By David Hricik

This one will make your head spin, especially the statutory construction part.  The case is Encylopaedia Britannica, Inc. v. Dickstein Shapiro LLP (D. D.C. Aug. 26, 2015).

The Dickstein Shapiro firm was 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, however.

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 firm then argued that, as a result, the claims were ineligible and so any malpractice by it in 1993 could not have been the but-for cause of harm.  The claims would have been “invalid” under 101 even had it not botched the 1993 application, and so there was no harm caused by any error it made.

To put this in context:  Because of a 2014 Supreme Court decision, the 2006 case would have been lost anyway because, in 1993, the claims were not eligible for patenting.

And the argument worked.  The district court granted a motion to dismiss for failure to state a claim, finding the subject matter ineligible on the face of the patent.

I’ll leave the merits of that to others.

What is interesting is the court’s approach to retroactive application of Alice.  The issue was whether in the 2006 case, even had the firm’s alleged malpractice not caused the invalidity judgment, the claims were “invalid” under 101 then.  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.

There’s a lot to unpack here.

First, the retroactivity of Alice bodes ill for lawyers who obtained patents now being held “invalid” under 101.  If the law “always” was this way, why did you advise your clients to spend so much money on a patent so clearly invalid that a judge could decide it by looking at it? But keep reading, because you and I know Alice and the rest changed the law.  (Indeed, the USPTO changed its examination procedures to adjust to it!)

Second, there could be enormous consequences if Alice changed the Court’s prior interpretations of 101.

While as a matter of statutory construction the retroactivity principle relied upon by the district court is correct, 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.

More broadly, however, if Alice (and the rest) changed the meaning of 101, then it means many patents now being held “invalid” should not be judged under Alice.

I’ve been waiting for someone to make the retroactivity argument (as with Therasense, which clearly changed the CAFC’s interpretation of “unenforceability”).  It would be fun to try to see someone use Alice and apply it to the Supreme Court line of cases and make them all fall in a line.