PTO Office Actions threaten to gut MAD claims of patent infringement

Bad news for Mission Abstract Data (whom we’ll once again dub “MAD”). They’re the folks claiming to own two patents supposedly being infringed by almost every radio broadcaster in the country. (Unclear on the background here? Read our last two posts on the subject. We’ll wait for you.)    

In this, our third installment of “As the Patent Turns”, there’s been a major development in MAD’s quest for broadcast domination. Those patents it claims to own? Turns out MAD may have spoken too quickly. 

When last we left MAD and its targets, the United States Patent and Trademark Office (PTO) had just announced that it would be reexamining the underlying patents, raising the possibility that the foundation of MAD’s whole approach is nothing but, well, nothing.

We told you to stay tuned for the next exciting installment, and now here it is.

As our friends at Radio World have reported, in two separate “Office Actions” (check them out here and here) the PTO has tossed 15 of the 29 claims supporting the first patent (number 5,629,867) and five of the ten claims supporting issuance of the second patent (number 5,809,246). At first blush that might look like a split decision that could leave MAD’s lawsuit (and related efforts to negotiate deals with as-yet-unsued radio licensees) alive and kicking. BUT a closer look suggests that that lawsuit (and related efforts) are now on life support: the claims rejected by the PTO relate to the elements of the patent dealing directly with automated radio programming; the claims the PTO left standing deal with other aspects of the technology.

It’s too early to gauge the real-world impact of the PTO’s action: the PTO proceedings aren’t over by a long shot, and there are still MAD’s pending federal court case and its attempts to rope radio stations into licensing agreements. As things continue to develop, here are a few factors to keep your eye on:

MAD has been given two months to respond to each Office Action. MAD could offer up more evidence of patentability. Once any response is filed, the PTO will mull things over and issue a final Office Action. We should know more after the first of the year. But until then, MAD has to deal with the fact that at least one PTO official doesn’t think too much of MAD’s claims.

And don’t forget that there’s still a lawsuit being litigated in federal court. There’s a hearing scheduled for October 27 on a Motion to Stay filed by the radio licensee defendants. It’s possible that the PTO’s Office Actions were rushed through for release before that hearing. For sure the fact that the PTO has identified major concerns (preliminarily, at least) about MAD’s core claims is likely to influence whether that lawsuit is stayed. After all, letting the case go forward would impose a serious drain on the parties and the court. Why go through all that when the primary legal issue – the validity of the patents underlying the entire matter – is clearly in question. Why put the parties and the court through a fact-based discovery process if the case will be kicked out on legal grounds? Why indeed, when staying the case for this reason would not impose an obvious hardship on MAD?

We’re sticking with what we have said before: smaller broadcasters who have not been sued would be well-advised to take any communication from MAD seriously, but obviously now it should also be taken with a grain of salt.  Anyone contacted by MAD should do their due diligence: have an attorney thoroughly review any licensing agreement they receive; dig out any potential indemnification clause that might be invoked to require their software provider to cover legal costs and/or damages; and check to see whether their own insurance policies will cover damages if they have no indemnification.

We’ll continue to follow this saga. For our money, the biggest surprise would be any ruling favoring MAD . . . but you never know.