Update: If Alice was always the law, why did you get so many “invalid” patents for your clients?

I blogged about this case — Encylopaedia Britannica, Inc. v. Dickstein Shapiro LLP (D. D.C. Aug. 26, 2015) — way back when it came out.  The case was summarily affirmed in June.  A cert petition has been filed, and it’s worth reviewing this case again.  If the law stays the way it is, then maybe clients should start suing lawyers to get their fees back for patents that the lawyers “should have known” were “invalid” years before Alice came out…

The Dickstein Shapiro firm had been retained by Encyclopaedia Britannica, Inc. (EB) in 1993 to file a patent application. The patent issued, and in 2006 EB sued several companies for infringing it. The patent was held invalid due to “an unnoticed defect” in the 1993 application.  The basis for invalidity was not 101, and is not clearly stated in the opinion, but seems to have been a break in the chain for priority.

EB then sued the law firm for malpractice in prosecuting the 1993 application.  EB contended that, but for the firm’s negligence, it would have made a lot of money in the infringement suit.

After the malpractice suit was filed, Alice was decided.  The defendant law firm then argued that — had the defendants in the 2006 case not prevailed on the “unnoticed defect” defense (the break in the chain for priority) — they would have prevailed because the patents were “invalid” under 101.  Because the claims would have been “invalid” in the 2006 litigation under 101, there was no harm caused by the actual basis for invalidity — the priority problem.

To put this in context:  Because of a 2014 Supreme Court decision, the 2006 infringement case would have been lost in 2009 anyway because the court in 2009 would have applied Alice’s standard and found the claims ineligible.

And the argument worked.  The district court granted a motion to dismiss for failure to state a claim (actually, for judgment on the pleadings under 12(c), but same standard), finding (holding?) the subject matter ineligible on the face of the patent.

What is interesting is the court’s approach to retroactive application of Alice.  The issue was whether in the 2006 litigation asserting the patent, even had the firm’s alleged malpractice not caused the invalidity of the patent because of the break in priority, the claims were “invalid” under 101 in 2006 — years before Alice was decided.  The district court held that Alice did not change the law, but merely stated what it had always been.    Specifically, the district court stated:

When the Supreme Court construes a federal statute… that construction is an authoritative statement of what the statute has always meant that applies retroactively.  Alice represents the Supreme Court’s definitive statement on what 101 means — and always meant.  Because the underlying case is governed by 101, it is appropriate for this Court to apply the Supreme Court’s construction of 101 as set forth in Alice.

(Citations omitted).

For this and other reasons, the court reasoned that “the only rule that makes sense in this context is to apply the objectively correct legal standard as enunciated by the Supreme Court in Alice, rather than an incorrect legal standard that the [district court in the 2006 infringement case] may have applied prior to July 2015 [when the court was deciding the motion.]”  The court then applied Alice and found the claims “invalid” under 101.  Thus, the firm’s failure to maintain priority did not cause harm — the “invalidity” under 101 did.

There’s a lot to unpack here.

Let’s start with a basic statutory interpretation principle: as a matter of statutory construction the retroactivity principle relied upon by the district court is correct in that retroactivity does not ordinarily apply when an interpretation is changed.  (This perhaps explains why the Supreme Court is careful to avoid saying it is changing an interpretation, because changes to interpretations of a statute are prospective, only, as a general rule.  In that regard, think about Therasense for a moment.) So, if Alice changed the law, then the district court was likely wrong to apply it retroactively.

Let’s be real:  the Supreme Court will never say that Alice changed the law.  We all know it did, or I guess a better way of putting it is:  we were wrong about what the pre-Alice law meant — despite reading the cases as best we could, and so was the USPTO (which is why it issued all those bad patents, and had to put in place, post-Alice, all of those new guidelines, etc.).  So, we were all wrong and Alice merely said what we all were not smart enough to understand the law always was and had been.

Shame on us.

But now let’s look at Dickstein Shapiro’s conduct through that lens: if the law was that clear — that you could 12(b)(6) or summary judgment this patent for “invalidity” under Section 101, why did you get the for the client in the first place?    If the law about 101 “always” was this way, why did you advise EB to spend so much money on a patent so clearly invalid that a judge could decide it by looking at it?

If cert is not granted, patent prosecutors should be ready to disgorge a lot of fees, I guess is what I’m saying.  Remember:  fee disgorgment doesn’t require damages — it requires (usually) a clear and serious breach of duty.  How can this not be?

So now let’s say prospective litigation counsel looks at a patent and in evaluating it, says to the patentee “no, this one’s bad under Alice.  It’s worthless.”  If the client then sues the lawyer who prosecute the patented, you’d think the client would have an easy case: “Lawyer, the law was always the way Alice says it was, and yet you got me this stupid patent, and charged me $25,000 to get it. Give that money back.”

Now, we can get into what is called judgmental immunity — but if the law was settled and clear, how can that help?  We could also argue the law changed — but it didn’t, or so the courts tell us.

But we can’t obviously do this: Allow lawyers to escape liability for bad patents because the law was “clear” back then, and so the client would never have prevailed in an infringement suit, but then allow lawyers to say “the law was unclear” and allow them to avoid disgorging fees.

Someone got any ideas?  The intellectually honest way to approach it is to say that the EB case was wrongly decided:  whether the patent would have been “invalid” under 101 in the 2006 litigation should be decided under the law at the time of trial, not the law in 2014, just as the decision to seek the patent in 1993 should turn on 101 law in 1993, not the law in 2014.  More to that point, we all know that certain claim formats have fallen out of favor (e.g., means-plus-function). If the law was favorable to them in, say, 1993, and a lawyer picked them, why should we use standards developed in 2014 to judge the lawyer’s conduct, even though the “change” is more subtle than occurred in Alice?

And now one more wrinkle.  Suppose a firm represents the client, and sues.  Suppose the judge shifts fees onto the client under 285.  Unless the court holds that those fees are the responsibility of the lawyer bringing the suit, not the client, then the client’ going to be responsible for having sued on an “invalid” patent. Is it going to sue the prosecution firm and say: the law was clear back then, why did you get this patent for me? Look at the damages you caused…?

Stay tuned.


About David

Professor of Law, Mercer University School of Law. Formerly Of Counsel, Taylor English Duma, LLP and in 2012-13, judicial clerk to Chief Judge Rader.

46 thoughts on “Update: If Alice was always the law, why did you get so many “invalid” patents for your clients?

  1. 9

    It’s too bad the defendants can’t have SCOTUS joined as a defendant, arguing that SCOTUS was negligent in failing to clearly “enunciate the law” in a timely fashion. Or for just lying through its teeth when it says it wasn’t legislating from the bench in Alice.

  2. 8

    Why is this article/post only available from the “Recent Patent Posts” listing and not displayed in the list of articles on the main page?

    The same seems to be the case with the Texas Ethics post as well.

    1. 8.1

      You have to go to the “Hricik” side of the blog – click on “Ethics” in the banner at the top of the page.

  3. 7


    Assuming you are still tuned in, rephrasing your headline: Doc, if the latest in imaging technology reveals that the patient had early stage cancer, why weren’t you treating it?

    Switching to patent prosecutors, they have a duty to obtain (if possible) valid patents. There may be an ex post facto breach after Alice, but this was not foreseeable by the patent community (except for a few who now claim prescience). Therefore, the original prosecution was not the proximate cause of the invalid patent.

    The Encyclopedia case is behind a LexisNexis pay-wall. You report the court’s reasoning that defendants would have prevailed in 2009 because of Alice in 2014. This reverses the arrow of time. I guess lay judges can do that.

    You say that fee disgorgement does not require damages, only a breach of duty. Are you saying that every patentee with a business method/software patent now gets their fees back even though the patent has never been asserted and there are no plans to do so. I am dubious.

    In the Encyclopedia case, there were actual damages pre-Alice. The patent owner wasted money on litigation that proved fruitless for reasons unrelated to Alice.

    Something to ponder from Festo, 535 US 722 (2002), at 739: “The Court of Appeals ignored the guidance of Warner-Jenkinson, which instructed that courts must be cautious before adopting changes that disrupt the settled expectations of the inventing community. See 520 U. S., at 28. … ‘To change so substantially the rules of the game now could very well subvert the various balances the PTO sought to strike when issuing the numerous patents which have not yet expired and which would be affected by our decision.’ Id., at 32, n. 6; … As Warner-Jenkinson recognized, patent prosecution occurs in the light of our case law. Inventors who amended their claims under the previous regime had no reason to believe they were conceding all equivalents. If they had known, they might have appealed the rejection instead. There is no justification for applying a new and more robust estoppel to those who relied on prior doctrine.”

    Contrast Alice, 134 S.Ct. 2347 (2014) at 2355: “‘We have long held that this provision contains an important implicit exception: Laws of nature, natural phenomena, and abstract ideas are not patentable.’… We have interpreted § 101 and its predecessors in light of this exception for more than 150 years.”

    And at 2361 in the concurrence: “There is no suggestion in any of th[e] early [English] consideration of process patents that processes for organizing human activity were or ever had been patentable.”

    1. 7.1

      You are not seriously saying that the actual US Supreme Court jurisprudence has been consistent (let alone consistent past the controlling law of 101 (the Act of 1952), are you, Troubled?

      If so, you are indeed Troubled.

      1. 7.1.1


        No, that is the Court speaking. I was just contrasting the concern for settled expectations for the lesser flea of prosecution history estopple vs. section 101.

        From Bilski, 130 S.Ct. 3218 (2010), in Justice Stevens’ concurrence, joined by Ginsburg, Breyer, and Sotomayor, at 3231: “In the area of patents, it is especially important that the law remain stable and clear. … I agree with the Court that, in light of the uncertainty that currently pervades this field, it is prudent to provide further guidance. But I would take a different approach.”

        It looks after 150 years, there is still uncertainty.

        My answer to David’s question about disgorging fees for patents that are now invalid under Alice is that, the fact that Alice has been the law for 150 years was not foreseeable in the Palsgrafian sense.

    2. 7.2

      “Contrast Alice, 134 S.Ct. 2347 (2014) at 2355: “‘We have long held that this provision contains an important implicit exception: Laws of nature, natural phenomena, and abstract ideas are not patentable.’… We have interpreted § 101 and its predecessors in light of this exception for more than 150 years.” ”

      Yes, but you have not “held” what an abstract idea is.

      Is a screw an abstract idea? If a claim recites connection with a fastener is that merely an abstract idea? Connection with a screw? Connection with a 10×32 machine screw? Connection with a stainless steel 10×32 countersunk 2 1/4 inch machine screw?

  4. 6

    “Someone got any ideas?”

    “Go ask Alice
    When she’s ten feet tall

    And if you go chasing rabbits
    And you know you’re going to fall
    Tell ’em a hookah-smoking caterpillar
    Has given you the call
    Call Alice
    When she was just small

    When the men on the chessboard
    Get up and tell you where to go
    And you’ve just had some kind of mushroom
    And your mind is moving low
    Go ask Alice
    I think she’ll know

    When logic and proportion
    Have fallen sloppy dead
    And the White Knight is talking backwards
    And the Red Queen’s off with her head
    Remember what the dormouse said
    Feed your head
    Feed your head”

    link to play.google.com

  5. 5

    Let’s be real: the Supreme Court will never say that Alice changed the law. We all know it did, or I guess a better way of putting it is: we were wrong about what the pre-Alice law meant — despite reading the cases as best we could, and so was the USPTO (which is why it issued all those bad patents, and had to put in place, post-Alice, all of those new guidelines, etc.). So, we were all wrong and Alice merely said what we all were not smart enough to understand the law always was and had been.

    I dunno, some of us were able to call it several years in advance, as all you had to do was read a hundred year old case and recognize that the Federal Circuit was bad at its job.

    Did Alice lay down a particular test? Sure. Did it backtrack on established precedent or take the law in an unforseen direction? Nope.

    Sidenote: The PTO issues terrible claims all the time even with the benefit of Alice. Telling non-lawyers to apply a test second-hand without ever reading any of the cases should not be a standard by which you judge whether the law has changed.

    1. 5.2


      It is not a matter of “calling it” (or even being “told” nebulously and without any legal foundation, but just on “feelings”) how the Court would re-write the law, it is in understanding the law, its history, and its proper authority of being written that is the focal point of this thread.

      We all saw years ago the possibility of the scoreboard being broken and you just don’t get any “cred” for pointing to a broken scoreboard for the wrong score (especially when the topic is the fact that the scoreboard is broken).

    2. 5.3

      “some of us were able to call it several years in advance, as all you had to do was read a hundred year old case and recognize that the Federal Circuit was bad at its job.”

      Until the pendulum swings back and we find out the the Federal Circuit was right all along.

  6. 4

    Shame on us.

    Don’t feel too bad. You were hardly the only one who bought into the absurdity.

    On the other hand, you did have the benefit of having the law carefully explained to you on your own blog, probably several times before the Supreme Court published its opinion. Even in that regard you weren’t alone.

    But, yes, you should feel some shame. Now you can start doing the right thing and educating other people.

      1. 4.1.1

        You quite miss the point Malcolm about the change in law.

        Perhaps if you were not so eager to be smarmy, you would have picked up on that.

        (And yes, an improper change in “law,” by a branch without the authority to change the law IS a broken scoreboard condition).

  7. 3

    If we DO say that Alice did change the law, then we have to face the fact that the Court itself has violated the Constitution and the separation of powers.

    I do not see anyone with enough gumption (in the political arena) to call that spade a spade.

    1. 3.1

      Anon, there are some people who live in the world of the Federal Circuit, a kind of alternative universe. These people are called patent attorneys. They perceive the world the way the Federal Circuit sees it, not the way everyone else sees it.

      Thus when the Supreme Court declares the Federal Circuit jurisprudence in the area of patentable subject matter unacceptable, and in defiance of fundamental law that goes back to Le Roy v. Tatham and O’Reilly v. Morse, patent attorneys suddenly find themselves in the real world and think that it is the real world that has changed.

      1. 3.1.1


        You are mistaken in your characterization and quite miss the entire point of this thread.

        Will you find a way to return to the point of the discussion?

        Are you listening?


          anon, the point being that patent attorneys should know when the Federal Circuit is out of line. True they must follow that court until overturned, but they should hedge their bets.


            …or know when the Supreme Court is out of line.

            You really don’t think that the Supreme Court must be infallible, do you?

            You may have a separation of powers case before them soon – I certainly hope that your understanding of the separation of powers is better than what you are showing here.

            The Separation of Powers doctrine applies to each and every branch in relation to the two other branches. NO one branch is above that doctrine.


              If you are intelligent enough to know and understand the law, take all the points and counter points offered, evaluate them in an inte11ectually honest manner, the answer Les, is most anybody.

              Unless of course you carry the rather odd idea that the Supreme Court by definition can never be wrong (although that rather rules out the “inte11ectually honest” part)…

  8. 1

    David, it would be helpful to understand why the court in this case held the claims to be invalid under 101. Were they directed to a business method? The Federal Circuit overturned the business method exception in State Street Bank which is the case that came down in 1998, five years after the filing date of this patent. Up until that point in time, it was well understood, and the prevailing law, that business methods were not patentable subject matter absent novel means.

    There something does not smell right here from the point of view of why the claims are in this particular case are invalid under 101.

    1. 1.1

      Absolutely wrong Ned – you are trying to retread your argument you attempted right after Bilski.

      It took literally more than a year of pounding it into you that such was not the case.

      To answer Prof. Hricik’s underlying question, is to note that the question in the headline is a trick question. Alice simply was NOT always the law.

      The patents granted prior to Alice passed under the then law and that now may be invalid because of Alice are only invalid because of the change in law that the Supreme Court (not the branch of the government authorized to write patent law) has – in fact – rewritten patent law.

      1. 1.1.1

        anon, well, you and I will simply have to agree to disagree. One has to look at the situation the way it was in 1993, five years before State Street Bank.


          This has nothing to do with “looking at the situation in 1993.”

          This has everything to do with your curse-ade against software and business method patents.

    2. 1.2


      I don’t know if the outcome would have been different had the court applied 1993 (or 2009, when the patent suit was tried) law, rather than 2014 law. Presumably, it made a difference because the parties were fighting over which applied. And, I think obviously, the fact that the USPTO issued patents that were “invalid” after Alice but not before.


      1. 1.2.1

        David, OK. But my point is simply that if the claims were not invalid in ’93, the should not be invalid after Alice, for Alice simply restored the status quote ante in my view.

        Thus, from the viewpoint a 1993 filing, Alice changed nothing.


          You presume too much about 1993, Ned.

          Prof. Crouch had a guest post awhile back that showed business method patents throughout the entire span of the US patent system.

          You also run away from other points that I present on this topic – like why did Congress make a limited protection in the original Prior User Rights if your view that business method patents were never proper? There would be NO SUCH NEED if you were correct, and the legislation passed would be invalid on its face (or not passed at all).

          And yet, reality intrudes and you refuse to listen.


          I think the premise that Alice changed nothing flies in the face of objective evidence — USPTO issued thousands of patents that it “shouldn’t have,” and then had to change examination rules/standards, and 101 was never used as a basis for challenge much before Alice, never (I think, literally, never) in a facial (12(b)(6) or 12(c)) challenge.

          So, I think the objective evidence is that Alice changed the law…


            David, until 1996 or so, the MPEP still relied on Hotel Security.

            There is little doubt that the PTO was way, way off base when it issued patents for simply reciting a computer or CRM. But that was because of the Alappat dicta in ’94 and State Street Bank in ’98.

            The PTO issued thousands of isolated DNA patents as well. The law never authorized them. Ever.


              until 1996 or so, the MPEP still relied on Hotel Security.

              I don’t think so – and certainly NOT in the “version” that you have attempted to spin, Ned (even Prof. Crouch told you that you were not using that case properly).

              Further – as I explained to you, you continue to misrepresent a holding of Alappat as mere dicta. Remember – there can be multiple holdings in a case, and a holding is anything necessary for the case decision to hold as it did. Had the government won on ANY of its alternative arguments, the case would have come out differently – thus there is a holding for each of the alternative arguments.

              Try listening Ned.


                anon, how many time do I have to quote you State Street Bank before you begin to understand just what happened. Here it is again:

                “[I]n the most recent edition of the Manual of Patent Examining Procedures (MPEP) (1996), a paragraph of § 706.03(a) was deleted. In past editions it read:

                Though seemingly within the category of process or method, a method of doing business can be rejected as not being within the statutory classes. See Hotel Security Checking Co. v. Lorraine Co., 160 F. 467 (2nd Cir.1908) and In re Wait, 24 USPQ 88, 22 C.C.P.A. 822, 73 F.2d 982 (1934).

                MPEP § 706.03(a) (1994). This acknowledgment is buttressed by the U.S. Patent and Trademark 1996 Examination Guidelines for Computer Related Inventions which now read:

                Office personnel have had difficulty in properly treating claims directed to methods of doing business. Claims should not be categorized as methods of doing business. Instead such claims should be treated like any other process claims.

                Examination Guidelines, 61 Fed.Reg. 7478, 7479 (1996). We agree that this is precisely the manner in which this type of claim should be treated. Whether the claims are directed to subject matter within § 101 should not turn on whether the claimed subject matter does “business” instead of something else.”

                Obviously, Rich was either clueless or he pretended to be clueless. But it was the PTO that lead the way here.

                1. You keep on wanting to put words in my mouth and I keep on correcting you.

                  My view has nothing to do with State Street, and is completely founded on the Act of 1952 with well accepted case law.

                  You really need to listen.

                2. …and you cannot pretend that even Prof. Crouch told you that you were misusing that very same case.

                  And as I recall, another attorney ripped you apart on the use of that case as well (just cannot remember the guy’s name and I did not bookmark it).

                3. As for the MPEP, you are aware that it itself says that it has no force of law and that there are several errors of cases – those cases simply NOT being read correctly, right?

                  You need a better authority – and you should know that.

                4. The point here is that you THINK that the MPEP reflected the law.

                  As you are – or should be aware – not everything in the MPEP does ACTUALLY reflect the law as it exists.

                  That’s kind of why the Office makes the statement that the MPEP is NOT the final word on what the law IS.

                  Are you not listening?


            This is the pragmatic position. Prior to Bilski, subject matter eligibility was a footnote in patent law right next to utility. Both tests were presumed to be passed by 99.99% of patent applicants, with notable exceptions such people attempting to patent mathematical truths like e=mc2.

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