United States, saidthat, while “it’s very easy to overstate theinterest of the Supreme Court in the Federal

Circuit, to the extent it is going on, it reflectsthe fact that virtually the only thing we makein this country is IP.”

Waxman said that the IP bar’s concernover the ambiguities left by High Court deci-sions on patent cases was valid: “You havevery generalist judges writing IP opinions ata very high level.” However, he said that theaddition of judges with experience in tryingIP cases, such as Justice Sonya Sotamayor,“is going to help.”

Chief Judge Michel predicted that theSupreme Court will continue to take morepatent cases, which he said is not necessari-ly a bad thing. “Everyone needs a reviewer,”he said.

However, Michel also pointed out that,while the Supreme Court judges have heardabout a total of 16 patent cases in their careers,he has participated in 1,600: “There ought tobe some comparative advantage.”

The tale of the Hungry Look BowlingBall vexed attendees at yesterday’sdesign protection and functionality

session. The Ball – a black bowling ball withthree standard finger holes and a shallowrecess looking like the outline of a face – illus-trates the problems that arise when objects cangive rise to different forms of IP protection.

In this hypothetical example, the broadidea of a bowling ball with a decorative face isprotected by a utility patent, owned by a thirdparty, which expires next year. This patentclaims a face painted on the outer surface of abowling ball, saying the painted face serves thepurpose of increasing sales.

When a duplicate bowling ball appears onthe market, the seller is sued for trade dressinfringement, as the company marketing theoriginal ball argues that it consists of productpackaging trade dress and the painted face isnon-functional: many faces are available, buttheirs is the best looking.

The designer of the ball appliesfor a rocket docket design patent(citing the utility patent as priorart) and an expedited copyrightregistration. Once they are issued,the designer amends the complaintto allege design patent infringe-ment and copyright infringement.The defendant replies:“Functional.” How do you rule?

“It depends on how big or small, or in otherwords how prominent, the face is,” said pan-elist Perry Saidman, of Saidman DesignLawGroup (pictured). He added that the entireclaimed design has to be taken into accountwhen assessing the case: “If it’s mainly de jurefunctional, you have a shot of getting it invali-dated.”

Robert E. Browne, of Neal Gerber &Eisenberg, agreed that “it’s a very difficultcase.” From a copyright perspective, he said:“you could flip a coin” adding: “You can evokeemotion and still be entitled to copyright pro-tection.”

Kenneth B. Germain of Greenebaum Doll& McDonald addressed the problem from atrade dress perspective and said it would beconsidered in the light of the Supreme Court’sWal-Mart decision: “Maybe they can haveproduct configuration trade dress. But don’tbet on it.”

The discussion came aftereach speaker had presented onissues including functionalityand design patent infringement,separability – the copyright per-spective, and trade dress. It pre-ceded a committee educationalsession on current issues indesign law, which featuredspeakers from the ITC, OHIMand USPTO.

optimist’s view, Rader said that the system“is a grand, international invitation to coop-erate and coordinate your technology withthe world.”

He also said that the pejorative but pop-ular term, “patent troll,” which is oftenused to describe entities who own patentssolely for the purpose of asserting them, is“terminology of the Skeptisaur.” “Almostevery IP owner has patents it doesn’t prac-tice,” said Rader. “That term would alsocast away universities and research institu-tions, who are some of our most importantcontributors.”

Instead, Rader defined a troll as “anyone– from IBM and Microsoft down to thesmallest patent owner – who asserts a patentfar beyond its value.”

The answer to this problem, said Rader, isto find a way of properly valuing IP early inthe litigation process, so that the value of aparticular patent cannot be too grossly inflat-ed. “Maybe we can short circuit the trollproblem by assigning proper value topatents,” said the Judge.

2 NEWS SATURDAY, 17 OCTOBER 2009 AIPLA DAILY REPORT

Panelists bowled over bydesign debate

Judges ponder SupremeCourt practice

YOUR VIEWS

R. Whitney WinstonSteptoe & Johnson Washington D.C.I think he went a little far there – a troll is some-one who is an NPE. The problem is that the cost

of litigation is so high that people need to settle for less thanthat cost. It is a nuisance settlement.

Pamela SherridIPO’s IP Chat ChannelNew York, New YorkI think the Cornell v HP case is important. There wasa huge damages assessment which was then cut

back by Judge Rader. There is a general problem that nobodyknows what anything’s worth. If you could have accurate patentvaluation it would be good for the system.

Keith CallinanMarks & Clerk SingaporeIt’s an interesting definition – I’m not certain Iagree 100% but it’s a refreshing change. I agree

with him about NPEs not being a good thing, but if the defini-tion is about asserting a patent far beyond its value then what’sthe value – how do you calculate that?

George ChanRouseBeijing, ChinaRader has an appreciation of IP as a system in whichpatents have a specific function, and when the value

of a patent is artificially inflated he sees this as bad. Generallyspeaking, practitioners consider trolls to be deriving economicvalue without contributing to the body of knowledge.

Bruce SunsteinSunstein Kann Murphy & TimbersBoston, MassachusettsI think a troll is anyone who is suing my company!A troll is a pejorative term which is used to say

that there is trouble in the patent system. I think even that is amade up target – in my view the patent system works.

Maria EliseevaHouston EliseevaLexington, MassachusettsI agree with him on the issue of valuation, which ingeneral is tremendously important and hasn’t been

solved yet. I don’t think anyone really knows how to do it. Iwouldn’t use such a broad definition – I don’t think I representany trolls, but in some sense I think he has a good point.

Do you agree with Judge Randall Rader’s definition of a patent troll as anyone who asserts apatent far beyond its value?

Continued from page 1

Patent and trademark practitioners joined a USPTO Judge, the Director of the Office of Patent Legal Administration and in-housecounsel yesterday to share tips on how to communicate effectively with USPTO examiners to expedite the prosecution process

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Representatives of the FederalTrade Commission (FTC) andthe Department of Justice (DOJ)

on Thursday questioned the concept ofsettlement agreements between genericand brand drug companies, claiming thatthey eliminate the ability to evaluate thepatent validity of a potentially importantdrug. “Ironically, this should be troublingto patent lawyers too,” said Will Tom,General Counsel of the FTC. He addedthat such agreements “also encourage friv-olous challenges to strong patents.”

Tom spoke during a joint meeting ofthe Antitrust Law and BiotechnologyCommittees, where he was joined by hiscolleague, Suzanne Michel, Bureau ofCompetition Assistant Director for Policyand Coordination at the FTC and PhilipWeiser, Justice Department AntitrustDivision’s Deputy Assistant AttorneyGeneral.

On Thursday, the Senate JudiciaryCommittee approved the Preserve Accessto Affordable Generics Act, which wouldpotentially ban such settlements. FTCChairman Jon Leibowitz said in a state-ment that the Committee’s passage “rec-ognizes the very real danger that thesesweetheart deals pose to Americans strug-gling to pay their medical bills.” He esti-mated that such so-called pay-to-delay set-tlements cost consumers about $3.5 bil-lion a year.

However, Ken Frankel, Chair of theAntitrust Law Committee and moderatorof Thursday’s panel, said that passing leg-islation would be “the wrong way to go.”“This is complex stuff,” said Frankel, who

claimed that the courts should decide theissue.

Michel told AIPLA members that theFTC’s series of hearings on the “EvolvingIP Marketplace,” which began last year,identified two major trends: 1) increasedtechnology transfer; and 2) a proliferationof patents used exclusively for transferringrights (i.e. patent holding companies).

In the second scenario, Michel said,“none of that is increasing innovation orhelping consumer welfare. It’s not the way

the system is supposed to work.” Michelpondered how to attack the problem with-out harming the increasingly valuabletechnology transfer industry.

“The Evolving IP Marketplace” serieshas now wrapped up, but the Commissionwill publish a report summarizing its con-clusions and recommendations on suchissues sometime in the coming months.“There’s a lot of value in talking to oneanother; we need your engagement,” saidWeiser.

4 NEWS SATURDAY, 17 OCTOBER 2009 AIPLA DAILY REPORT

FTC and Senate back reverse payment ban

Women at thetop of theirprofession

yesterday discussed thechallenges they have hadto overcome on theirjourneys to secure posi-tions of power in IP at ajoint breakfast meeting ofthe Corporate Practiceand Women in IP Law Committees.

The panel also discussed “firsts”: Georgann Grunebach of Fox Groupwas the first woman to be hired as a patent lawyer at Westinghouse in thecompany’s history, while Meg Boulware of Baker & McKenzie was thefirst female registered patent attorney in Texas. This led to obstacles such

as balancing work andfamily in a male-dominat-ed corporate world. “WhatI had to go through in the1970s and 1980s to get mykids in daycare was a dis-grace,” said Mary-EllenDevlin of BoehringerIngelheim Corp.

While speakers agreedthat the playing field has leveled somewhat, particularly since the econ-omy has forced companies to look hard at who is most valuable to them,they said that there is still a need to mentor women who are just startingout. In particular, the panelists encouraged young attorneys to becomeinvolved in local bar associations and organizations like AIPLA.

Successful women share their secrets

“This should be troublingto patent lawyers too”

“We are going to see far fewertrademark cases withclaims or counterclaims of

fraud,” said Susan Hightower, a senior asso-ciate of Pirkey Barber, in a session on fraud-ulent procurement of copyrights, trade-marks and patents yesterday.

Hightower helped to draft AIPLA’s ami-cus brief in the breakthrough In re Bose rulingof the Federal Circuit in August this year.The case was an appeal of the TTAB’s 2007decision to cancel Bose’s Wave mark

because the company had stopped using themark for all of the goods specified in itstrademark renewal application.

Many trademark practitioners had criti-cized the Board’s criteria for establishingfraud since its 2003 decision in Medinol vNeuro Vasx, which the Federal Circuit rulingoverturned.

Hightower added that the TTAB hasalready issued its first precedential opiniondenying a motion for summary judgment onthe ground of fraud.

Linda McLeod of Finnegan, who alsohelped draft AIPLA’s amicus brief, told theAIPLA Daily Report that the Board’sOctober ruling in Enbridge Inc v ExcelerateEnergy Ltd Partnership “signals the end of theTTAB’s strict rule of fraud under Medinoland underscores that post-Bose, a claim offraud must be proven by the rigorous clearand convincing standard.”

At the session, Hightower said that uncer-tainty over the definition of fraud remained.In particular, the Federal Circuit did not con-

sider the element of fraud defined in AIPLA’sbrief as “intent to deceive or, at least, a stateof mind so reckless as to the consequencesthat it is held to be the equivalent of intent.”

“It’s really anybody’s guess when a case onrecklessness will come up before the TTAB orthe Federal Circuit,” she added. Overall, shesaid that lawyers should still apply the samestandards for good faith and duty of candorthey used before the Bose decision: “The bot-tom line is: keep doing what you’re doing interms of being careful with applications.”

Professor F. Scott Kieff of GeorgeWashington University Law Schoolgave a thought-provoking speech yes-

terday on patent reform, arguing that reform-ers should look to history for inspiration.“Patents are not all about incentives to invent,”he told a packed room. “They are about gettinginventions put to use and facilitating transac-tions. Patents help people interact with eachother; they are not just about new technologiesbut also new business models.”

In a talk spanning patent and antitrust law,Kieff criticized conventional wisdom aboutpatent reform, such as the need for flexibilityand the call for post-grant oppositions, as wellas recent Supreme Court cases such asMedImmune and Quanta. “Quanta says the saleof a slice of bread means you have transferredthe whole loaf. If you have to sell whole loaves,that is more expensive and interferes with deal-making,” he said. “Changes are well motivatedbut they are the wrong changes.”

The effect of recent developments, headded, is that settlement negotiations arebased primarily on the cost of fighting, ratherthan the real business or the technology: “Inmediation, all we’re talking about is the cost oflitigation. That’s not an IP system.” He arguedthat reform should not weaken patents, butlead to more predictable enforcement, encour-age deal-making and add symmetrical mecha-nisms to deal with abusive litigation.

AIPLA DAILY REPORT SATURDAY, 17 OCTOBER 2009 NEWS 5

Bose bodes well for trademark owners

Back to thefuture

What is a patent? What are the different types ofclaims? Why might a patent be invalid? Whatconstitutes infringement and willful infringe-

ment? How are damages defined? Where does the burden ofproof lie in patent cases?

These are just some of the questions that are addressed inthe 77-page National Patent Jury Instructions, published inJune this year and created by a nine-member committeeappointed by Chief Judge Paul Michel of the US Court ofAppeals for the Federal Circuit.

Today, members of that committee will take part in a dis-cussion on the jury instructions and their role in patent trials.The panel comprises Judge Patti B. Saris, Judge T. John Wardand Judge Ronald M. Whyte as well as former JudgeRoderick R. McKelvie and will be moderated by Edward R.Reines, who chaired the jury instructions committee.

“We were tasked with coming up with jury instructionsthat would be national in scope and also bring a judicial per-spective,” says Reines. He adds that, while there are manygood regional or district jury instructions, it can be difficultfor judges to choose to follow one rather than another:“Who’s to say that instructions from Iowa should be pre-ferred to those from California?”

The national jury instructions are therefore an attemptto draw up a model set of guidelines that can be used incourts throughout the country. They took more than a yearto put together, and involved “prodigious outreach to the

community” through IP associations and the blogosphere,says Reines.

One valuable element in the process was the involvementof judges on the committee , he adds: “Judges have to readthe instructions. They also try more cases than most triallawyers and have to debrief the juries afterward’s.” Heexplains that the instructions have also not attempted tocover in too much depth issues such as damages and obvious-

ness, where the law is in flux, but have emphasised simplicityand accessibility. “They’re not as comprehensive as mostlawyer-written sets of jury instructions,” he says.

Still, with 65 pages of instructions and two appendices, theinstructions are certainly thorough. There are also footnotesoffering different approaches, where judges can select what-ever is most appropriate in their case.

Reines says today’s panel will not focus just on the juryinstructions as such, but will also look at how they can beused and adapted in practice: “In the panel we will attempt tocover the thoughts that these experienced and respectedjudges have on the jury instruction process generally, and inparticular how they see juries relating with judges.”

Despite the challenges of educating juries in complex lawand technology, he adds that – properly instructed – theyare an excellent way of “resolving real-world issues withcommon sense.” He says that, at some level, most legalcases are a “morality play” and the jury is tasked with decid-ing what is right and wrong in society. The new jury instruc-tions should help to ensure that determination is informedand consistent.

There is a small shadow hanging over the role of juries,however, thanks to a case pending before the US SupremeCourt. In a dispute with Kinetic Concepts, medical devicecompany Medela has asked the court to rule on whether anaccused infringer has a right to ask a judge, rather than a jury,to determine whether a patent is obvious. The Court willdecide whether to hear the case next month, and Reines(who has filed an amicus brief on behalf of a number of tech-nology companies) says that, if it does so, the role of juries inpatent cases could be transformed.

6 PREVIEW: JURY INSTRUCTIONS SATURDAY, 17 OCTOBER 2009 AIPLA DAILY REPORT

James Nurton previews today’s panel in which four current and formerjudges will discuss the recently published national jury instructions

Judges to discuss role of juries

“If you’re not scared yet, that’s my job”said Bradley Forrest of SchwegmanLundberg Woessner (pictured) dur-

ing Thursday’s morning session,Understanding USPTO Restrictions andExport Licenses. Forrest and other panelistsoutlined the complexities of filing patent appli-cations in a global world, including how to han-dle inventions conceived by multiple inventorsfrom different countries; differing laws on com-pany remuneration for employee inventions;and USPTO restrictions on exporting informa-tion about US inventions to other countries.

Panelist Joel Miller reminded attendeesof the USPTO memo circulated last Julywarning patent applicants that a foreign fil-

ing license only allows for the export ofinformation for filing foreign patents. Ifinformation is being sent to a foreign entityfor the purpose of preparing a US patentapplication, applicants must comply withauthorities such as the International Trafficin Arms Regulations (ITAR) and the ExportAdministration Regulations (EAR).

Antoinette Paytas of Thomson & Burkeexplained that these rules stem from the factthat “the world is a dangerous place.”However, they can greatly complicate life forinventors and patent attorneys working in aworld where inventions are often created ina multinational context.

Valentina Boyet of SAP advised appli-

cants to carefully studythe laws of each countryin which they plan to fileand to make sure they arein compliance, as failureto do so can have direconsequences. For exam-ple, in the US, applicantscan approach theUSPTO directly if theyhave forgotten to requesta foreign filing licensewithout fear of major penalties. However, inIndia “you must simply withdraw the appli-cation as soon as possible before the inven-tor goes to jail,” said Boyet.

The panel also dis-cussed differences inremuneration require-ments for inventions creat-ed by an employee of acompany. Boyet said that,while some countries donot have remunerationrequirements, the decisionnot to compensate oneinventor in a multinationalgroup could negatively

impact employee morale and team work. “Understanding and knowing how to

deal with cross-border patenting issues is avery important skill,” said Boyet.

Know your foreign filing facts

Judge Ronald M. Whyte Judge Patti B. Saris

Judge T. John Ward Roderick R. McKelvie

For an IP association which has “American,” as thefirst word of its name, the AIPLA is anything butinsular. In a world of cross-border transactions and

international treaties, the Association is, more than everbefore, as likely to focus on reform of WIPO as on changes atthe USPTO. Under the leadership of Alan Kasper, theAIPLA’s president-elect, that trend is only going to continue.

Kasper, a partner with Sughrue Mion, began his career asan examiner at the USPTO, before working as an attorneyand later as the chief patent counsel for CommunicationsSatellite Corporation (COMSAT). The company providedservices for Intelsat, an international satellite organization.After a move into private practice, Kasper headed to Japan in1990 to lead Sughrue’s Tokyo office, where he was the resi-dent partner for four years.

“I think my career path highlights my interest in all thingsinternational,” says Kasper. “And I’m sure it was this back-ground that led the AIPLA to consider selecting me to jointhe leadership ladder.”

AIPLA leadership commits to a five-year program that seesthe President, immediate past-President and three futurePresidents work closely to ensure continuity in the way that theAssociation’s plans are implemented. Part of its current StrategicPlan is to extend the reach of the Association, both professional-ly and internationally. Earlier this year, for example, the Board ofDirectors backed a proposal to amend the Association’s by-lawsto allow patent attorneys, as well as attorneys-at-law from othercountries to become members. But it is on the international IPstage that the organization wants to have a bigger impact.

“The challenges that we as an IP organization and a pro-fession face are global challenges and it is essential that theAIPLA gets more involved in meeting those challenges,” saysKasper.

To help it do that, the Association is setting up a series of

committees to monitor and engage in international debateson IP. It recently established a special committee on geneticresources, traditional knowledge and folklore that will startwork later this year, for example. “That’s a topic that hasgreat international significance,” says Kasper. Thomas T.Moga of Shook, Hardy & Bacon has been tapped to chair thecommittee and pharmaceutical and biotech specialistDeAnn F. Smith of Foley Hoag will serve as vice-chair. It isexpected that the committee’s members will attend some ofthe international meetings of organizations such as theWTO and WIPO.

In another example of the AIPLA’s commitment to engag-ing in cross-border debates, the Association is establishing acommittee to liaise with IP attorney associations in othercountries such as the JPAA in Japan and the ACPAA inChina. This committee will be responsible for finding areasof common ground on areas such as cross-border privilegeand WIPO’s plans to reform the PCT, says Kasper. “It’s achallenging opportunity. We’ve done some outreach to oursister organizations and they are very enthusiastic.” TheAIPLA plans to hold a summit next year with representativesof around 15 national organizations to develop a commonvoice in IP advocacy.

Another area where the AIPLA wants to expand itsreach is in the Industry Trilateral – where it works along-side other private sector organizations, namely the JapanIntellectual Property Association, IPO andBusinessEurope, to monitor discussions between EPO,JPO and USPTO. As the Trilateral Offices move to includerepresentatives of the Korean and Chinese patent offices asapplicants from Asian countries grow in both importanceand number, Kasper says the AIPLA wants to strengthenthe role of the Industry Trilateral.

Emma Barraclough interviews Alan Kasper, who takes over as AIPLAPresident this week

Looking forward, looking outwards8 PROFILE: ALAN KASPER SATURDAY, 17 OCTOBER 2009 AIPLA DAILY REPORT

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ProsecutionInfringementLitigationIP

Trademark challenges, from virtualworlds and multimedia playergames to drafting watertight

licenses, avoiding litigation and survivingbankruptcy, were discussed at a session onThursday.

Karen Berry, of Patterson Belknap Webb& Tyler, described how life for trademarkowners has been transformed in the past 10years, with the rise of online activities such as

World of Warcraft, which has 10 millionplayers worldwide, and Second Life, whichhas more than 15 million registered users.These users have generated 18 billion min-utes of voice chat, produce 1250 text mes-sages every second and type 6 million wordsevery day. They are also worth $50 millionevery month.

The scale of these activities means thatbrand owners cannot afford to ignore virtualworlds, said Lara Pitaro of Major LeagueBaseball Alternative Media. She said that“engaging in this space is a little bit foreign

and alien” but added: “The opportunities arenot so different from traditional media.”

For MLB, that includes looking at ways ofreaching fans and customers through licens-ing, subscriptions, advertising, micro-trans-actions and cross promotion. “People aremore and more concerned with the ‘where’every day,” said Pitaro, pointing out that newonline communities represent new opportu-nities. “But you always have to remember toprotect your ‘what’ no matter where you are.”

Already, said Pamela Kilby of Microsoft,virtual worlds have generated complex legalissues, many arising from “rampant trade-mark infringement.” She added: “There arestores all over Second Life where you can buyknock-offs. There are millions of transactionsevery year, so trademark owners ought to bepaying attention to virtual worlds.”

Issues include whether use of a trademarkin a virtual world amounts to use in com-merce, what rights brands created in SecondLife (such as Tringo) will have in the realworld and whether trademark applicationsshould include Second Life in their clear-ance searches when planning new brands.

As well as these, there are questions overterritory, jurisdiction and enforcement aswell as fair use and the First Amendment.Some of these issues have been addressed incases over real estate and intellectual proper-ty, such as those pursued by adult entertain-ment company Eros. In its latest case, filedlast month, Eros filed a class action lawsuit

against Second Life’s owners alleging theyallowed users to sell counterfeit goods inSecond Life.

The outcome of such cases will be closelywatched particularly if, as Berry said, virtual

worlds expand to the extent that they beginto rival the real world: “By 2014, maybethose of us who can’t attend the AIPLAAnnual Meeting in person will be here as ouravatars instead.”

Afew years ago, IP lawyer GaelDiane Tisack was asked to con-duct due diligence on a small

inventor, which had some impressive med-ical device technology. “Everyone agreedthe patents looked great,” she said. But thenTisack, of Terumo Cardiovascular Systems,discovered a problem: “The company had aloan from the state of Pennsylvania, whichhad not been repaid, and the IP was securi-ty. That meant the state of Pennsylvanianow owned the patents.” The deal wascalled off.

Tisack told that horror story in yester-day’s session on agreements, reps andwarranties and negotiating IP aspects. Sheexplained that due diligence must consid-er issues such as whether maintenancefees have been paid and whether allassignments are recorded in the correctnames. “If one inventor isn’t named,you’ve got to chase them down.Otherwise you no longer have exclusiverights to that invention.”

Successful due diligence involves identify-ing all the potential problems in a portfolio,covering not just patents but other IP rights,such as copyright and trade secrets. Fortrademarks, key issues include ownershipand assignments, and whether the markshave been used consistently with the registra-tions and in all countries where registered.Tisack pointed to five rules you can use toassess the due diligence needed (see box)

One of the key issues is assessing free-dom-to-operate. Tisack said another hor-ror story she experienced involved theacquisition of a smaller company, whichswore it had freedom-to-operate opinionsfrom outside patent counsel for its keyproduct, even though it was in a very liti-gious field. “We did a freedom-to-operateopinion and found seven patents that wereprobably infringed, and which we didn’tthink we could invalidate,” said Tisack.The deal didn’t go through. The targetcompany later launched its product, andwas immediately sued on six of the sevenpatents that had been identified.

Deborah Peckham of Brown Levinson,who spoke in the same session, had her ownhorror stories. As an outside counsel, shereported, she was often called by a deallawyer and asked to take a quick look overthe IP representations in the deal within amatter of a few days, or even hours. Thattime only allowed her to say: “Yes, these areIP reps.”

Effective due diligence cannot be limitedin such a way, she added: “Particularly if yourepresent the buyer, the onus is on you tolook beyond the reps. Think creatively aboutother areas you need to protect.”

Peckham stressed the importance of flex-ibility and negotiation, especially in the lightof uncertainty over issues such as thepatentability of business methods given thepending Bilski case. Michael Geoffrey of

Reed Smith agreed, and used examples fromhis work with Chinese companies to showthe importance of cultural considerations.

For her horror stories, Nancy Lutz ofKelley Drye looked to post-closing filings,and highlighted two cases where disputeshad arisen over the marks Rolls-Royce andShamu. “Clarify. Clarify. Clarify. Thereisn’t room for serendipity,” she said.Records should cover the chain of title (ineach jurisdiction), releases, licenses andregistered users as well as security inter-

ests. A recent case in Tennessee, InvisibleFence Inc v Fido’s Fences Inc, involved amark that had been assigned, corrected orhad the name of the owner changed 10times. With businesses changing hands,and creditors assuming rights in the eco-nomic downturn, making sure no stone isunturned is more important than ever.“You want a door closed so tightly it can-not possibly be opened.... There’s no sub-stitute for good due diligence up front,”said Lutz.

AIPLA DAILY REPORT SATURDAY, 17 OCTOBER 2009 NEWS 9

How to survive Second Life

Horror stories show value of due diligence

1) Use an experienced IP specialist.2) Understand why the investor wants the deal.3) Define the scope of review consistent with (i) why the investor believes it is

attractive and (ii) the investor’s risk tolerance.4) “Review” not “do”.5) If the deal is done, make sure the company gets the benefit of review.Source: Stephen Schaefer & Mathias Samuel, “Intellectual Property Due Diligence:Getting the Most for Your Budget,” 2 MedTech Bus Rev 54

Tisack’s five rules for due diligence

When it comes to reviewing trademark licenses, said Richard Raysman of Holland &Knight at Thursday’s session, judges look closely at every clause in the contract: “Amisplaced comma or an omitted word can make a big difference.”

His comments came after Eli Nathanson of Pryor Cashman had provided a guide tohow to write watertight licensing agreements, particularly for extensions or derivativesof existing brands. Raysman said recent high damages awards for companies such asadidas, Verizon and Philip Morris showed how expensive mistakes or oversights can be.

One recent case arose after designer Joseph Abboud assigned rights in his name toa company, JA Apparel, for $65.5 million. Although he signed a non-compete clause,he was found to be preparing to use his name in another venture. The district courtgranted an injunction, but in June the Second Circuit reversed it, ruling that non-trade-mark use of the name was acceptable. In another case, a court upheld Ramada Inn’sright to terminate a franchisee’s agreement for quality control reasons.

Just like landlords and tenants, licensing partners can easily fall out over issuessuch as payments and quality control, said Raysman: “These clauses really need tobe negotiated. Sometimes you have to slow the client down a bit.”

Every word has meaning

Anshe Chung claims to be the firstSecond Life millionaire

“We had a freedom-to-operate opinion andfound seven patents thatwere probably infringed”GAEL DIANE TISACK

L to R: Karen Berry, Lara Pitaro and Pamela Kilby

The modern courtroom has many high-tech acces-sories – laptop computers, flat-screen monitors,touch-screen technology. But go to Judge T. John

Ward’s court in the town of Marshall, in the Eastern Districtof Texas and the most important tool you will see will bebased on a technology that is centuries old: a clock.

Judge Ward, who marks 10 years on the bench this fall,uses the clock to measure litigators’ opening and closingarguments, and it symbolises his disciplined approach to tri-als. “Time limits are on everything,” he says, adding that set-ting deadlines for discovery and imposing restrictions on oralargument is “a great procedure for getting lawyers to use timeefficiently.”

The use of the clock in the courtroom was something helearned from a judge in the Northern District of Texas,Sidney Fitzwater. Ward was well into his 30-year career as alitigator, where he worked mainly as a defense attorney in awide range of cases concerning matters such as product liabil-ity and personal injury, when he appeared in Fitzwater’s strictcourt and was told to keep his arguments within a time limit.“I was just appalled – in more than 25 years I had never hadthat happen.” But it says it taught him an important lesson: “Ithink I used only 60% of the time he gave me.”

Litigators who have appeared in Marshall say Ward’sapproach to patent cases is demanding. He admits he is a“strict” judge, but adds that he is one who is known for “com-mon-sense”: “If the rules are enforced, it’s better for everyonein the process.” His attitude has helped make the EasternDistrict of Texas into one of the nation’s busiest patentforums, in the process transforming the reputation ofMarshall, a town of just 25,000, which was previously bestknown for its Fire Ant Festival held each October, and theWonderland of Lights – one of the largest light festivals in theUnited States.

Eastern District of Texas transformedWard was nominated to the bench on September 27 1999,shortly after his one and only patent trial as a litigator, wherehe represented Hyundai in a dispute with Texas Instruments(TI) that led to a $25 million award against his client. At thetime, the court heard few patent trials – though TI itself sawthe advantages of bringing cases in a quiet but competentcourt on its doorstep. As recently as 2002, only 32 disputeswere started – not a large number compared to the busiestpatent courts in California or Virginia.

However, under Ward’s leadership that position wastransformed over the next five years, and in 2007 some 350cases were brought in the Eastern District of Texas. Wardestimates that he alone wrote 25 patent judgments in thatyear. The district had become one of the most popular juris-dictions to hear high-tech cases in the whole country.Plaintiffs felt that cases were dealt with quickly and efficient-ly, and often resulted in large damages awards: in one of thefirst big cases, in 2006, Tivo won $73 million in a case againstEchostar. Recently, i4i won an award of $290 million from ajudge in Marshall’s sister court in Tyler (a decision subse-quently stayed by the Federal Circuit), while a jury in Ward’sown courtroom awarded Centocor Ortho Biotech and New

York University a record $1.67 billion,finding that Abbott’s drug Humirainfringed their patent.

But there is another side to the story ofthe Eastern District’s success – one thatstarts with big corporations being suedfor infringing what they view as weakpatents, continues with furious debatesover so-called patent trolls, and leads tocalls for Congress to reform the patentlaw to deal with the perceived problemsof patent quality and forum shopping.The finale of this story has yet to be writ-ten, but Ward for one believes change willcome, eventually: “I’ve always thoughtthere will be changes in several areas asproposed, but it is for Congress to decidewhat those changes will be. We will try to enforce whateverthey pass.”

Ward acknowledges that his court has gained attention forwhat appear to be plaintiff-friendly verdicts, but says thetrend can be explained. “The first patent cases tried here wereplaintiffs’ verdicts and that probably started a trend. But, his-torically, Marshall has always been considered plaintiff-friendly, not just in patent cases. It’s also been viewed asunfriendly to corporate defendants.” He says that perceptionmight be attributed to the nature of the juries: “Jurors in thispart of the world believe in personal property rights and theytrust in the government – so they are deferential towardswhat the PTO does. And they’re not going to hesitate todecide wilfullness. But that’s just my guess.”

But he insists that juries are fair and thorough, and ascapable of understanding the legal and technology issues asany judge: “I think they’re close to right most times.” Andthat statement comes from an attorney who spent 30 yearsarguing cases in front of them: “I never had a runaway jury. Igot kicked around some as a defense attorney. I lost myshare of cases – maybe more – but I’d never say there’s nobasis for that.”

In any case, he adds, if you put aside a few celebratedcases, the picture is more balanced than a lot of peopleassume in the Eastern District. “Many times companies areconcerned about the venue where they find themselves butover time defendants have won a lot of cases in many aspectsin this court.” And, this year, with a dozen or so cases decid-ed, he estimates that outcomes are running 50-50: “Therehave been huge verdicts for both plaintiffs and defendants inthe patent area.”

Marshall under scrutinyMarshall’s success in hosting patent litigation, like that ofother district courts before it, has meant that one of its attrac-tions – speed – has suffered. Early on, thanks to his clock andthe implementation of rules for patent cases that Ward sayshe adapted from those of the Northern District of California(“I modified them and shortened some of the timeframes sothey would work for me”), patent cases were being tried in 16to 18 months. Today, patent trials are taking some 26 to 30

months, far longer than those in otherdisciplines. Judge Ward estimates thatpatent work now makes up about 25% to30% of the number of cases, but about75% to 80% of his workload.

The longer timeframe is one reasonwhy the number of patent cases in theEastern District is falling, with fewer than300 expected to be filed this year. But it isnot the only reason. The court was alsocriticised last December by the FederalCircuit in the TS Tech case, where theFederal Circuit said that the trial shouldbe transferred to a more convenient loca-tion, which had more connection to thekey witnesses and physical evidence. Italso said the Eastern District could not

claim there was “a substantial interest” in having the casetried there. Lawyers predicted that the case would have animmediate impact on plaintiffs’ decisions about where to sue,and encourage defendants to file venue transfer requests.

What makes a good patent litigator?The roller-coaster of the past 10 years has given Ward a uniqueperspective on patent trials in the United States. Overall, hesays IP litigators are impressive: “One good thing from ajudge’s perspective is that patent lawyers are always very wellprepared.” He also welcomes the use of technology and visualaids in the courtroom: “People learn from visual teaching aswell as oral. You’ve got to have a story to tell the jury.”

But he says some attorneys could be more focused: “Theyfight over things where they’re wasting their clients’ money.”In particular, he says they should avoid presenting motionsfor summary judgment that are of questionable merit (“that’swasting our time”) and resist over-using challenges to expertwitnesses. He also reminds counsel that “advocacy skills aremore than just reading”: “In Markman hearings, some attor-neys simply read their brief back to you. That’s one of theworst things they can do.”

Although Ward’s own experience as a patent litigatorcomprised just one case, it clearly gave him an appetite forpatent law, which he describes as “intellectually very chal-lenging.” He describes his only case as a litigator, represent-ing Hyundai, as “a real bloodletting” and “a long, hard trial.”He does not have a background in patents (he has a Bachelorof Arts from Texas Tech University and a Bachelor of Lawsfrom Baylor Law School and spent a brief period drafting leg-islation and as an assistant county attorney before going intoprivate practice) but he says: “I have a bathtub brain – some-thing in, something out,” and this has enabled him to handlethe high volume of complex cases in his courtroom over thepast 10 years. Next week, in San Antonio, Ward will be pre-sented with an award as Jurist of the Year by the Texas chap-ter of the American Board of Trial Advocates (ABOTA), inrecognition of his high ethics, fairness and support of theright to trial by jury. In two years’ time he will retire and takesenior status. How would he like to be remembered? “I triedto be fair. That would be my goal,” he says.

10 PROFILE: JUDGE T. JOHN WARD SATURDAY, 17 OCTOBER 2009 AIPLA DAILY REPORT

Judge T. John Ward has become one of the busiest and most controversial judges in the United States, thanks tothe emergence of the Eastern District of Texas as a leading patent forum. In advance of today’s panel on jury instruc-tions, he spoke to James Nurton about clocks, juries and good advocacy

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Patents and the art of time management

7:00–8:30 am Continental Breakfast Exhibit Hall A Exhibition Level

Plenary session 8:00–11:25 am Annual Review & Ethics Marriott Ballroom Salons 2 & 3 Lobby Level 11:25–12:00 noon National Model Patent Jury Instructions: A View From the Bench Marriott Ballroom Salons 2 & 3 Lobby Level10:00–11:00 am 2010 Mid-Winter Institute Planning Committee Meeting (Committee Members Only) Tyler Mezzanine Level

Luncheon (tickets required) 12:00–2:00 pm Networking Luncheon (tickets required) Virginia ABC Lobby Level 12:00–4:00 pm Board of Directors Meeting Delaware AB Lobby Level

2009 AIPLA Career Fair10:00 am–4:00 pm Career Fair Office Washington Room 4 10:00 am–4:00 pm Career Fair Hospitality Room Washington Room 4 11:00 am–4:00 pm AIPLA Career Fair Washington Rooms 5 & 6 4:00–6:00 pm Career Fair Reception Washington Room 3

AIPLA honored USPTO and Copyright Office staff at a presentation yesterday morningAttendees visit the Exhibits yesterday. Exhibitsare open from 7:00 am to 12 noon today

TODAY’S SCHEDULE: SATURDAY, OCTOBER 17, 2009

Guests at the President’s Dessert Receptionon Thursday night