Obtaining Patents with Fictional Data - More Than Just Plausible
In the USA it is possible to obtain a patent using fictional data as the basis for the patent’s claims. The USPTO allows this provided the experimental data is expressed in the present or future tense, such data is known as prophetic examples or paper examples. In contrast, experimental data from actual experiments are expressed in the past tense and are known as working examples. Patents can be granted where only prophetic examples are used, although there can also be a mixture of prophetic and working examples.
On 1st July 2021 the USPTO issued a guidance reminding applicants that it is important to accurately distinguish between prophetic examples and working examples. Where it is ambiguous or otherwise misleading as to whether an example is prophetic or actual experimental data, then the adequacy and accuracy of the disclosure can be questioned and may give basis for an enablement rejection.
By allowing for prophetic examples applicants are able to provide support for broad claims without having to undertake costly and time-consuming experiments. A valid patent can be obtained through the use of prophetic examples, although it can be invalidated if the predictions later prove to be incorrect.
However, several commentators argue that prophetic examples should not be allowed to provide support for patent claims as they do more harm than good for innovation. If the prophetic examples are shown to be unsound they can still be used for obviousness purposes against a subsequent inventor who has created a functioning prototype or used working examples. Once a patent is granted it has a presumption of validity and prophetic examples within it are presumed to be enabled, which can have a chilling effect on others seeking to innovate in that space. There is also the danger that the fictional data is not recognised as such, which has been shown to be the case with scientists more often than not referring to prophetic examples as if it was actual experimental data results. This is particularly troubling if the prophetic examples are actually wrong, yet remain unchecked with the status of scientific facts.
One commentator, Janet Freilich, suggests that it is better to think of such fictional data as hypothetical examples rather than as prophetic examples as that more clearly shows that they are testable predictions that may or may not be true. Freilich further suggests that inventors could be given a grace period in which to provide working examples to back-up their hypothetical examples.
While the use of fictional data is not actively catered for in other jurisdictions, there are some parallels with the requirement under UK and European jurisprudence that an enabling disclosure has to at least be plausible as considered in the following cases, which will be influential in New Zealand under the Patents Act 2013.
In Regeneron Pharmaceuticals Inc v Genentech Inc  EWCA 93 the UK Court of Appeal clarified when patent claims containing predictions (i.e. unsupported by experimental work) satisfy the sufficiency requirements of the Patents Act. The Court of Appeal found that when considering the sufficiency of a patent an assertion that the invention would work across the scope of the claim had to be plausible or credible. If it was possible to make such a prediction, then it could not be said that the claim was insufficient simply because the patentee had not demonstrated that the invention worked in every case. However, if it was not possible to make such a prediction, or if it was shown that the prediction was wrong, and the invention did not work with substantially all the products or methods falling within the scope of the claim, then the scope of the monopoly would exceed the technical contribution made by the patentee to the art and the claim would be insufficient.
In Generics [UK] Limited v Yeda Research & Development Co Ltd  EWCA 925 the UK Court of Appeal held that post-priority evidence can be used to demonstrate lack of invention by contradicting assertions in the specification to the effect that a technical effect is plausible. If a problem has not in fact been solved, then a patent should not have been granted in relation thereto, since plausible but untrue predictions do not constitute a contribution worthy of patent protection. The Court of Appeal also confirmed that post-dated evidence cannot be used to establish a technical effect that has not been made plausible by the specification.
In Actavis Group PTC EHF v Eli Lilly and Co  EWHC 3294 a UK Judge held that the test for plausibility in regards to sufficiency is easier to satisfy than the test for obviousness. The Judge noted that the fair expectation of success criterion for obviousness is not satisfied by being obvious to try. Were obviousness to be satisfied by the latter there would be insufficient incentive for research and development, since many approaches may be obvious to try without any real idea of whether they will work. By contrast, plausibility is satisfied by a disclosure that is credible, which is akin to the obvious to try test and easier to satisfy than the fair expectation of success criterion. The purpose of the plausibility criterion is to exclude speculative patents based on mere assertion where there is no real reason to suppose that the assertion is true. The EPC does not require claims to be supported by data or experimental proof. Provided they are plausible, claims unsupported by such material can stand without needing to have a fair expectation of success.
In Bristol-Myers Squibb Holdings Ireland v Actavis Group PTC T 488-16 an EPO Boards of Appeal (BoA) emphasised the importance of demonstrating the plausibility of the proposed inventive subject matter at the filing date. According to established case law the plausibility of the technical effect cannot be established by evidence filed after the filing date, although such evidence can be used as supplementary evidence to corroborate a technical effect that was deemed to at least be plausible at the filing date.
Although the application as filed generically referred to assays that could be employed in ascertaining the degree of activity of the numerous compounds initially claimed, no experimental results were provided for any compound in any assay. Nor had any threshold level for activity been given.
The application as filed also did not show that the skilled person was in the possession of common general knowledge which, even in the absence of data, made it plausible that the compounds of the invention, in particular dasatinib, could be expected to show the claimed activity. The EPO BoA rejected Bristol Myers Squibb’s attempt to infer such knowledge from structurally different compounds due to the absence of any correlation between structural features and function.
The EPO BoA noted that the invention relies on a technical effect which is neither self-evident nor predictable or based on a conclusive theoretical concept. In such circumstances at least some technical evidence is required to show that a technical problem has been solved. In particular, it was not considered acceptable to draw up a generic formula covering millions of compounds, vaguely indicate an activity and leave it to the imagination of the skilled reader or to future investigations to establish which compounds exhibit the activity in a way that is suitable to achieve the desired effect.
In Australian Patent Office decision Evolva SA  APO 57 the Hearings Officer approved the use of UK and European jurisprudence in assessing sufficiency, and in particular the notion of plausibility, for applications subject to the “Raising the Bar” legislation.
In summarising the principles behind the UK and European cases on point the Hearings Officer found that:
the plausibility criterion is satisfied by a low threshold designed to prohibit speculative claiming rather than one that gives a reasonable expectation of success.
the scope of the monopoly, as defined in the claims, must correspond to the technical contribution the patentee has made to the art. If the assertions made in the specification are not plausible then it cannot be reasonably said that the patentee has made a contribution to the art.
The Hearings Officer also affirmed UK authority for a two-stage test for sufficiency, stating that:
an invention that is plausible may still fail on sufficiency if the specification essentially sets out a research programme and there is an undue burden of experimentation required to put it into practice.
In Warner Lambert Company LLC v Generics (UK) Ltd  UKSC 56 the Supreme Court confirmed that sufficiency of disclosure requires that the specification should at least make the claimed subject matter plausible. Such a requirement is considered crucial in the case of second medical use patents, since the active ingredient is already known so the quid pro quo contribution to the art needs to be something more than mere speculation, with the onus being on the patentee to establish it. However, plausibility does not require definitive evidence, which would only be available after clinical trials were done and which can further support a patent application as post-published evidence, but nonetheless some reasonable basis for making the claim needs to be present in the application on its filing date.
2. Plant Variety Rights
Consultation on Fees for Replacement Plant Variety Rights Act
As part of the current review of the Plant Varieties Act 1987 (see summary) IPONZ has released a wide-ranging consultation paper on the amount and structure of fees that should apply.
Currently there are four main types of fees applied by the Plant Variety Rights Office (PVR Office):
- Application fee: for the pre-trials initial examination of an application along with a contribution to administrative and fixed costs;
- Examination Fee: for examination of an application taking into account data from growing trials conducted by an independent party arranged by the applicant;
- Trials Fee: for growing trials outsourced by the PVR Office and examination taking into account the data obtained therefrom;
- Annual Grant Fee: a uniform annual renewal fee to keep the granted plant variety right active, commencing the year after grant.
In line with the pattern in other PVR schemes around the world the number of PVR applications has declined and stabilised at a lower level than around 20-years ago when fees were last reviewed. This has resulted in the PVR Office currently operating at a significant deficit, with income covering only about 30% of costs, mainly due to increased costs for growing trials and fixed costs. The deficit is currently covered by surplus from IPONZ administration of other intellectual property rights.
The consultation paper does not specify the amount of any proposed fee, but feedback is sought on what impact a doubling or tripling of fees would have on likely use of the regime, and what other mechanisms would be used to obtain a return on investment if PVR protection is not sought.
Currently the application fee depends upon the species to which the variety belongs. On the basis that the costs for the application phase is largely independent of species type it is proposed that a uniform application fee is introduced.
It is proposed to introduce a tiered renewal fee structure, with the annual renewal fee for years 1 – 5 the lowest, then increasing for years 6 – 10, and again for years 11 – 15, and finally again for any remaining period within the term of the PVR right. This would allow some time for PVR owners to assess the commercial viability of their variety and incentivise them to only maintain those that are profitable.
For the examination and trials fees it is proposed to re-group plant varieties into the following categories on the basis of involving similar levels of resources and personnel time:
- Agriculture and vegetable crops (includes wheat, barley, oats, potatoes, peas, tricticale, rye, forage brassicas)
- Fruit and nuts
- Ornamentals, trees, and other plants
- Pasture plants and amenity grasses (includes grasses, clover)
- Fungi (includes grass endophytes)
Currently, where the applicant opts for the PVR Office to organise the field trials, there is a fixed fee. There are options to (i) retain an upfront fixed fee structure, albeit increased and category based; or (ii) have a variable fees structure dependent upon the expenses incurred and paid at the end of field trials and examination, or (iii) a combination of upfront fixed and deferred variable fees, with the likely variable fees discussed with the applicant in instances where further specialist work was deemed necessary.
The consultation paper also acknowledges that the PVR regime provides public benefits in addition to private benefits and seeks feedback on to what extent this should inform the fee review.
It is expected that the proposed Maori Plant Varieties Committee will deliberate over less than 10% of applications. Feedback is sought on how the establishment and operating costs for the Committee should be apportioned.
Feedback on the questions in the consultation paper is sought by 25th August 2021 and will inform a more detailed discussion document on fee structure and levels expected to be released in October 2021.
3. Trade Marks
Guidance on Finding Distinctiveness and Specification Sweet Spots
In Flujo Sanguineo Holdings Pty Ltd v Merisant Australia Pty Ltd  NZIPOTM 11 the Assistant Commissioner clarified when disclaimers are appropriate and also made a rare finding that the scope of the application’s specification was too broad on account of likely use.
In January 2016 Flujo applied to register the shown device mark in relation to the following broad range of goods in class 30: coffee; tea; cocoa; sugar; natural sweeteners, sweeteners, natural sweetening substances, sugar substitutes; cakes; biscuits; confectionery; chocolate; edible ices; ice cream; rice; flour and preparations made from cereals; bread; pastry; honey, treacle; yeast; baking-powder; salt; mustard; vinegar; sauces (condiments); spices; food preparations containing the aforesaid ingredients; prepared meals in this class.
The device mark corresponds to the packaging of Flujo’s NATVIA sweetener product, except with some details left blank or removed, and contains the following two phrases: ‘Natural like sugar – only better’ and ‘the 100% Natural sweetener’.
Merisant opposed the application, and by the hearing the grounds of opposition had been restricted to requiring disclaimers for each of the phrases on the basis that they are descriptive and likely to be used by other traders, and that Flujo does not intend to use the mark on all the goods in the specification.
Under the Trade Marks Act 2002 IPONZ does not routinely require the descriptive contents of trade mark applications to be disclaimed in order to achieve acceptance – in contrast to IPONZ’s practice under the Trade Marks Act 1953. Rather, provided the mark as a whole is considered sufficiently distinctive, it is largely left to third-parties to request the insertion of disclaimers, as in this case, if the applicant has not voluntarily disclaimed those elements. However, the Commissioner (or Court) retains discretion to require the insertion of disclaimers if it is considered to be in the public interest.
Flujo contended that disclaimers are not required. While the phrases are prominent, they considered the phrases are not sufficiently dominant to be essential to the mark meaning that a person seeing them would not consider that rights exist in the phrases in isolation and as such disclaimers would serve no purpose and would only add clutter to the register.
The Assistant Commissioner considered that Flujo approached the issue from the wrong direction, holding that before determining whether a phrase is an essential feature of a mark it is first necessary to determine the distinctiveness of the phrases in isolation. It is only if the phrases in isolation are considered descriptive that the issue of whether they are sufficiently essential to the mark to require a disclaimer arises. In considering each phrase separately in relation to the goods for which the mark is used the Assistant Commissioner readily found that each phrase is descriptive, and merely act as a subsidiary tagline, catchphrase or slogan. The Assistant Commissioner found the stylised phrases add some distinctiveness to the mark as a whole and that their aural and conceptual dominance and visual prominence mean that the public interest is engaged regarding whether the rights in the registration extend to the phrases, and so ordered that disclaimers be added.
Regarding the scope of the specification the Assistant Commissioner noted that section 32(2) only allows specifications for all or a large variety of the goods or services of a class to be claimed when it is justified based upon the current or intended use. However, the Assistant Commissioner also noted that in the opposition context there is a presumption that the applicant intends to use the mark on all the goods or services in the specification. Nonetheless, Merisant contended that the presumption can be displaced if it is shown on the balance of probabilities that there is no bona fide intention to use the mark across the whole specification. The mark is currently used only on stevia-based natural sweeteners. Given that each of the phrases are only apt in relation to sweetener type products, the Assistant Commissioner held that Merisant had displaced the presumption of wide intended use and ordered the specification to be limited to: natural sweeteners, sweeteners, natural sweetening substances, sugar substitutes. The Assistant Commissioner considered that the broadness of the description was likely a result of over protective drafting that went too far beyond genuinely contemplated use. While the practice of using general terms to describe the goods or services the mark is to be used on is justifiable, merely adding in other goods or services that the mark is unlikely to be used on in order to extend the scope of protection is likely to have a similar result.
Appeals Court Finds Agreements Restricting Search Engine Keyword Bidding Not Anti-Competitive
In 1-800 Contacts Inc v FTC 18-3848 the Court of Appeals for the Second Circuit (CA2C) has reversed the controversial majority decision of the Federal Trade Commission (FTC), which held that agreements that prevent competitors from bidding for their competition’s trademarked terms as search engine ad generating keywords are anti-competitive.
As noted in the earlier reporting of the FTC’s decision, 1-800 Contacts Inc, which is the largest online retailer of contact lenses in the USA, actively sought to protect its trademarks by entering into agreements with rival online contact lens sellers who had used 1-800 Contacts’ trademarks as search engine ad generating keywords. The agreements prohibit the parties thereto from using the other party’s trademarks as search engine keywords and also require each party to designate the other party’s trademarks as negative search engine keywords – which prevents the search engine from generating an ad even though the advertiser did not select the keyword. However, most of the agreements allow the use of the other party’s trademarks for non-infringing uses, such as comparative advertising and parodies.
The FTC majority gave preference to open competition in online search bidding and held that the agreements constitute unfair methods of competition on the basis that consumers would be deprived of ads informing them that identical products are available at lower prices. The higher prices 1-800 Contacts charged compared to other online competitors was considered to evidence the anticompetitive effect of the agreements. It was also held that by harming competition in bidding for search engine keywords 1-800 Contacts benefited by paying artificially reduced prices for its ads.
The FTC majority held that trademark’s pro-competitive functions of reducing the likelihood of consumer confusion, assuring consumers of consistent quality and reducing consumer costs of making purchasing decisions are outweighed by the benefits from consumers having ready access to market information. However, as noted in the dissenting judgment people who search with a trademarked term most likely do so for navigational rather than cost comparison reasons and, by allowing for comparative advertising, the agreements achieve their goal of preventing trademark infringement while balancing the need to permit non-infringing advertising.
On appeal the CA2C noted that while trademark settlement agreements are not automatically immune from antitrust scrutiny and that what must be determined is whether the restraints in the agreements are reasonable in light of their actual effects on the market and their pro-competitive justifications. It was also noted that the level of proof required is dependent on where the alleged anticompetitive agreement falls between agreements that are per se illegal and those that have strong pro-competitive justifications. If the likelihood of anticompetitive effects can easily be ascertained, courts apply an abbreviated rule of reason analysis known as the “inherently suspect” framework and only minimal evidence or analysis is required before the burden shifts to the defendant to provide procompetitive justifications for the agreement. In contrast, if the likelihood of anticompetitive effects cannot easily be ascertained, then a full rule of reason analysis is required starting with establishing a prima facie case of anticompetitive conduct before the burden shifts to the defendant. If procompetitive justifications for the agreement can be provided, then the burden shifts back to the plaintiffs to prove that any legitimate competitive benefits offered by defendants could have been achieved through less restrictive means.
The CA2C held that the FTC majority was wrong to apply the inherently suspect framework to the agreements as agreements to protect trademarks should not be presumed to be anticompetitive, and their balancing of the need to permit non-infringing advertising meant they were not obviously anticompetitive.
The CA2C found the evidence for difference in prices to competitor’s products to be theoretical and anecdotal and not sufficiently direct to show that prices would have been different in the absence of the agreements. While there was evidence showing that prices for certain keywords dropped, that was found not to be direct evidence of the effect on the market as a whole.
The CA2C held that the FTC majority gave insufficient weight to the pro-competitive functions of trademarks and found the agreements to simply be the product of negotiations regarding trademark rights, and that those provisions were not auxiliary to an underlying illegal agreement.
The FTC argued that the agreements could have instead had a less restrictive provision requiring the generated ads to clearly show the identity of the rival seller. However, the CA2C held that courts should give substantial weight and deference to agreements determined between parties. The CA2C considered forcing companies to be less aggressive in enforcing their trademarks is antithetical to the procompetitive goals of trademark policy. The FTC majority was also found to have not considered the downstream effects of requiring less aggressive enforcement, and so had not established that the same procompetitive effects would be achieved thereby.
Back here in New Zealand the Commerce Commission has advised it has just filed proceedings against consumer loan provider Moola, alleging that it has engaged in cartel conduct by entering into agreements with other consumer loan providers regarding online advertising with Google Ads. As with the 1-800 Contacts agreements, the agreements prevent the parties from bidding on each other’s brand names and require the use of negative keywords. It is not yet clear whether the agreements allow for comparative advertising, although presumably they will as that is provided for under New Zealand’s Trade Marks Act 2002.