Tafas v. Dudas et al

Filing 222

Amicus Brief in Support of Plaintiffs' 135 MOTION for Summary Judgment, 133 MOTION for Summary Judgment filed by CFPH, LLC. (Attachments: # 1 Declaration of Dean Alderucci# 2 Attachment A to Declaration of Dean Alderucci)(klau, )

Tafas v. Dudas et al

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IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF VIRGINIA
(Alexandria Division)

TRIANT AFYLLOS T AF AS,

Plaintiff,
- against -

1 :07cv846 JCC/TRJ
Judge Cacheris

JON. W. DUDAS, et aI., et aI.,

Defendants.

SMITHKLINE BEECHAM CORPORA nON, et aI.,
Plaintiff,
- against 1 :07cv1 008 (JCC/TRJ) Judge Cacheris

JON. W. DUDAS, et aI., et aI., Defendants.

DECLARATION OF DEAN ALDERUCCI IN SUPPORT OF BRIEF OF AMICUS CURIAE CFPH, LLC
I, Dean Alderucci, declare as follows:
1. I make this declaration on behalf of CFPH, LLC (Cantor Fitzgerald Patent Holdings,

"CFPH") in support of the Brief of Amicus Curiae Cantor Fitzgerald Patent Holdings In Support

of Plaintiffs' Summary Judgment Motions ("CFPH Brier'), and the accompanying motion
seeking leave to have the brief fied. I have personal knowledge of the facts set forth herein, and
if called as a witness could and would testify competently to the facts under oath.

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2. I am a Vice President and Assistant General Counsel of Cantor Fitzgerald, L.P. I manage

a group of patent attorneys and other legal professionals. This group is responsible for all patent

application fiings, patent prosecution and other matters related to patents for Cantor Fitzgerald,
L.P., its affiiate CFPH, and its affiliated companies (collectively "Cantor").
3. I received a B.S. summa cum laude in Computer Engineering from Boston University. I

received a M.S. in Computer Engineering from Boston University. I received a J.D. from the

University of Connecticut School of Law. I received an M.B.A. from the University of
Connecticut.
4. I spent several years in various positions engaged in software design and systems design

at Draper Laboratory and at the Sikorsky Aircraft Corporation.
5. I am admitted to practice before the cours of Connecticut and Massachusetts, the U.S.

Patent and Trademark Office ("PTO") and the Court of Appeals for the Federal Circuit.
6. For twelve years I have practiced patent law at Cantor, Walker Digital Management,

LLC, and McCormick, Paulding & Huber obtaining (and supervising and assisting others to

obtain) numerous U.S. and foreign patents for a wide variety of technologies in a variety of
technical fields.

7. I am named as an inventor on several issued patents and pending patent applications.
8. Over the years I have spoken at a variety of bar and academic conferences, including

those hosted by the American Intellectual Property Law Association, on different aspects of

patent law and of patent practice.
9. I am very familiar with the rules of

practice before the PTO, codified at 37 CFR Parts 1,

10, and 40, which govern application drafting, fiing, and prosecution before the PTO, attorney

conduct, and appeals. I am also intimately familiar with the Changes to Practice for Continued

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Examination Filings, Patent Applications Containing Patentably Indistinct Claims, and
Examination of

Claims in Patent Applications; Final Rule. 72 Fed. Reg. 46,715 (Aug. 21, 2007)

("the Final Rules"). I filed extensive comments (Attachment A hereto) on behalf of Cantor on

the PTO' s proposed rules in the instant proceeding, in which the PTO purorted to provide
reasons for issuing some aspects of the Final Rules.

10. Cantor is a global financial services provider. Cantor is a recognized leader in the
specialized areas of equity and fixed income capital markets, offering products and services to

more than 5000 institutional clients around the world. Cantor operates trading desks in every
major financial center in the world with 41 offices and more than 3000 employees. Cantor also

operates in other areas including investment banking, merchant banking, asset management,
clearing and market data services, and energy emissions.
11. Cantor invests significant resources in the patent system. I am involved in decisions to

invest significant financial and human resources in research and development for new
technologies, and in decisions to enter new business directions. Many such decisions are made
on the basis of patent protection that may be available, on the scope of such patent protection, on

the speed with which such patent protection can be acquired, and on the likelihood of the U.S.
Patent and Trademark Offce wil grant such patent protection.
12. Cantor has dozens of applications pending before the PTO and foreign patent offices.

Cantor spends extensive amounts of money for salaries and to hire law firms and other
consultants to prosecute its patent applications in order to protect the extensive investments that

Cantor makes in developing and implementing new inventions. Decisions regarding Cantor's

abilty to obtain patent protection, and the time by which such protection might be obtained,
dramatically affect Cantor's decisions to invest in developing and implementing new inventions.

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13. Cantor (like many other financial services entities and other patent applicants) relies on

the ability to file multiple, related applications addressing the many different aspects of the new
inventions that it develops. Separate applications addressing "independent and distinct

inventions" are required by the PTO's rules and contemplated by the Patent Act. See 35 U.S.C.

§ 121; 37 CFR § 1.141(a). By fiing separate applications addressing related but distinctly
claimed inventions, Cantor assures that its patent application attorneys, PTO examiners, and
others focus on the specific natue of

the inventions actually claimed in the separate applications.

This not only assists understanding of what is "particularly pointed out and distinctly claimed" in

any application (as required by 35 U.S.C. § 112, second paragraph), but also helps to expedite
and simplify application drafting, examination, and prosecution.
14. Multiple applications containing claims drawn to only one of

many distinctive but related

inventions are examined significantly faster than applications containing all such claims in a

single application. Not only are such applications easier to understand, but also they are not
subject to restriction requirements (under 35 U.S.C. § 121) that require the PTO to take initial
offce actions and applicants to respond with an election of the claims to be pursued in the initial
application and the fiing of a continuation (divisional) application or applications (fied under 35
U.S.C. § 120) in order to continue to obtain patent protection for the non-elected distinctively

claimed invention (under 35 CFR § 1.141(b) (three-way restrictions for claims addressing
products, methods of making, and methods of

use) and 37 CFR § 1.142(a)&(b) (requirements for

restriction and withdrawal of

non-elected claims).

15. Cantor (like many other financial services entities and other patent applicants) seeks
protection for its related but distinctive inventions by claiming them in different ways in different

applications (that could trigger restriction requirements if contained in a single application). The

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additional means of claiming inventions assure that Cantor is better able to fully protect the
inventions, and thus to assure that Cantor's investments in new inventions can achieve their
licensing and competitive revenue potentials. Cantor pays the required fees for fiing and

examination of each separate and distinctive application.

16. By filing multiple applications drawn to related but distinctively claimed aspects of the
inventions, Cantor may obtain patents that issue separately and thus may be sold or retained (and
licensed) separately to different entities. The abilty to separately sell or license distinctive

inventions increases the revenue that can be obtained from sale and licensing of patented
inventions. Further, it minimizes the risk that distinctive but related inventions may be

invalidated. The separate patents either may not be challenged or, because they are in separate
patents, there wil be less risk of common prosecution errors or judicial mistakes assuming that
issues unique to particular distinctive claims apply to other claims.
17. By fiing multiple applications drawn to related but distinctively claimed aspects of the

inventions, Cantor may obtain patents on distinctive inventions earlier. Furher, because of

variations in the time it takes for the PTO to examine patents, these distinctive inventions wil be

subject to different term extensions under 35 U.S.C. § lS6(c). By placing the distinctive

inventions in separate applications, the later-obtained patents wil not be subject to the duration

limits established for the earlier-granted distinctive inventions. In some cases, later expiration
dates are valuable. More importantly, because such later-granted applications contain
distinctively claimed inventions, their terms are not limited to those of the earlier-granted

applications (but rather receive term extensions providing for the full amount of excessive delays

in the PTO), and they do not require terminal disclaimers that would limit their term to those of
the earlier-granted patents. In contrast, if applicants were required to include distinctively

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claimed inventions in the same application, they could not issue until all of the claims were
resolved, and when they did they would be subject to the same term extensions for all claims.
18. Cantor (like many other financial services entities and other patent applicants) files many

individual applications that contain multiple independent claims (in excess of five) and total
claims (in excess of twenty-five), seeking to protect different features of

patentably indistinct (as

well as patentably distinct) new inventions. Cantor must consider when fiing claims to protect
its inventions and to preclude competition from using its inventions including the many different

entities (such as manufacturers, distributors, and end users, the many kinds of people who
interact with financial services providers, the many ways that people can provide financial
services, etc.), the many different technologies (such as software, communications technologies,

personal interactions, etc.), and the many different methods (such as advising, calculating,

investing, pooling, etc.) that are used in financial service operations. Additional claims help to
avoid problems with so-called "divided infringement," where one entity uses or performs part of

a claimed invention and another entity (sometimes in a different country) uses or performs the
rest of the claimed invention.
19. Cantor invests milions of dollars in particular inventions, and seeks diligently to protect

those investments by obtaining full protection for all distinctive and indistinct patentable aspects

of those investments. Such extensive claiming is necessary because of the scale of financial
services operations and the potential revenues that can be generated in licensing of inventions or
can be recovered in infringement actions. Because of these extensive revenues, competitors

diligently attempt to avoid patents by seeking to design around particular claims or to find prior
art that might invalidate broad claims. For this reason, Cantor (like many other financial services

entities and other patent applicants) seeks to fie many dependent claims drawn to all of the

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specific ways that its inventions can be implemented and additional features that may be added

to the broadest concepts on which its inventions operate. This is also one reason why Cantor
(like many other financial services entities and other patent applicants) needs to file additional
claims after the first applications have been filed, often many years later, as Cantor is unable to
determine at the earlier times which of the many variations of the disclosed invention

competitors wil adopt when entering the market (employing trivial changes or substitutions to
the patented technology).
20. Different types of infringing activity are encompassed by different types of claims

For example, in a complicated system where the invention is intended to be made, distributed,

and used by different types of entities, it is often impossible to encompass the activities of these
different classes of entity with a single type of claim because they use the invention or aspects of

the invention in different manners. Thus, for such inventions it is known at the outset that
several types of claims wil be necessary to obtain adequate protection. Typically, each such
entity requires its own independent claim and a large number of corresponding dependent claims

addressed to particular features that such entities might employ (or that might be employed by
other entities in conjunction with the target entity).
21. Cantor (like many other financial services entities and other patent applicants) not only
seeks to patent the broadest claims available for an invention, on the theory that the broadest

claims wil cover competitors' making, using, and sellng of the invention, but also seeks to
patent many narrower independent and additional dependent claims. In many circumstances,

especially in areas where sophisticated parties negotiate for licenses to different aspects of
technology, it is imprudent to license broad claims that confer more than a licensee desires and
which may preclude other licensees from obtaining that claim. Thus, several specific and precise

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claims allow a business to conduct more sophisticated technology transactions by matching

desired technology with licensees. Further, broad claims are more likely to be found invalid in

light of prior art of which applicants are not aware, and thus it is imprudent to seek only the
broadest claims that can legitimately and in good faith be drafted based on known prior art. And

when additional prior art becomes known, additional independent and dependent claims are
routinely fied to assure the maximum protection for inventions, rather than abandoning all value
due to reliance on simplistically broad claims.

22. By claiming additional dependent features of the invention, such as the invention when
incorporated into a larger product or wider service, Cantor also may increase the royalty base or
lost profits used to calculate licensing revenue or to obtain damages in an infringement action.

Under existing law, the revenue base for inventions in damage awards is often calculated based

on the product actually claimed, and not the inventive contribution to the claim, when the
invention is what results in sales of the invention. Thus, by claiming a product in which the new
invention is incorporated (as well as the invention itself), the patent wil generate significant

additional licensing and infringement damages revenue.

23. Cantor (like many other financial services entities and other patent applicants) seeks
diligently to protect its inventions as soon as possible, and bases its decisions to invest in those
inventions on its abilty to fie continuation applications. Such applications permit claims that

have been allowed by an examiner to be issued, while continuing to dispute or appeal examiner
rejections of (or objections to) other claims in the application. Furher, continuation applications

are often needed to assure that Cantor obtains the full scope of patent protection that is available
under the patent laws. Continuing applications are especially important in three areas:

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(a) obtaining the full range of claims to which an invention in entitled, especially those

inventions which are complicated or which have many variations, and therefore are
capable of being made and used by copyists in a variety of manners,
(b) preventing deadlock in prosecution before examiners at the U.S. Patent and

Trademark Office, and

(c) ameliorating the negative effects of the persistent backlog at the U.S. Patent and
Trademark Office.

24. With respect to (a), an invention that is complicated or amenable to many variations
typically requires several claims since no single claim may encompass, or adequately encompass,

all or most such variations. Each variation requires a set of claims, and accordingly requires a

significant amount of resources from inventors and lawyers in designing and drafting such
claims. Although it is known at the fiing of the application what those areas are, it is unknown
which variation wil actually surive examination (particularly in light of prior art ldiscovered by

examiners and brought to the attention of applicants for the first time long after the original
application or a continuation application was filed). Similarly, it is unknown at the time of fiing

which areas of protection copyists wil capitalize on. Thus, although many claims can be and
typically are directed at encompassing all variations, Cantor rationally elects to invest significant

resources to claims to particular variations only after time has passed and the direction of
copyists are easier to predict or, unfortunately, to actually witness.

25. With respect to (b), it is important to be able (for the reasons discussed above) to permit
allowed claims to issue while continuing to dispute rejections (or objections) to other claims in

the same application. By filing a continuation application to address only the disputed claims,

the applicant not only receives a patent faster on claims not in dispute but also helps to focus

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examination attention and achieve faster resolution of the claims that remain in dispute (for
reasons similar to those discussed above for multiple applications addressing patentable distinct
claims). Further, it permits the claims not in dispute to avoid the lengthy and costly appeals

process (regardless of the merits of the disputes regarding the rejected claims), delaying a final
decision on the allowed claims for years, and permits appeals to focus solely on the claims that
are actually in dispute.

26. With respect to (c), the persistent backlog at the U.S. Patent and Trademark Office causes
great uncertainty in the whether patent protection wil be available for an invention, the scope of

such patent protection, and the speed with which such patent protection can be acquired. With
continuing applications, these risks can be spread out over several applications directed to

patentable variations of an invention or of related but distinctive inventions. For example, if it is

unkown whether a particular variation wil be deemed patentable by an examiner or wil instead

require protracted appeals, that variation can be encapsulated in the claims of a single
application. Meanwhile another variation of that invention, which may be unrelated enough to

merit confidence that its patentability is high, or at least that its patentability rests on different

decisions altogether, can be encapsulated in the claims of a single application. Though the

technology of both applications is related, the decision processes during examination are
unrelated so the decisions need not be wed together naively by a single application.
27. Because of

the needs discussed above to file (and to obtain prompt issuance of) multiple

applications containing patentably distinct claims, applications containing more than five
independent and twenty-five total claims (as well as application families containing more than
fifteen independent and seventy-five total claims), and more than two continuing applications,

the Final Rules wil have a dramatic adverse effect on Cantor's ability to obtain patents, to obtain

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them in as prompt a fashion as possible, to assure that their terms last as long as possible, and to
obtain them with the least costs of prosecution. The Final Rules, if allowed to go into force,

would require Cantor to dramatically change its application drafting and prosecution practices,
resulting in dramatically increased costs of prosecution. In order to seek to obtain as much

protection as possible under the Final Rules, Cantor would have to draft and fie as many claims

as it could initially and in the same applications, even though it wil later turn out that acquiring

such claims was not needed to effectively protect the invention. Cantor also wil bear (without
being able to spread over time) the costs of these additional new claims and the extensive costs

associated with Examination Support Documents required under new Rule 1.78(b)(1) &
1.26S(a), including the costs of new searches of prior art, of explanation of patentability for the
claims that Cantor fies, and of explanations of written description support for each claim that

Cantor fies.

28. Cantor wil remain subject to 37 CFR § 1.141(a), restricting patentably distinct claims
from being fied in a single application. For the patentably distinct claims that must be filed in
separate applications, Cantor wil now incur dramatic new costs of making arguments regarding
the patentable distinctness of the claims seeking to rebut under new Rule 1.78(f)(2)(ii)(A) the

new Rule 1.78(f)(2)(i) presumption of patentable indistinctness, which claims would previously
have been found patentably distinct without a double patenting rejection (on the same evidence,

based solely on the new presumption). Because Cantor may be unsuccessful in such rebuttals,

Cantor wil also lose patent term for such claims by being required to file terminal disclaimers

under new Rule 1.78(f)(2)(ii)(B). Further, Cantor may incur substantial additional costs of
prosecution by being required to cancel the claims found to be patentably indistinct and add them
to other applications under new Rule 1.78(f)(3).

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29. Cantor wil lose patent rights by being unable to file more than two continuing
applications under new Rule 1.78(d)(l). Cantor also wil have its 'applications delayed from

issue because, to avoid the result of lost patent rights, Cantor wil need to fie many more claims
in initial and earlier continuation applications (although in many cases Cantor may be unable to
anticipate all of the claims it otherwise might have filed through continuation applications that no

longer wil be permitted). Cantor also wil bear the costs of filing new petitions to permit the
fiing of continuation applications where it meets the limited petition showing requirement of
new Rule 1.78(d)(1)(vi), but under the vague standards for granting such petitions in many cases

may not be successful in obtaining a grant of the petition and again wil lost patent rights as a
result. Even when such petitions are granted, Cantor wil lose much of the commercial value of

the patents by the delays that result from their issuance. Finally, Cantor wil need to bear the
additional costs of providing Examination Support Documents as a result of filing additional

claims in initial and earlier continuation applications.

30. As a result of the Final Rules, Cantor may no longer seek to fie many of the claims it

would otherwise have found cost-effective and needed for protection, because of the likelihood
that they wil not issue or wil not issue in a timely fashion, which wil exceed the expected value
of prosecuting those claims (considering the costs of doing so). As a result, Cantor wil no

longer be able to fully protect its inventions and its competitors wil find ways to avoid the
protection that Cantor in fact obtains, to Cantors substantial financial detriment.

I declare under penalty of perjury under the laws of the United States that the foregoing is true
and correct.

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. 20th clay ofDccc1lber 2007 at New York, New York.

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