RFID PATENT WARSOr:

How I Learned to Stop Worrying andLove the Software Patent

Chris Rourk, Partner

Intellectual Property SectionJackson Walker L.L.P.

crourk@jw.com

PART I: RFID PATENTSPART I: RFID PATENTS

Who are the major RFID patent owners?• Texas Instruments - ~7 (12319 total since 1976)• Intermec – ~70 (443 total since 1976)• IBM - ~100 (40944 total since 1976)• Symbol - ~110 (Matrics ~35) (777 total since 1976)• HP - ~121 (14407 total since 1976)• Micron - ~146 (13120 total since 1976)

Source – USPTO patent and published application records search for “RFID” and “radio frequency identification,” and USPTO issued patents search based on assignee at issue.

INTERMEC AND SYMBOL• First lawsuit, Intermec v. Matrics, filed June 2004• Symbol acquires Matrics, July 2004• Second lawsuit, Symbol v. Intermec, filed March 2005• Third lawsuit, Intermec v. Symbol, filed March 2005• Fourth lawsuit, Symbol v. Intermec, filed April 2005• Fifth lawsuit, Symbol v. Intermec, filed June 2005• ITC investigation requested by Intermec, July 2005

INTERMEC AND SYMBOL (con’t)• Why all the lawsuits?

• Intermec – enforce patent rights• Symbol – PR? Sloppy legal work?

• Symbol was no stranger to patent litigation, it had filed over a dozen patent infringement lawsuits, mainly for laser scanner technology.

• Settlement announced, August 2005 – 5 months after first Symbol lawsuit.

• Was this a war? Or was it just a Three Stooges slap fight?• Relatively boring case - no major patent issues were ever

tried.

WHAT WAS GOING ON?

• Symbol had been licensing barcode scanning technology to Intermec and others since at least 1989 - 7.5% royalty.

• Intermec seeking 2.5% to 7.5% royalty for its RFID technology – less than Symbol.

• Symbol/press vilified Intermec for slowing growth of RFID technology - did Symbol patents slow growth of barcode technology?

• Class action lawsuit filed against Symbol in August, 2005, pending SEC investigation (both have since settled) - too many legal troubles for Symbol?

WHAT NEXT?

• Is it over? 90-day moratorium to work out all IP disputes, so maybe no.

• If problems worked out, most likely scenario is one or two industry patent licensing organization(s) with non-negotiable royalty.

• Only alternative to paying royalty will be to litigate, or to acquire or develop patents to contribute to patent pool.

• Possible antitrust challenges if patent licensing not carefully managed.

WHAT NEXT? (con’t)

• There will always be lawsuits filed by companies or inventors that own IP assets.

• Sometimes called “patent pirates” (or worse), when assets are bought from start-up companies that go out of business.

• Legislation has been proposed to prevent such entities from filing lawsuits, but then major players could then steal technology from start-ups by just driving them out of business.

BIG ISSUE IN PRESS:“SOFTWARE PATENTS”

• www.wi-fitechnology.com: “Symbol Infringes Key Wireless Access And Software Patents, Intermec Says

• ZDNet Asia Interview of Symbol’s CEO:• Q: “Do you agree that software patents are accorded way

too easily?”• A: “I think just like hardware, software patents are equally

important in the market.”• Critics of software patents often equate them with so-called

“business method” patents.

SOFTWARE PATENTS (con’t)

• U.S. Patent 6,371,375 was asserted by Intermec:• Claim 1: A system for storing and retrieving data comprising:

• A radio frequency tag having a memory for storing data;• A first identifier stored in the memory of the radio frequency tag;

and• A machine readable symbol associated with the radio frequency

tag, at least a portion of the machine readable symbol encoding a second identifier logically associated with the first identifier.

• Software patent? “Business method” patent?

SOFTWARE PATENTS (con’t)

• U.S. 5,995,019 was also asserted:• Claim 1: A method for communicating between a base

station and a set of radio frequency RF transponders (Tags) comprising: • defining a plurality of RF tags into different groups according to a

physical wave characteristic of the electromagnetic wave energy received from the RF tags, and

• communicating with the tags in each defined group. • Software patent? “Business method” patent?

SOFTWARE PATENTS (con’t)

• U.S. 4,593,186 was previously asserted by Symbol:• Claim 11: A method of successively sensing and

reading bar code symbols, each in its respective turn, comprising the steps of: • (a) generating a laser beam, and directing the same along a light path

to each symbol; • (b) repetitively scanning the directed laser beam across each symbol

for reflection there from; • (c) detecting the variable intensity of each scanned laser beam

reflected from each symbol . . . • (f) decoding the processed signal for each symbol to be read . . .

• Covers essentially the same process as Intermec’s patents, except for bar codes and not tags.

SOFTWARE PATENTS (con’t)

• No difference between Symbol’s licensing of barcode scanning technology and Intermec’s licensing of RFID technology.

• Different environment – vocal minority opposed to patenting any aspect of software.

• Is the real issue “software patents” and/or “business method patents,“ or antiquated attitudes towards protection of software technology?

SOFTWARE PATENTS (con’t)

• “Business method” was a pejorative term applied to patent application in Hotel Security Checking v. Lorraine Co. in 1908.

• The court found the patent in that case invalid for lack of novelty, not because of a “business method” exception.

• Nevertheless, the PTO subsequently rejected patents for claiming “business methods” for the next 90 years.

• The Federal Circuit explicitly overruled the so-called “business method” rejection in State Street Bank in 1998.

SOFTWARE PATENTS (con’t)

• How has PTO responded to overruling of “business method” rejection? Average allowance rate of “business method” patents: 3%, all others: 70% - PTO still rejecting them.

• Why shouldn’t software be patentable? Annual software sales = $90 billion globally in 2004.

• Copyrights are virtually worthless to protect software, only good for mass-produced, widely- used software packages.

• Patents protect underlying idea/function, not expression of idea.

SOFTWARE PATENTS (con’t)

MORE INTERESTING CASE: TROVAN V. SOKYMAT

• 1989 - Trovan and Sokymat enter into NDA.• Sokymat/Gustafson develops process for connecting

wound wire antenna to chip without bonding by using wire lead to support chip.

• Trovan, Sokymat each file patent applications, do not name each other’s inventors.

• Neither company was paying much attention to its intellectual property in dealing with other companies.

TROVAN V. SOKYMAT (con’t)• 1997 – Trovan sues Sokymat, claiming

1) ownership of Sokymat patent by virtue of NDA, and 2) infringement by Sokymat of Trovan patent.

• Sokymat countersues, claiming:1) non-infringement of Trovan patent; 2) correction of the inventorship of the Trovan patent to

add Gustafson; 3) invalidity of the Trovan patent for failure to name all

co-inventors; and 4) obviousness.

TROVAN V. SOKYMAT (con’t)

• Court Held:• genuine issue of fact as to whether contribution by

Gustafson was inventive,• NDA preceded development of Sokymat patent

invention, therefore Trovan has no legitimate claim to Sokymat patent, and

• No holding as ownership or invalidity, but genuine issue of material fact existed.

• Good example of why it is important to protect your intellectual property.

PART II: PROTECTING YOUR IP

• Disputes typically focus on five issues:• Patent infringement• Trademark infringement• Copyright infringement• Trade secret/confidential information theft• Contractual issues

• Protecting against disputes is like insurance.• Using patent war analogy, paying for protection is

like building a standing army.

PATENTING:

• Search – patentability and clearance.• Preparation and filing of the application.• Prosecution – getting the application through the

patent office to issuance.• Licensing and enforcement – protecting and

monetizing your investment.

SEARCHING:

• Two types – patentability and clearance• For patentability, focus is whether invention is

patentable; novel and non-obvious.• For novelty, look for patents, publications or other

prior art that discloses the invention.• For obviousness – do two or more references suggest

a combination that anticipates the invention?• Are any missing elements things that would be

obvious to add?

CLEARANCE SEARCHING

• For clearance, focus is whether product would infringe the claims of other patents.

• Look at claims of other patents that would cover product.

• Doesn’t matter if product is patentable, it can still infringe the patents of others.

• Is product is disclosed in an expired patent? If so, good chance you are free to use.

PREPARATION AND FILING• Average patent – 20 to 40 pages, 5 to 10 sheets of

drawings, 20 claims.• Average time to prepare – 20 to 30 hours.• Design specification and/or drawings usually

provide sufficient detail to aid attorney or agent in drafting application.

• A few special considerations:• Design versus utility application• Provisional versus utility• Foreign versus domestic

HOW TO PREPARE A PATENT APPLICATION

• One way - begin with claims• Why? Anything not claimed is dedicated to the public.• Prepare drawings that track claims.• Prepare description of drawings.• Need to add additional detail to allow you to narrow claims.• Other considerations depend on case law currently in

effect.

SOME CURRENT CASE LAW CONSIDERATIONS

• Amending claims can result in loss of claim for infringement under doctrine of equivalents (DOE).

• DOE – even if there is no literal infringement, accused product can infringe if it performs substantially the same function in substantially the same way to accomplish substantially the same result.

• Equivalents developed after the patent.• Strategy – file narrower claims first, then try and get

broader claims allowed.

CASE LAW CONSIDERATIONS - MEANS-PLUS-FUNCTION CLAIMS

• Short-hand way to claim the structure shown in the specification and equivalents (not DOE – includes contemporaneous equivalents)

• Typically easier to get those claims allowed, but claim scope is narrower.

• For software inventions, structure is algorithm – can be broader than hardware structures.

PROSECUTION

• Length of time before examination, chance of getting claims allowed depends on art unit

• Art Unit 705 – allows very few patents• Strategy – take any allowed claims, file continuation

to seek broader claim coverage.• Keeping a continuation pending allows newly

discovered prior art to be submitted for consideration by patent examiner.

FOREIGN FILING CONSIDERATIONS

• Very expensive.• Must file within 1 year.• Patent cooperation treaty (PCT) – 116 countries are signatory.• Delays need to file national phase application in each country

by 18 months or more.• Still need to pay ~$5000 on the average to file in each country.• Can designate the US and then file a national phase

application in the US after 30 months.

LICENSING AND ENFORCEMENT

• Very few patent applications are ever sold or licensed, but it does happen.

• Patents – easier to license and enforce, but still not source of most lawsuits.

• Products – most likely source of dispute is when companies are competing for market share.

SUMMARY

• Patent disputes between large companies are different than patent disputes between small companies or between a small company and a large company.

• Protecting your intellectual property can reduce or eliminate the need to spend money fighting lawsuits.