Tag Archives: Federal Circuit En Banc

“Top 10” Patent Cases of All Time

Patent,

By Jason Rantanen

I teach the Introduction to Intellectual Property course each spring here at Iowa.  Because this is a survey course that covers multiple areas of law that themselves each can be covered in an intermediate-level course, I always find it a fascinating challenge to balance breadth and depth in a way that maximizes students' ability to learn and apply the law. 

This coming semester I'm trying something new: rather than use a regular casebook, I'm taking a "top 40" cases approach combined with a hornbook.  The idea here is to use the hornbook together with lectures to cover the breadth of intellectual property while using discussion of the cases to dig more deeply into particularly significant or interesting moments in patents, copyrights, trademarks, trade secrets, and associated areas of law.  (For those of you not familiar with conventional casebooks, they're typically structured so that preparing for a single class involves reading 2-4 opinions plus associated casenotes.)

My current "top 10" list of patent cases is:

Bowman v. Monsanto, 133 S.Ct. 1761 (2012)
Diamond v. Chakrabarty, 447 U.S. 303 (1980)
Bilski v. Kappos, 561 U.S. __ (2010)
Egbert v. Lippmann, 104 U.S. 333 (1881); City of Elizabeth v. American Nicholson Pavement Co., 97 U.S. 126 (1878) (taught together; yes, this technically makes it 11 cases)
KSR v. Teleflex, 550 U.S. 398 (2007)
The Incandescent Lamp Patent case, 159 U.S. 465 (1895)
Phillips v. AWH, 415 F.3d 1303 (Fed. Cir. 2005) (en banc)
Therasense v. Becton Dickinson, 649 F.3d 1276 (Fed. Cir. 2011) (en banc)
Global-Tech Appliances v. SEB, 563 U.S. __ (2011)
Bonito Boats v. Thunder Craft Boats, 489 U.S. 141 (1989)

These cases track the subject matter I cover in the classroom, so while there are more great cases in each area, I've limited it to just the top case or cases in each.   Also, I recognize that Bowman v. Monsanto is probably not on most folks' top 10 lists; however, I think it's a great way to introduce students to patent law and is particularly relevant here in the midwest.

Are there other cases that you think are even more important or interesting?  Keep in mind that adding cases also requires removing an equivalent number of cases from the list.

US Government Suggests that Supreme Court Reject Federal Circuit’s Divided Infringement Jurisprudence

Patent, ,

By Dennis Crouch

Limelight Networks, Inc. v. Akamai Technologies, Inc. (Supreme Court 2013)

Akamai is the licensee of MIT’s patents for that solve some problems associated with distributing large amount of data to individual servers and endpoints in a large computer network (such as the Internet). The ideas therein are used by Limelight to distribute video content on behalf of many of the largest content providers in the world. However, the Akamai/MIT patent has a problem in that several steps of the claimed method are performed by Limelight but others are performed by its customers. Prior Federal Circuit cases would have found Limelight not liable in this situation because no single entity (or its agents) performed each and every step of the claimed invention. The Federal Circuit rejected that rule in its en banc decision in this case – holding instead that Limelight could be held liable under 35 U.S.C. § 271(b) for practicing several of the steps itself and inducing others to perform the remaining steps.

Limelight has petitioned the Supreme Court for a writ of certiorari, asking the following question:

Whether the Federal Circuit erred in holding that a defendant may be held liable for inducing patent infringement under 35 U.S.C. § 271(b) even though no one has committed direct infringement under § 271(a).

The question presented by Limelight is somewhat misleading because the Federal Circuit left-open for another day whether Limelight’s activity could be considered direct infringement under § 271(a). Adamai/MIT re-wrote the question:

Whether the Federal Circuit correctly held that a determination of induced infringement under § 271(b) does not require a predicate finding that a single entity was liable for infringement under § 271(a), under circumstances where all of the steps of a method claim are performed, but the inducer performs some steps itself and induces another to perform the remaining steps?

The Supreme Court then asked the US Solicitor General to provide comments on behalf of the US Government. In a brief signed both by the US Solicitor General Donald Verrilli and USPTO Solicitor Nathan Kelley, the US Government has supported the petition for writ of certiorari and sughested that the court reverse the Federal Circuit Decision.

The US Government position is typically seen as the most important and predictive brief on whether the Supreme Court will hear a particular case.

The government writes:

The Court should grant the petition … hold that a party cannot be liable for inducement under 35 U.S.C. 271(b) if no party has directly infringed the patent.

In its brief, the Government recognizes that, if the court follows its proposal, that the law “will likely permit vendors such as Limelight to avoid liability altogether.” The brief goes on to indicate that the “statutory gap is unfortunate, but reflects the better reading of the current statutory language in light of establish background principles of vicarious liability.”

The basic statutory argument is that 271(b) creates liability against someone who “actively induces infringement.” And, the implication that the word infringement in the statute means infringement under 271(a).

SCOTUS Blog has the briefs: http://www.scotusblog.com/case-files/cases/limelight-networks-inc-v-akamai-technologies-inc/

Is Software Patentable?: Supreme Court to Decide

Patent, ,

By Dennis Crouch

50-years on, we still don’t have the answer as to whether computer programs are patentable.

The Supreme Court has granted a writ of certiorari in the software patent case of ALICE CORPORATION PTY. LTD. V. CLS BANK INTERNATIONAL, ET AL., Docket No. 13-298 (Supreme Court 2013). The Australian patent holder Alice Corp presented the following question:

Issue: Whether claims to computer-implemented inventions – including claims to systems and machines, processes, and items of manufacture – are directed to patent-eligible subject matter within the meaning of 35 U.S.C. § 101 as interpreted by this Court.

In a highly fractured en banc decision, the Federal Circuit determined that Alice Corp’s claims lacked eligibility. Because none of the opinions in the decision carried a majority, the result was that the Federal Circuit only added confusion to the area.

Alice Corp’s Patent No. 7,725,375 covers software for managing the risk associated with an online transaction essentially by using an electronic escrow service. Claim 26 recites how the system would work:

26. A data processing system to enable the exchange of an obligation between parties, the system comprising:

a communications controller,

a first party device, coupled to said communications controller,

a data storage unit having stored therein (a) information about a first account for a first party, independent from a second account maintained by a first exchange institution, and (b) information about a third account for a second party, independent from a fourth account maintained by a second exchange institution; and

a computer, coupled to said data storage unit and said communications controller, that is configured to (a) receive a transaction from said first party device via said communications controller; (b) electronically adjust said first account and said third account in order to effect an exchange obligation arising from said transaction between said first party and said second party after ensuring that said first party and/or said second party have adequate value in said first account and/or said third account, respectively; and (c) generate an instruction to said first exchange institution and/or said second exchange institution to adjust said second account and/or said fourth account in accordance with the adjustment of said first account and/or said third account, wherein said instruction being an irrevocable, time invariant obligation placed on said first exchange institution and/or said second exchange institution.

The patent also claims “a computer program” for accomplishing the same result.

Federal Circuit: Patent Claims Broadened During Prosecution Fail Written Description Requirement

Patent, , ,

By Dennis Crouch

Synthes USA v. Spinal Kinetics (Fed. Cir. 2013)

In a split opinion, the Federal Circuit has affirmed the jury verdict that Synthes’ asserted patent claims are invalid for lack of written description and has also affirmed the district court’s denial of SK’s request for exceptional-case attorney fees under 35 U.S.C. § 285. Judge O’Malley penned the majority opinion that was joined by Judge Prost. Judge Taranto dissented – arguing that the evidence presented at trial was – as a matter of law – insufficient to prove that the claims lacked adequate written description.

Synthes’ U.S. Patent No. 7,429,270 is directed to an intervertebral implant invented by a team of Swiss researchers. The original application was placed on file as an international application (PCT) in 2003. The U.S. national stage application was then filed in 2006. Five-years into prosecution, the patentee substantially amended the claims and added a new set of claims that were then asserted against SK. Claims 29-31. As part of these new claims, Synthes included the new terms “opening” and “plurality of openings” that had not been used previously in the patent application document. The original disclosure was directed more particularly toward grooves rather than the seemingly broader term openings. According to SK, Synthes added these limitations to the claims only after the accused SK product was on the market in a calculated attempt to shift the scope of the patent to cover SK’s improved technology. Under US patent law, that sort of intentional shifting of patent claim scope is permissible so long as the amended claim is sufficiently supported by the original disclosure. See See Liebel-Flarsheim Co. v. Medrad, Inc., 358 F.3d 898, 909 n.2 (Fed. Cir. 2004).

It is not surprising that the infringement litigation turned on the proper construction of the “plurality of openings.” As is usual for patent litigation, the patentee was working to find a “right-sized” patent that was broad enough to cover the accused product but narrow enough to still be valid. Here, the approach was to create a term “opening” in an implant-plate that was generic enough to both (1) be described by the disclosed radial plate grooves and (2) capture the elongated circle slots of the accused device. However, the jury sided with the accused infringer and found the claims invalid under the written description doctrine.

On appeal, the Federal Circuit affirmed – finding that the substantial evidence supported the jury verdict.

Sufficiency of written description requires that the original disclosure reasonably convey to PHOSITA that the inventor had possession of the claimed subject matter at the time of filing. The exact level of detail required depends upon “the nature and scope of the claims and on the complexity and predictability of the relevant technology.” See Ariad Pharms., Inc. v. Eli Lilly & Co., 598 F.3d 1336, 1351 (Fed. Cir. 2010) (en banc).

In affirming the jury verdict, the basically followed the precedent of Leibel-Flarsheim to find that increased breadth-of-claim was not supported by the more narrow original specification. In particular, the court noted that the original disclosure only included “groove” examples, not slots or openings on the plate. (“The written description, however, never discloses anything broader than using grooves to anchor the fiber system to the cover plates.”) That intrinsic evidence was then bolstered by expert testimony regarding the important differences between grooves, slots and other openings. Based upon this evidence, the court found substantial evidence for the jury verdict of invalidity.

[T]he jury was asked to determine whether the written description disclosure of “grooves” “reasonably convey[ed] to those skilled in the art that the inventor had possession of [an intervertebral implant that could utilize any sort of opening located anywhere on the cover plates to anchor the fiber system] as of the filing date.” Ariad, 598 F.3d at 1351. The jury did not believe so and, when all reasonable inferences are drawn in favor of the jury verdict, we must affirm that decision.

One tricky issue here is the various burdens. On review, the appellate court looks for substantial evidence (more than a mere scintilla) but the jury had to find clear and convincing evidence of invalidity.

Writing in dissent, Judge Taranto framed this case is one where the “structural claim language … is broader than the specific embodiments disclosed in the written description.” Of course, Federal Circuit precedent allows claims to be broader than the specific embodiments. See In re Rasmussen, 650 F.2d 1212, 1215 (CCPA 1981). According to Taranto, in this type of situation (alleged over-breadth), the challenger must show that the “particular difference” between the claim and the disclosure “has a material effect on whether the product or process would achieve the aims of the claims at issue, with materiality of the effect not the same as non-obviousness but related to predictability.” In other words, broader conceptions of the invention that would be predictable by PHOSITAs mind after reading the specification should be deemed to fit within the written description.

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On the concept of attorney fees under 35 U.S.C. § 285 – the court reiterated its rule sanctions against a losing patentee can only be imposed after a showing of clear and convincing evidence of either (1) litigation misconduct; (2) bringing the litigation in subjective bad faith; or (3) bringing objectively baseless litigation. Here, the appellate court agreed with the district court that SK had failed to demonstrate clear-and-convincing evidence of any one of those three justifications for fees.

Enforcing Injunctions: Perhaps Not so Powerful

Patent, ,

By Dennis Crouch

NCube (ARRIS Gp) v. SeaChange (Fed. Cir. 2013)

Injunctive relief is a powerful mechanism for stopping ongoing patent infringement and for forcing settlement by placing large hold-up costs on adjudged infringers who are locked-into maintaining their technology profile. In the area of multi-component systems, many accused-infringers and academics argue that the hold-up costs of injunctive relief sets-up an imbalance of power that results in a windfall settlement for minor-component patentees. The prototypical case is where an injunction is ordered to stop sales of a complex product based upon the finding that one of the many components infringes a patent.

The decision here offers a counterbalance based upon the recognition that product specifications and production methods are continually updated and modified. Major modifications may result in a new product version, but more minor changes regularly implemented without direct customer notification.

Here, the ARRIS patent covers a system of delivering streamed video that have been purchased online. Patent No. 5,805,804. A jury found that SeaChange’s ITV product was infringing and the district court entered a permanent injunction – enjoining SeaChange from using or selling the ITV product or “any devices not more than colorably different therefrom that clearly infringe the Adjudicated Claims of the ‘804 patent.” Although stated within the same paragraph here, it actually took four years for the court to order the permanent injunction following the jury verdict. The delay took into account post-verdict motions and briefing and then an appeal to the Federal Circuit where the verdict was affirmed.

By the time the injunction order became effective, SeaChange had modified its ITV system in order to avoid infringement. This approach is common. In essence, when an injunction issues regarding a minor component of a product, the outcome is normally not to cease manufacturing and sales but rather to modify or “patch” the product design and thus avoid the injunction. It’s also common that the work-around is – from the patentee’s point of view – still within the coverage of the patent.

After a failed settlement attempt, ARRIS filed a contempt motion asking the district court to stop the sales. However, the district court refused and that refusal has been affirmed on appeal the Federal Circuit. Rather, in order to stop the new product ARRIS would need to file an entirely new federal lawsuit.

Contempt motions are actually difficult to win. The basic rule is that the party seeking to enforce the injunction must provide clear and convincing evidence that the accused activity falls within the injunction. For new product designs, the courts only allow contempt when the new product is “no more than colorably different” than the one found to be infringing. See TiVo v. EchoStar (Fed. Cir. 2011) (en banc).

Here, the modification was to basically take a ClientID out of a particular table stored on the system and instead stored elsewhere on the system. Although the ClientID still performs the same function, the change “is a significant change to the system.”

The result then is that ARRIS only avenue for enforcement is to file a new infringement lawsuit.

Supreme Court Action Today

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By Dennis Crouch

Supreme Court Action on 10/7/2013

Extraterritorial Application of US Patent Law: The Supreme Court has issued an invitation to the Solicitor General to file the Views of the Obama Administration (CVSG) in Maersk Drilling USA, Inc. v. Transocean Offshore Deepwater Drilling, Inc., Sct. No. 13-43 (2013). The focus of the case is location – and, what is meant by an “offer to sell . . . within the United States” under 35 U.S.C. § 271(a). The Federal Circuit held that the actual location of the offer is immaterial so long as the offer contemplated performance within the United States.

Subject Matter Eligibility: The Supreme Court has denied certiorari in the § 101 case challenging PerkinElmer’s patented “method for determining whether a pregnant woman is at an increased risk of having a fetus with Down’s syndrome.” Intema Ltd. v. PerkinElmer, Inc., Supreme Court No. 12-1372. The case with a much greater shot is Alice v. CLS Bank and perhaps its companion WildTangent v. Ultramcercial. Briefing of the petition continues in those cases.

False Marking: The Supreme Court has denied certiorari in PubPat’s False Marking case. PubPat had challenged the AIA’s retroactive rejection of non-competitor qui tam suits for false marking. Public Patent Foundation, Inc. v. McNeil-PPC, Inc., Sct. No. 13-161.

Prior Art Presumed Enabling: The Supreme Court has denied certiorari in the Finjan’s challenge to the PTO’s presumption that prior art is enabling. Finjan, Inc. v. U.S. Patent and Trademark Office, Sct. No. 12-1245.

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Patent Cases Where Petition for Certiorari has been Filed:

Limelight v. Akamai, Sct. No. 12-786, is still pending at the Supreme Court and awaiting comments from the US Solicitor General (CVSG) before the court decides whether to grant the petition for writ of certiorari. The question presented in that case is whether indirect infringement (inducement) requires underlying direct infringement by a single actor. The Federal Circuit says “no.”

Hyundai Motor America, Inc. v. Clear with Computers, LLC, Sct. No. 13-296. This pending case is a follow-up to the Supreme Court’s 2011 decision in Microsoft v. i4i where the court held that invalidity defenses must be proven with clear and convincing evidence. That decision included a concurrence by Justice Breyer indicating that questions of law (such as obviousness) need not be proven with clear and convincing evidence. “The question presented is whether, following i4i, a district court may … instruct a jury to apply the heightened ‘clear and convincing’ standard not only to disputed factual aspects of an invalidity claim, but also to the legal aspects of such a claim – including the ultimate question of a patent’s invalidity?”

The petition for writ of certiorari in Sony v. 1st Media, Sct. No. 12-1086, is fully briefed but has not yet been decided. That case involves the extent of district court discretion in evaluating the equitable doctrine of patent unenforceability. The case largely challenges the strict requirements of Therasense.

In Fox Group, Inc. v. Cree, Inc., Sct. No. 12-1378, the asserted patent was found invalid under 35 U.S.C. § 102(g)(2) since the subject matter of the patent had previously been invented. The statute only works if the prior inventor did not abandon, suppress, or conceal the prior invention and here the prior inventor concealed how to make the invention, did not commercialize it, and did not apply for a patent. However, the prior inventor did disclose the fact of the invention and publicly offered some non-enabling clues to the invention. Although briefing is now complete, the Supreme Court took no action in this case yet.

Nautilus v. Biosig is pending at the Supreme Court and awaiting a response from Biosig. The case questions whether the “Insolubly Ambiguous” standard for indefiniteness is overly strict.

Another pending petition is Nokia v. v. International Trade Commission, Sct. No. 12-1352. The case focuses on patent enforcement entities and the “domestic industry” requirement for USITC jurisdiction.

Organic Seed Growers and Trade Ass’n v. Monsanto Co, Sct. No. 13-303, is also pending as a petition for writ of certiorari. The case argues that organic farmers have jurisdiction to challenge Monsanto’s GMO seed patents.

Saffran v. Johnson & Johnson, Sct. No. 13-405. In this case, the patentee essentially asks the Supreme Court to decide the issue before the en banc Federal Circuit in Lighting Ballast Control. I.e., “Whether the Federal Circuit should have given deference to the district court’s factual findings in construing the patent claims.” This petition is something of a place-holder to give the patentee time to see the outcome of Lighting Ballast.

Artesyn Technologies, Inc. v. SynQor, Inc., Sct No. 13-375. In this pending case, the losing defendant has asked that the Supreme Court tell the Federal Circuit to “Follow KSR” and also “Follow Global-Tech” rather than recreating the formal TSM test and allowing recklessness serve as proof of knowledge for induced infringement. In the similar pending petition of Arthrex, Inc. v. Smith & Nephew, Inc., Sct. No. 13-290, the petitioner asks for a further definition of “willful blindness” for inducement.

Power Integrations, Inc. v. Fairchild Semiconductor International, Inc., Sct. No. 13-269. This damages case focuses on when lost-sales outside of the US can be captured under US law. Here, the patentee argues that those sales should be accounted-for when they are “direct and foreseeable result of patent infringement inside the United States.” Briefing is ongoing at the petitions stage.

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Patent cases where the Supreme Court has granted certiorari and will be hearing the case this term:

Medtronic Inc. v. Boston Scientific Corp., Sct. No. 12-1128 (Does a Declaratory Judgment plaintiff who is also an ongoing licensee of the patent have the burden of proving non-infringement?).

Highmark Inc. v. Allcare Health Mgmt. Sys., Sct. No. 12-1163 (When must deference be given to a lower court judgment regarding an exceptional case finding under §285?).

Octane Fitness, LLC v. Icon Health and Fitness, Inc., Sct. No. 12-1184 (What is the proper definition of an “exceptional case”?).

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Hal Wegner follows these developments closely and his Top-Ten lists are available through the LAIPLA website: http://www.laipla.net/hal-wegners-top-ten-patent-cases/

Fascinating Split Decision on Impact of a Rule 36 Affirmance that May have Significant Consequences

Ethics, , ,

Wow, this one — Tecsec, Inc. v. IBM (Fed. Cir. 2013) — may have huge repercussions for appellate strategy, and also for the legal impact of hundreds of existing judgments. It deserves a read in full.  Judge Reyna's dissent captures what happened:

The majority concludes that the district court misconstrued various claim terms from three TecSec, Inc. patents. It reaches this conclusion notwithstanding that the same claim terms, same constructions, same arguments, and same summary judgment order were previously before this court and reviewed on January 9, 2012. See TecSec, Inc. v. Int’l Bus. Mach. Corp. (“TecSec I”), 466 Fed. App’x 882 (Fed. Cir. 2012). In TecSec I, this court summarily affirmed the district court’s grant of summary judgment of noninfringement pursuant to Rule 36. Id. After TecSec lost its case against IBM, and without offering any additional evidence against the other defendants now before us, TecSec stipulated to noninfringement and has once again appealed the same district court’s claim constructions to this court. I respectfully dissent because I believe that entertaining this appeal gives TecSec a second bite at the apple and undermines the utility of Rule 36. 

The key paragraph to the majority's basis for reaching a different result is this:

The Rule 36 judgment in the IBM appeal summarily affirmed the district court’s judgment that IBM did not directly or indirectly infringe TecSec’s patents. The district court’s judgment was based on two independent grounds. The district court first ruled as a matter of law that TecSec’s direct and indirect infringement claims failed for failure of proof that IBM itself or any of its customers performed every claimed step or made, used, sold, offered for sale, or imported any system containing all of the limitations of the asserted claims. As the dis- trict court stated in its opinion, without questioning TecSec’s construction of the terms now at issue, “TecSec has utterly failed to come forward with any evidence that IBM itself performed any of the steps of the method claims,” and “even if some user-implemented system were to meet all of the asserted claim limitations—which, as explained below it cannot . . . —TecSec has provided no evidence that IBM ever made, used, sold, offered to sell, or imported that entire claimed system . . . .” Summary Judgment Order, 769 F. Supp. 2d at 1010, 1012 (first emphasis added). The district court drew a similar conclusion regarding indirect infringement, as to which it found, as well, insufficient proof of the required intent. Given the absence of evidence that any steps were per- formed by IBM or that an entire claimed hard- ware/software system was ever made, used, sold, offered to sell, or imported by IBM or its customers, the district court was compelled to find no direct or indirect infringe- ment. Pennwalt Corp. v. Durand-Wayland, Inc., 833 F.2d 931, 949–50 (Fed. Cir. 1987) (en banc) (“Every Supreme Court decision which has addressed the issue of infringe- ment of a patent claim, beginning with Prouty v. Draper, 41 U.S. (16 Pet.) 335, 10 L.Ed. 985 (1842)—and the prece- dent is voluminous—has held that where a part of the claimed invention, that is, a limitation of the claim, is lacking in the accused device exactly or equivalently, there is no infringement.”) The district court, in finding a complete failure of proof regarding any act of infringe- ment by IBM or its customers, did not rely on any rejec- tion of TecSec’s constructions of the terms at issue here. Indeed, IBM represented to the court that we could affirm the district court’s judgment solely based on TecSec’s “complete failure of proof” and did not “need to get to claim construction.” TecSec, Inc. v. Int’l Bus. Machs. Corp., No. 2011-1303, Oral Arg. at 19:30–24:55, available at http://oralarguments.cafc.uscourts.gov/default.aspx?fl=20 11-1303.mp3. While the district court also ruled in the alternative that TecSec failed to show that IBM’s software met various claim limitations, as construed, our Rule 36 decision does not articulate a basis for affirmance, let alone an explication on claim construction. On this record, it cannot be concluded simply on the basis of this court’s summary affirmance that we expressly or by necessary implication decided the claim construction issues in the IBM appeal .

The majority later reasoned:  "Had claim construction been the only issue in the IBM appeal, and had that claim construction been essential to sustaining the judgment of noninfringement, the preclu- sive effect of our Rule 36 judgment would have been undeniable. But that was not the case."

I have a lot of questions.  If infringement can be found, or not, only after claim construction (I think that's right, absent marginal odd-ball cases), then claim construction was necessary to the judgment.  I also wonder how this fits in with the general rules about the impact of an affirmance of a judgment on alternate grounds, which the court does not discuss (perhaps the defendants did not appreciate these obscure doctrines; I don't know).  

If the panel decision is correct, doesn't it mean that a lot of appealable judgments that were "affirmed" on appeal have no impact, even on the parties to that appeal?  Suppose the district court clearly construes the claims, and based on that finds the patent both invalid and non-infringed. The case is Rule 36'd.  Is nothing decided except claim construction?  Isn't the patent, once again, "valid" because there is no binding judgment of invalidity?  I may be missing something… 

I bet there are an enormous number of fact patterns that might be implicated by this.  I am trying to get my head around how a district court's order, which is binding on the parties, becomes non-binding when affirmed on appeal?

I know that this may have huge impact on Rule 36; if a panel's decision does not resolve claim construction, unless it is somehow more "necessary" than it was here, then perhaps a panel should not use Rule 36 very often?  Interesting case with lots of systemic ripples, perhaps.

 

 

Patent Law Federalism (Part II): Protecting the Free Speech Interest of Patent Owners to Conduct an Out-of-Court Patent Enforcement Campaign

Patent,

By Dennis Crouch

Activision TV v. Pinnacle Bancorp (D.Neb 2013)

In a second opinion in as many weeks, Federal Judge Bataillon (D.Neb.) has again ruled against the Nebraska State Attorney General and the state’s campaign against patent enforcement activities. [Link to Decision] Activision holds several patents that essentially cover the operation of a digital menu board with photographs. See U.S. Patent Nos. 8,330,613 and 7,369,058. And the company has sued a host of defendants and has sent out cease-and-desist letters to an even larger group, including some in Nebraska.

In response to those enforcement activities, the Nebraska Attorney General sent a letter to Activision’s litigation counsel ordering the firm to “immediately cease and desist the initiation of any and all new patent infringement enforcement efforts within the State of Nebraska pending the outcome of [the Attorney General] office’s investigation.”

In the first opinion, Judge Bataillon held that the firm could continue to represent Activision in Federal Court patent litigation by enjoining enforcement of that aspect of the Attorney General’s order. Following that order, Activision pressed on – asking the court to also enjoin the entire Attorney General order so that the firm could continue to pursue new out-of-court enforcement activities – such as contacting infringers and demanding that they pay for licenses. The Court has now sided with the patentee and against the Attorney General – finding that the restriction on enforcement activities likely operate as a prior-restraint on speech in violation of Activision (and its Attorneys) First Amendment rights of Free Speech and their Due Process rights.

The court finds the cease and desist order in this case is akin to a prior restraint. . . . The court finds Activision is likely to win on the merits as there is no claim or evidence to date of bad faith. Further, as there is no claim of bad faith, federal law governing these patents, including sending initial letters to businesses believed to violate a patent owned by Activision, is preempted by the federal government. Also, Activision has a First Amendment right to associate with counsel of its choosing without interference from the state of Nebraska. In addition, the cease and desist order operates in this case as a prior restraint on Activision’s speech and association rights. For these reasons, the court finds Activision is likely to win on the merits. . . .

The court is deeply concerned about the ability of the Attorney General to issue cease and desist orders, prior to the conclusion of the investigation, prior to any negative findings, prior to any hearings, and prior to permitting submission of documents and evidence by the Farney Daniels law firm. On the contrary, the Attorney General sent a request for information to Farney Daniels the same day it sent the cease and desist order, and gave Farney Daniels until August 18, 2013, to respond. Farney Daniels responded, and no further actions have been taken. The inability of Farney Daniels to submit such letters to businesses in Nebraska clearly infringes on the First Amendment rights of Activision to be represented by the counsel of their choice.

This opinion comes as a result of Activision’s motion for preliminary injunction (that has now been granted). Thus, the court found that the patentee was likely to win its case on the merits and that the Attorney General order was causing immediate irreparable harm. Under the laws of Appellate Procedure, the Attorney General has the right to immediately appeal this decision to the Court of Appeals to the Federal Circuit (where he would lose).

An important aspect of this decision is that it is not limited to patent law issues. Rather, the same First Amendment and Due Process claims here would apply any time the Attorney General issues a cease-and-desist order prior to conducting any investigation.

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To be clear, the court did not shut-down the Attorney General’s investigation but instead found that it is improper for the Attorney General to compel silence without even conducting an investigation. “The court notes, there is no doubt the Attorney General generally has the power to investigate activity that it believes violates state law. . . . If … at some point during the investigation evidence supports a claim of bad faith, the Attorney General is free to revisit this preliminary injunction with the court.”

Supreme Court’s New Patent Cases

Patent, , , , ,

By Dennis Crouch

The Supreme Court today granted writs of certiorari in two patent-related cases appealed from the Court of Appeals for the Federal Circuit and one copyright case out of the Ninth Circuit.

  • Octane Fitness, LLC v. ICON Health & Fitness, Inc., Docket No. 12-1184;
  • Highmark Inc. v. Allcare Health Management Sys., Docket No. 121163; and
  • Petrella v. MGM, Docket No. 12-1315.

The patent cases fit as a pair and both ask questions regarding the award of attorney fees to a prevailing party. In the US, each party to a litigation ordinarily pays its own attorney fees. Thus, although an accused infringer who successfully raises an invalidity defense will not pay damages to the patentee, that prevailing defendant will still need to pay its attorneys and experts for the thousands of hours spent defending the lawsuit. Likewise, a patentee who wins an infringement lawsuit generally takes a substantial portion of any award and turns it over to the attorneys and experts who turned the patent into cash.

Rule 11(c) of the Federal Rules of Civil Procedure offers sanctions for litigation abuses and indicates that reasonable attorney fees can serve as one form of sanctions. In addition, the section 285 of the Patent Act provides that a “court in exceptional cases may award reasonable attorney fees to the prevailing party.” 35 U.S.C. § 285. The language of Section 285 was first included in the 1946 statutory revision of damage calculations. However, that rather than limiting the award to “exceptional cases” the 1946 statute provided that “[t]he court may in its discretion award reasonable attorney’s fees to the prevailing party.” I have not researched the legislative history behind this particular

In general, accused infringers who win patent cases have three particular complaints regarding the “exceptional case” limitation: (1) that the court has too narrowly interpreted the statute so that attorney fees are rarely awarded; (2) The second complaint is that fees are more likely to be awarded to a prevailing patentee (typically based upon willful infringement) than to a prevailing defendant despite Supreme Court precedent that suggests “prevailing plaintiffs and prevailing defendants are to be treated alike.” (quoting the Supreme Court copyright case of Fogerty v. Fantasy). (3) Finally, the parties complain that the Federal Circuit is too quick to overturn fee-awards rather than providing substantial deference to the district court judgment. I should point out here that – at this point – these arguments do not have strong empirical support.

Over the years, there has been substantial academic debate on the policy potential of a more rigorous loser-pay rule. The primary idea is that the loser-pays rule reduces speculative litigation and would “limit the tactical leverage gained by a party with a weak case threatening a defendant with costly litigation.” At the same time, the created-risk may also over-deter by also discouraging valid claims. As Jay Kesan explains, in general, the outcome of a balanced fee shifting regime is difficult to predict since parties who believe they have a strong case are more likely to sue (with the belief they will both compensatory recover damages and recoup attorney fees). “If both parties are pessimistic, settlement will likely occur under either system. However, if the plaintiff is optimistic, he is more likely to litigate because he will get a judgment without incurring costs.” Jay P. Kesan, Carrots and Sticks to Create a Better Patent System, 17 Berkeley Tech. L.J. 763 (2002). By making more at-stake in the lawsuit, we also likely shift the rate of appeal upward for cases that do not settle.

= = =

In Octane Fitness, the petition challenges the “rigid and exclusive” test that the Federal Circuit uses to determine whether a case is “exceptional.” A common theme of recent Supreme Court patent cases is a holding that challenged Federal Circuit rule is too rigid and should instead be more flexible. The second theme in recent Supreme Court patent cases is a holding that, when appropriate, patent law should fall in step with all other areas of law. The petition latches onto these theme and essential says “the Federal Circuit has done it again…” The particular question raised by Octane Fitness is as follows:

Whether the Federal Circuit’s promulgation of a rigid and exclusive two-part test for determining whether a case is “exceptional” under 35 U.S.C. § 285 improperly appropriates a district court’s discretionary authority to award attorney fees to prevailing accused infringers in contravention of statutory intent and this Court’s precedent, thereby raising the standard for accused infringers (but not patentees) to recoup fees and encouraging patent plaintiffs to bring spurious patent cases to cause competitive harm or coerce unwarranted settlements from defendants.

Icon rephrased as follows:

Patent infringement claims between industry competitors, ICON Health & Fitness, Inc. and Octane Fitness, LLC, were decided below on summary judgment. Both lower courts held that this case was not an “exceptional” patent case that would warrant the award of attorney fees to the prevailing party. Should this Court reverse the lower courts through judicial expansion of the attorney fee-shifting statute found in 35 U.S.C. § 285?

In the particular case, the district court conducted a Markman hearing and, based upon its claim construction, held that Octane’s products did not infringe Icon’s patent covering its elliptical exercise machine.

For its part, Octane writes that the “most compelling reason[] to grant certiorari …. [is that] the Federal Circuit’s current exceptional case standard is squarely in conflict with this Court’s holding in Fogerty v. Fantasy, Inc., 510 U.S. 517 (1994) … Fogerty mandates that plaintiffs and defendants be treated alike under an analogous fee-shifting provision in the Copyright Act.” Of course, one problem with the even-handed mandate is that plaintiffs and defendants lose cases for different reasons. Within this framework, a party’s status actually does make some difference for fee-shifting. Findings of willful infringement, for instance, favor only patentees, while findings of inequitable conduct during patent prosecution favor only accused infringers. Either party can be awarded attorney’s fees based on the bad faith assertion of objectively baseless claims or other litigation misconduct.

In the background are a variety statutory proposals that would accomplish much of what Octane seeks. However, a Supreme Court decision in the case is likely to arrive before any Congressional action. See Congressing.

In Highmark, former Acting Solicitor General Neal Katyal (now at Hogan Lovells) has asked the Supreme Court to focus on whether the Federal Circuit must give deference to a lower court award of attorney-fees to a prevailing party.

The petition asks:

The Patent Act provides that A case is “exceptional” if it is objectively baseless and brought in bad faith. After living with this case for more than six years, the District Court found that it was objectively baseless and brought in bad faith, and it awarded fees. Over a strong dissent, a Federal Circuit panel reversed, holding that a district court’s objective baselessness determination is reviewed “without deference.” The Federal Circuit denied rehearing en banc by a vote of six to five. One of the two pointed dissents from that denial accurately observed that the decision below “deviates from precedent *** and establishes a review standard for exceptional case findings in patent cases that is squarely at odds with the highly deferential review adopted by every regional circuit and the Supreme Court in other areas of law.”

The question presented is: Whether a district court’s exceptional-case finding under 35 U.S.C. § 285, based on its judgment that a suit is objectively baseless, is entitled to deference.

Undoubtedly, the Supreme Court will reverse in Highmark and the reasons are well understood by the Federal Circuit judges. In all likelihood, a GVR without opinion would provide sufficient instruction to the Federal Circuit in this case. However, I suspect that we will see these two cases argued and decided in parallel with a roughly identical timeline. One important aspect of the Highmark case is the question of whether attorney fees can be awarded as a deterrent against other parties’ bad behavior.

The copyright case is Petrella v. MGM and focuses on the doctrine of laches as it applies to copyright enforcement – with a particular focus on what might be termed “rolling infringement.” The copyright holder in the case is Paula Petrella whose father Peter Petrella wrote two 1970s screenplays (one titled The Raging Bull) and a book about the life of boxer Jake LaMotta. A few years later(1980), Raging Bull became an Oscar winning movie. In 2009, Petrella sued MGM for copyright infringement. Now, both MGM and Petrella claim ownership over the copyrights being asserted and MGM claims that the movie does not infringe the Petrella copyrights. However, the focus of the case at the Supreme Court is whether the doctrine of laches can block a copyright holder from suing for a new act of infringement (such as distributing another copy of the movie).

Petrella presents the question as follows:

The Copyright Act expressly prescribes a three-year statute of limitations for civil copyright claims. 17 U.S.C. § 507(b). The three-year period accrues separately for each act of infringement, even if it is one of a continuing series of acts of infringement.

The federal courts of appeals have divided 3-2-1 over whether the nonstatutory defense of laches can bar a civil copyright suit brought within the express three-year statute of limitations. Three circuits forbid any application of laches or restrict the remedies to which it can apply. Two other circuits strongly disfavor laches and restrict it to exceptional circumstances. The Ninth Circuit not only does not restrict laches or the remedies to which it can apply, but has also adopted a presumption in favor of applying laches to continuing copyright infringements.

The question presented is: Whether the nonstatutory defense of laches is available without restriction to bar all remedies for civil copyright claims filed within the three-year statute of limitations prescribed by Congress, 17 U.S.C. § 507(b).

The case has obvious implications for patent law since patent law doctrine includes a similar non-statutory laches doctrine and six-year statute of limitations. It is possible that the Supreme Court will essentially eliminate the laches doctrine (but leave a claim of equitable estoppel).

It should be an interesting year in patent law.

Patent Law Federalism

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Activision TV v. Pinnacle Bancorp (D.Neb 2013)

The Supreme Court has held that state governments are preempted from legislating substantial patent law issues and from deciding patent law cases. Rather, in those contexts, patent law is the exclusive purview of the US national government. Of course, the Supreme Court also recently held (again) that there are many patent law issues that are not “substantial” and that a state can still exert power over those lesser issues. See Minton v. Gunn.

Activision owns a number of patents, including U.S. Patent Nos. 8,330,613 and 7,369,058. And the company has sued a host of defendants alleging infringement based upon the use of a digital menu board – as shown here at Western Sizzlin.

After five local companies received cease-and-desist letters from Activision TV, the Nebraska Attorney General’s office began an inquiry and then filed a cease and desist letter against the Texas based law firm of Farney Daniels ordering that the firm to stop sending these letters. The Attorney General letter raised a variety of potential violations involving unfair and deceptive actions and offered the following concluding paragraph:

The possible violations specified in this letter are serious and require your immediate and unconditional cooperation. Given the significant ramifications posed to Nebraska consumers and businesses by your potentially unlawful conduct, I hereby demand that you immediately cease and desist the initiation of any and all new patent infringement enforcement efforts within the State of Nebraska pending the outcome of this office’s investigation.

(Bold in original) [AG Letter].

In response, Activision amended its complaint against Pinnacle Bancorp to include allegations against the Attorney General and his chief deputies and requesting a declaratory judgment that Farney Daniels’ enforcement actions do not violate Nebraska State Law and that the Attorney General’s action violates “Activision’s rights under 42 U.S.C. § 1983, the First, Fifth, and Fourteenth Amendments to the U.S. Constitution” as well as the Supremacy Clause found in Article IV. Activision also requested a preliminary injunction. For its part, the State Attorney General argued that Activision had no authority to bring the action because the Attorney General letter was sent to the law firm Farney Daniels and not to the patentee. The Attorney General also stood by its guns in alleging that the letters from Farney Daniels were unlawful under Nebraska law.

[T]here are a number of possibly deceptive statements in the Farney Daniels letters on which businesses to detrimentally rely. For example, the letters warn there are “serious consequences for infringement,” and “[i]nfringers who continue to infringe in the face of an objectively high risk of infringement of a valid patent can be forced to pay treble (triple) the actual damages, as well as the patent owner’s litigation costs, including all attorney’s fees.” The letters … that [the recipients] contact Farney Daniels and Plaintiff “within three weeks of the date of this letter … further claiming Plaintiff has “suffered damages due to…past infringement, and will suffer damages and irreparable harm in the future in the absence of injunctive relief.” . . . The MPHJ letters also “encourage” the business to “retain competent patent counsel to assist you in this matter” and warn that “additional steps might be required” if a license is not purchased.

In all respects, these seem like “threats to sue.” . . . These threats to sue are deceptive, the Attorney General believes, because Farney Daniels had no intention of suing all, most, or many of these targeted businesses if they did not agree to licenses, and, of the businesses they actually sued, Farney Daniels had no intention of actually serving summons and/or prosecuting the case to trial. In the debt collection arena, misrepresentations of legal consequences have been held to violate deceptive trade practices laws.

Furthermore, they may be deceptive to the extent Farney Daniels and Plaintiff implied that they have a reasonable basis for identifying the target business as one that actually infringes on the patent. . . . Further facts that may show Farney Daniels’ intent, and/or the amount of letters it sent nationwide or to Nebraska businesses, however, have not yet been developed, as the investigation is still nascent.

With regard to the Supremacy clause and patent law’s preemption of state-law, the Attorney General argued that its consumer protection action does not impact the patent laws.

Federal law does not preempt the state regulation of entrepreneurial letter writing campaigns. The Attorney General’s possible state law deceptive trade practices claims do not involve any legal application to the validity of the patent, to the scope of what is infringing, or to the public domain in any way.

Finally . . . the July 18 letter in no way affects Plaintiff’s rights to bring suit in this or any Court.

In considering these claims, the Federal District court partially granted Activision’s preliminary injunction motion. In particular, the court held that “Farney Daniels can file an appearance in this case or any other federal cases without running the risk of violating the State of Nebraska Attorney General’s cease and desist order. Further, Farney Daniels and its attorneys may proceed to prosecute their cases, including all discovery, as it would in any other lawsuit.”

What’s missing from the court order, however, is any discussion of whether Farney Daniels can continue to pursue any pre-filing activity such as threatening suit against alleged infringers.

Oral Argument Recap: Lighting Ballast Control v. Philips

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Guest Post by Jonas Anderson, Assistant Professor at American University, Washington College of Law.

This morning, the Federal Circuit sat en banc in the case of Lighting Ballast Control v. Philips.  The case is the latest and most significant challenge to the court’s de novo standard of review in claim construction cases.  In taking the case en banc, the Federal Circuit asked the parties to brief three questions:

  • Should the Federal Circuit overrule Cybor Corp. v. FAS Techs. Inc., 138 F.3d 1448 (Fed. Cir. 1998) (in which the Federal Circuit held that “as a purely legal question, we review claim construction de novo on appeal including any allegedly fact-based questions relating to claim construction.”)?
  • Should the Federal Circuit afford deference to any aspect of a district court’s claim interpretation?
  • If so, which aspects should be afforded deference?

Both parties in this case agree that de novo review is not the appropriate standard of review for all aspects of claim construction.  The parties’ positions differ, however, as to the proper scope of appellate deference: Lighting Ballast argues that the court should completely abandon its practice of de novo review and afford deference to all aspects of claim construction decisions; Universal Lighting Technologies (the appellee), on the other hand, argues that deference is appropriate only in resolving “disputed issues of historical fact.”  The PTO echoes ULT’s stance.  In a recent paper forthcoming in the Northwestern University Law Review co-authored with Professor Peter Menell of Berkeley Law School, we argue that de novo review has already been replaced at the Federal Circuit with a more deferential standard, albeit informally.  We find evidence for out theory in the significant drop in reversal rate that has occurred over the past decade: from a high of 44% of terms in 2004 to 20% reversed in 2011.

Despite both parties arguing that Cybor should be modified to some degree and numerous Federal Circuit judges having expressed that belief in prior cases, the tone of the arguments today was certainly one of skepticism.  The three main topics addressed:

National Uniformity Concerns -  Judge Lourie’s initial question was whether deference would disrupt the national uniformity of patent law that the Federal Circuit was designed to achieve.  ULT admitted that the possibility of non-uniform claim construction decisions would be a negative outcome of overruling Cybor, but FRCP 52(a) is in tension with a pure de novo review of claim construction.  The acting Solicitor of the PTO, Nathan Kelley, closed his argument by addressing the non-uniformity concern.  Kelley argued that any non-uniformity that occurred in light of a lowered deference standard would be a benefit to the public because it would result in reduced patent scope in some parts of the country.  While that is obviously not ideal, Kelley’s point was that the concern should not be an overriding one for the court since any non-uniformity is a benefit, not a burden, to the public. 

Line-drawing Problems between Issues of Fact and Issues of Law – The issue that perhaps most captivated the Judge’s attention was whether a deferential standard was workable.  Judge Moore, perhaps one of the court’s most vocal critics of Cybor, was clearly troubled with the solution offered by ULT and the PTO.  She asked for a precise definition of a “historical fact” no less than three times, and never received an answer that satisfied her.  Because claim construction is ultimately an effort to decipher the meaning that a PHOSITA would ascribe to a claim term, she feared that every claim construction decision (other than when the patentee acts as his own lexicographer) would be considered a question of fact.  Despite the PTO and appellee’s repeated assurances that their preferred level of deference would amount to no more than a “small change” in the law, Judge Moore and others (including Judge Dyk, Lourie, and Reyna) seemed troubled by the potential implications of the change.  Judge Lourie asked whether every case would now involve litigants attempting to frame legal determinations as factual determinations.

The Impact of Stare Decisis – This issue, pursued extensively by Judge Taranto, seemed to take the litigants by surprise.  Judge Taranto repeatedly asked about the court’s ability to revisit a clearly established en banc precedent with no intervening Supreme Court case or other change in the law.  Neither side seemed to have a ready answer to his question.

Judge O’Malley, who was on the original panel decision, played a pivotal role in the argument, attempting to clarify the position of the PTO and ULT.  She interpreted their position as one in which a district court judge’s decision as to the historical meaning of a claim that was based on extrinsic evidence would be given deference, but if that interpretation runs counter to the Federal Circuit’s de novo review of the intrinsic evidence the district court’s decision would not impact the case.  This middle position was clearly not satisfactory to a number of judges.  In light of the skepticism, ULT’s counsel essentially backed away from his position that Cybor should be modified; on rebuttal he suggested that the court may well not want to modify Cybor. 

Ultimately, it will be interesting to see if the court decides to maintain the de novo standard or tries to find a way to disentangle factual issues from legal ones.  As a skeptical Judge Dyk quipped about the latter option, “let’s just experiment and see how difficult it would be.”  I sense that some on the court would like to make those distinctions (Judge O’Malley in particular), but I’m unsure whether enough votes exist to make the change.  I don’t think the court will gravitate to Lighting Ballast’s position of a pure legal error standard.  Characterizing all claim construction decisions as factual seems too radical of a departure to the court. Judge Lourie appeared taken aback when Lighting Ballast’s counsel suggested that the specification should be treated as parole evidence: “That is an extraordinary argument.”  Indeed, switching from de novo review to complete deference to all district court claim construction decisions appears, at this stage, very unlikely.

Ed.: You can listen to the oral argument here.

High Point v. Buyer’s Direct – Tell me more, tell me more (about design patents and § 103)

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Guest Post By Sarah Burstein, Associate Professor of Law at the University of Oklahoma College of Law

High Point Design LLC v. Buyer’s Direct, Inc. (Fed. Cir. Sept. 11, 2013) Download High Point v Buyers Direct
Panel:  Schall (author), O’Malley, Wallach

High Point Design LLC (“High Point”) and Buyer’s Direct, Inc. (“BDI”) both manufacture fuzzy slipper-socks. In this case, BDI accused High Point of infringing U.S. Des. Patent No. D598,183 (the “D’183 patent”). In May, the district court granted summary judgment in favor of High Point, concluding that the patented design was invalid as obvious and as functional. It also dismissed BDI’s trade dress claim.

The most interesting parts of this decision deal with the issue of obviousness. In the design patent context, the § 103 analysis has two steps. First, the court must identify a proper primary reference—i.e., a “something in existence” that has “basically the same” appearance as the claimed design. Second, other references can be used (assuming certain conditions are met) to modify the primary reference “to create a design that has the same overall visual appearance of the claimed design.”

In High Point, the district court identified two Woolrich slippers, the “Penta” and the “Laurel Hill,” as primary references. In particular, the district court found that the Penta slipper “looks indistinguishable” from the claimed design and that the Laurel Hill slipper had some “insubstantial” differences but “nonetheless has the precise look that an ordinary observer would think of as a physical embodiment” of the claimed design. The district court did not, however, include any images of these designs. For your reference, however, here is a chart comparing the Penta slipper to some of the drawings from the D’183 patent: 

High Point

On appeal, the Federal Circuit decided that the district court erred in its primary reference analysis in a number of ways. According to the Federal Circuit, the district court “erred by failing to translate the design . . . into a verbal description.” On this point, the court relied on its 1996 decision in Durling v. Spectrum Furniture Co., Inc. In Durling, the court divided the first step of the § 103 analysis (i.e., the determination of whether there is a proper primary reference) into two parts, instructing district courts to: “(1) discern the correct visual impression created by the patented design as a whole; and (2) determine whether there is a single reference that creates ‘basically the same’ visual impression.” According to the Federal Circuit, the district court’s analysis in High Point failed to satisfy both of these requirements.

As to the “first part of the first step”—i.e., “discern[ing] the correct visual impression”—the Federal Circuit noted that, under Durling, “the trial court must first translate [the design patent’s] visual descriptions into words,” so that “the parties and appellate courts can discern the internal reasoning employed by the trial court to reach its decision as to whether or not a prior art design is basically the same as the claimed design.”[1] The Federal Circuit found the district court’s description of the D’183 patent to be insufficient because it described the claimed design at “too high a level of abstraction.” So it reversed and remanded on the issue of obviousness, instructing the district court to “add sufficient detail to its verbal description of the claimed design to evoke a visual image consonant with that design.” The Federal Circuit did not, however, explain how much detail would be “sufficient” to meet this evocation standard.

This part of the opinion may seem strange in light of the 2008 en banc decision in Egyptian Goddess, Inc. v. Swisa, Inc., in which the Federal Circuit cautioned district courts against “attempt[ing] to ‘construe’ a design patent claim by providing a detailed verbal description of the claimed design.” In Egyptian Goddess, the Federal Circuit did attempt to distinguish Durling, stating in a footnote that “[r]equiring such an explanation of a legal ruling as to invalidity is quite different from requiring an elaborate verbal claim construction to guide the finder of fact in conducting the infringement inquiry.” Whether that distinction is persuasive is an issue for another day.

As to the second part—i.e., determining whether there is a reference with “basically the same” impression—the Federal Circuit concluded that the district court failed to adequately explain its reasoning. It stated that, on remand, “the district court should do a side-by-side comparison of the [potential primary reference and the claimed design] to determine if they create the same visual impression.”

The Federal Circuit identified a number of other errors in the district court’s § 103 analysis, including its use of an “ordinary observer” standard. The Federal Circuit reiterated that “the obviousness of a design patent must . . . be assessed from the viewpoint of an ordinary designer,” notwithstanding some unfortunate dicta (my characterization, not the court’s) in the 2009 case of Seaway Trading Corp. v. Walgreens Corp.

However, despite all of its criticisms of the district court’s analysis, the Federal Circuit did not say that the district court’s conclusion was wrong. Indeed, the Federal Circuit expressly refused to take a position on the ultimate issue of whether the D’183 patent was obvious. And the Federal Circuit did not say that the Penta or the Laurel Hill slippers could not qualify as primary references. So it will be very interesting to see what happens on remand.

Solicitor General: Don’t Grant Cert to Analyze Inequitable Conduct

Ethics,

A petition for cert was filed in a decision by Judge Linn, 1st Media, LLC v. Electronic Arts, Inc., 694 F.3d 1367 (Fed. Cir. 2012), asserting error essentially in Therasense's cabined view of inequitable conduct.  See Sony Computer Entertainment America LLC v. 1st Media, LLC, Supreme Court No. 12-1086.  The Solicitor General has filed a brief recommending against cert.  The petitioner's question presented was:

"Did the Court of Appeals for the Federal Circuit err in restricting district courts' equitable discretion in evaluating patent unenforceability, contrary to this Court's precedent in Keystone Driller, Hazel- Atlas, and Precision Instrument, by applying a rigid test that (a) forecloses district courts from considering the entire circumstantial record; and (b) precludes district courts from granting equitable remedies where a patent applicant has violated the PTO's duty of candor."

I filed an amicus brief in Therasense, and no one listened, but I still hold a lot of the same views expressed there.

Surprise! The Law of Subject Matter Eligibility Remains Unsettled

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By Jason Rantanen

Accenture Global Services, GMBH v. Guidewire Software, Inc. (Fed. Cir. 2013) Download Accenture v. Guidewire
Panel: Rader (dissenting), Lourie (author), Reyna

It is difficult to think of an issue that has more deeply divided the Federal Circuit over the past few years than subject matter eligibility.  Accenture is the latest barrage and counter-barrage in this seemingly endless war.  Unlike Ultramercial v. Hulu, though, in which Judge Rader wrote the majority opinion and Judge Lourie concurred in the result, the forces arguing against subject matter eligibility of computer programs won today's battle. 

At issue in the case were claims 1-7 and 8-22 of Patent No. 7,013,284.  Claim 1 read:

A system for generating tasks to be performed in an insurance organization, the system comprising:

an insurance transaction database for storing information related to an insurance transaction, the insurance transaction database comprising a claim folder containing the information related to the insurance transaction decomposed into a plurality of levels from the group comprising a policy level, a claim level, a participant level and a line level, wherein the plurality of levels reflects a policy, the information related to the insurance transaction, claimants and an insured person in a structured
format;

a task library database for storing rules for determining tasks to be completed upon an occurrence of an event;

a client component in communication with the insurance transaction database configured for providing information relating to the insurance transaction, said client component enabling access by an assigned claim handler to a plurality of tasks that achieve an insurance related goal upon completion; and

a server component in communication with the client component, the transaction database and the task library database, the server component including an event processor, a task engine and a task assistant;

wherein the event processor is triggered by application events associated with a change in the information, and sends an event trigger to the task engine; wherein in response to the event trigger, the task engine identifies rules in the task library database associated with the event and applies the information to the identified rules to determine the tasks to be completed, and populates on a task assistant the determined tasks to be completed, wherein the task assistant transmits the determined tasks to the client component.

The district court (Judge Robinson, one of the ) held claims 1-7 (system claims) and claims 8-22 (method claims) invalid under 35 U.S.C. § 101.  Accenture appealed only claims 1-7. 

System Claims Ineligible Subject Matter: In an opinion authored by Judge Lourie, the majority agreed with the district court that the claims were patent ineligible subject matter.  The majority provided two bases for its conclusion.  First, "because the system claims offer no meaningful limitations beyond the method claims that have been held patent-ineligible" and second, "because, when considered on their own, under Mayo and our plurality opinion in CLS Bank, they fail to pass muster." Slip Op. at 10.

The majority first compared the system claims to the method claims that were conclusively invalid because Accenture failed to appeal them.  Relying on the plurality opinion in CLS Bank v. Alice, the majority concluded that the proper approach is to "compare the substantive limitations of the method claim and the system claim to see if the system claim offers a “meaningful limitation” to the abstract method claim, which has already been adjudicated to be patent-ineligible."  Id. Because the court found no additional "meaningful limitation" in the system claims, they were as patent ineligible as the method claims. 

The majority also concluded that the method claims were invalid under Section 101 even standing on their own.  Applying a preemption analysis to the abstract idea at the heart of the system claims, the majority concluded that the additional imitations did not "narrow, confine, or otherwise tie down the claim so that, in practical terms, it does not cover the full abstract idea itself."  Slip Op. at 15.  Furthermore, "simply implementing an abstract concept on a computer, without meaningful limtiations to that concept, does not transform a patent ineligible claim into a patent-eligible one."  Id.

Judge Rader's Dissent: Unsurprisingly, Judge Rader disagreed with the majority.  Central to his disagreement was the belief that the plurality framework relied upon by the majority in this case lacks precedential value.  "[N]o part of CLS Bank, including the plurality opinion, carries the weight of precedent.  The court's focus should be on Supreme Court precedent and precedent from this court."  Slip Op. at 20.  He also disagreed with the basic idea of the comparing the system claims to the invalid method claims, characterizing it as estoppel that will have the effect of "requiring litigants to appeal the invalidity of every claim or else risk the potential for estoppel or waiver of other claims."  Id. And Judge Rader would have concluded that, even on the merits, the claimed systems present patent-eligible subject matter.  "The claims offer “significantly more”  than the purported abstract idea, …, and meaningfully limit the claims’ scope."  Id. at 4, quoting Mayo v. Prometheus, 132 S.Ct. 1289, 1293 (2012).

Judge Rader also once again proclaims his view that the courts' approach to patent law's subject matter eligibility requirement is pure folly:

In conclusion, I note that prior to granting en banc review in CLS Bank, this court commented: “no one understands what makes an idea abstract.” CLS Bank Int’l v. Alice Corp., 685 F.3d 1341, 1349 (Fed. Cir. 2012), opinion vacated, 484 F. App’x 559 (Fed. Cir. 2012) (internal quotations marks omitted). After CLS Bank, nothing has changed. “Our opinions spend page after page revisiting our cases and those of the Supreme Court, and still we continue to disagree vigorously over what is or is not patentable subject matter.” MySpace, Inc. v. GraphOn Corp., 672 F.3d 1250, 1259 (Fed. Cir. 2012); see generally CLS Bank. Indeed, deciding what makes an idea “abstract” is “reminiscent of the oenologists trying to describe a new wine.” MySpace, 672 F.3d at 1259.

I take this opportunity to reiterate my view that “the remedy is the same: consult the statute!” CLS Bank, 717 F.3d at 1335 (additional reflections of Rader, C.J.). The statute offers broad categories of patent-eligible subject matter. The “ineligible” subject matter in these system claims is a further testament to the perversity of a standard without rules—the result of abandoning the statute.

Slip Op. at 23.  That said, Judge Rader's thoughts about indeterminacy should perhaps be taken with a grain of salt: his opinions indicate, after all, that he has very strong views that one side of the subject matter eligibility battle is right and the other wrong.

One other thing of note about this case: Mark Lemley – who has written a great deal about patenting of computer-implemented inventions, including a recent post on PatentlyO – was the lead attorney for the defendant.

Soverain’s ‘314 Patent is Now Truly Invalid

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Soverain Software v. Newegg (Fed. Cir. 2013) (on rehearing)

In a rare grant of rehearing, the Federal Circuit has amended its original decision in this case. In the original opinion, the Federal Circuit reversed the lower court’s finding of non-obviousness and replaced that with a holding that the asserted claims are obvious as a matter of law. [Link]

According to the request for rehearing – “The panel’s decision analyzed the wrong claim of the ‘314 patent. The asserted claims at trial were claims 35 and 51–not claims 34 and 51.” I reviewed the original briefs and those briefs suggest that claim 34 should be the focus. However, the Federal Circuit allowed the patentee another shot on appeal.

Claim 34 – the one already found obvious by the court – is directed to a “network-based sales system” that links a buyer’s computer with a “shopping cart computer” and that facilitates certain purchasing functionality, including using a “payment message” that initiates the transaction once activated. Claim 35 adds one further limitation to the mix – that “shopping cart computer is programmed to cause said payment message to be created before said buyer computer causes said payment message to be activated.”

After reviewing the small amount of evidence presented, the court held that claim 35 is also invalid as obvious.

On this rehearing, Soverain has not provided any new information concerning the specific limitation of claim 35. The inclusion of an additional known element from a similar system, as set forth in claim 35, is subject to review on established principles, as summarized in KSR International Co. v. Teleflex Inc., 550 U.S. 398, 417 (2007) (an unobvious combination must be “more than the predictable use of prior art elements according to their established functions”). The supplemental briefing reinforces the absence of dispute that that the element in claim 35 is in the CompuServe Mall prior art.

On consideration of the additional briefing and arguments, we confirm that claim 34 is representative of the “shopping cart” claims, including claim 35, and conclude that dependent claim 35 is invalid on the ground of obviousness. The court’s judgment is amended accordingly.

Now Soverain’s patent is really invalid.

In its motion for rehearing en banc, Soverain cited my prior Patently-O essay for the notion that the original opinion was big news in the way that the court fully reversed the lower court’s finding of nonobviousness. The en banc rehearing request focuses on the distinction between questions of fact and law and argues that Federal Circuit improperly delved into a fact-finding expedition. The fact-law divide is difficult for questions of obviousness since the ultimate question of obviousness is an issue-at-law based upon the factual determinations found in the Graham analysis. In its opinion, the Federal Circuit states that it is only deciding the ultimate legal question while the en banc request argues that the court delved into the factual underpinnings without providing appropriate deference. That en banc request has been denied.

I suspect that Soverain will push for a petition for writ of certiorari. In the en banc rehearing request, the company added Seth Waxman to the list of counsel and the company has at least 15 live infringement cases involving the ‘314 patent. (U.S. Patent No. 5,715,314). The damages overturned by the court here amounted to $2.5 million plus costs and an ongoing royalty of $0.15 per infringing transaction until the patent expires in 2015 (denying injunctive relief).

Now, before you feel too sorry for Soverain, you should note that the company has a set of additional patents in the family that it can still assert. See, e.g., 5,909,492, 5,708,780, 6,449,599, and 7,272,639.

Interpreting CLS Bank Int’l v. Alice

Patent

Guest Post by Professor Bernard Chao

The issue of patentable subject matter eligibility has been in considerable flux. Currently, it’s unclear whether adding computer limitations to an otherwise unpatentable concept somehow renders the concept patent eligible. The Federal Circuit tried to settle this question when the entire court heard CLS Bank Int’l v. Alice, 717 F.3d 1269 (Fed. Cir. 2013). But the judges could not find common ground and the decision contained seven separate opinions reflecting at least three distinct approaches. Now it has been suggested that the CLS Bank Int’l provided the lower courts with absolutely no guidance. After all, no opinion garnered more than five judges’ support. In an effort diminish Lourie’s opposing opinion, Judge Rader even went so far as to say that “nothing” in the CLS Bank Int’l decision “beyond our judgment has the weight of precedent.” Id. at 1292, n 1.

Ironically, under the so called Marks rule, Judge Rader may not just be wrong, his opinion could be considered the holding of the court. The United States Supreme has said that when one of its decisions has no majority opinion in support of the judgment, “the holding of the Court may be viewed as that position taken by those Members who concurred in the judgment[] on the narrowest grounds.” Marks v. United States, 430 U.S. 188, 193 (1977). Now there is some disagreement about how to identify the narrowest concurring opinion. What’s more it’s unclear if the Marks rule applies to en banc decisions of the various Courts of Appeals. But there is certainly plenty of room to argue that Judge Rader’s opinion is the Federal Circuit’s holding under Marks.

To understand how the Marks rule would apply to CLS Bank Int’l, we have to examine the decision’s different opinions. I discuss these opinions in some detail in an upcoming article in the Berkeley Technology Law Journal, but I will provide a very short summary of the judges’ views here. Judge Lourie’s opinion (joined by Judges Dyk, Prost, Reyna and Wallach) took a “strong view” of § 101’s subject matter patent eligibility requirement. Consequently, these five judges would have found that all of Alice’s claims were ineligible for patenting. Judge Rader (joined by and Judges Linn, Moore and O’Malley) took a relatively “weak view” of § 101’s eligibility requirement. But Judges Rader and Moore applied this methodology differently than Judges Linn and O’Malley. Rader and Moore argued that the method and media claims were not patent eligible, but the system claims were. In contrast, Linn and O’Malley’s would have left all the claims intact. Finally, Judge Newman took an even weaker view of §101 arguing for almost no scrutiny of patentable subject matter eligibility whatsoever. Accordingly, she would have also found all the claims were patent eligible.

Both Lourie’s and Rader’s opinions concurred in the judgment of patent ineligibility for the method claims. So seven judges agreed that the method claims were not patent eligible. Lourie’s strong view advocated for a rule that would render many claims patent ineligible, while Rader’s weak view is more conservative and jeopardizes a smaller set of claims. As applied to the patents in CLS Bank Int’l, this meant that only the method claims would be ineligible. Under one interpretation of Marks, Rader’s opinion is the narrowest view supporting the end result and would be considered the holding of CLS Bank Int’l.

To be clear, I actually disagree with Rader’s analysis and say so in my article. I also don’t want to overstate the significance of the Marks analysis. Clearly, CLS Bank Int’l is still shaky precedent and the success of any appeal to the Federal Circuit may simply be panel dependent. Hopefully, the Supreme Court will resolve the issue. In fact, the Court is currently considering a petition for certiorari in Wildtangent v. Ultramercial. But in the meantime, software patents continue to be challenged on subject matter patent eligibility grounds and the Marks rule provides one way to try to interpret the confusing precedent now.

Guest Post: Why Lighting Ballast Won’t Solve Claim Construction

Patent, ,

Guest post by Thomas W. Krause and Heather F. Auyang.

In our recently-published article, What Close Cases and Reversals Reveal About Claim Construction at the Federal Circuit, 12 J. Marshall Rev. Intell. Prop. L. 583 (2013) (available at http://jmripl.com/issues/article/310), we focus on two independent sets of cases that reveal some deep truths about the current state of claim construction jurisprudence, and which show that the current problems with claim construction have little to do with the narrow "deference" issue in Lighting Ballast. 

The article reports on (1) claim construction cases in which the Federal Circuit judges disagreed on an issue of claim construction, and (2) claim construction cases where the Federal Circuit reversed a district court. 

Close Cases

We call the former set "close cases," since they are typically decided by a 2-1 vote, as opposed to a 3-0 vote.  The notion is that 3-0 cases are not all that interesting — if all the judges agree on an issue, then odds are it is not that controversial.  2-1 cases, by contrast, often reflect differences in approach between the judges.

Here is a chart that shows that in close cases, some judges predictably vote for a broader interpretation, others predictably vote for a narrower interpretation, and the remaining judges vote unpredictably. 

Krause Figure 1

If predictability is the goal, then the easiest solution would be for the Court to choose between Judges Linn and Lourie, and let that judge's principles guide claim construction in every case.  Until such a "choice" is made, claim construction in "close" cases will always be panel dependent. If Judges Lourie and Linn are both deemed “wrong,” then it is difficult to see how we will ever attain predictability in claim construction at the Federal Circuit.  The basic divide seems to be over what we call the “actually invented” standard – the approach taken by Judge Lourie (and others), and opposed by Chief Judge Rader (and others).  The Federal Circuit’s failure to take this issue en banc in Retractable Technologies guarantees that there will be a steady flow of dissents in claim construction cases for the foreseeable future.

We also looked at the same set of cases in terms of whether the judges were (i) more or less likely to be accused of "importing" a limitation from the specification, (ii) more or less likely to affirm a district court claim construction, and (iii) more or less likely to vote for the patentholder.  These parameters are not independent of the decision to vote broad or narrow (since a narrow interpretation typically aligns with the district court [see below] and against the patentholder), but it’s interesting to look at the ways in which the data do not track.  Some judges vote against the patent holder and against the district court more often than one would expect based on their broad/narrow voting tendencies, and others vote for the patent holder and for the district court more often than one would expect.  Figures 2-4 in the article show these results.

We also created individual charts for each judge, which show case by case how the judges voted in terms of broad/narrow, pro-affirm/pro-reverse, and pro-patent/anti-patent.  Here are a few contrasting examples, which underscore some of the more dramatic differences:

Krause Figure 2
Krause Figure 3
Krause Figure 4
Krause Figure 5

Just looking at these charts (without even trying to figure out what they mean) shows that these judges vote very differently from each other.  The article provides itself provides a few observations based on the charts (and an explanation of how to read them, if it’s not readily apparent).

Reversals

The reversals are also very interesting.  We focused on these cases because they – by definition – are cases in which the district court did something wrong.  What we found is that when district courts err, they tend to err in favor of a narrower interpretation.  In other words, while one might expect, all things being equal, that district courts would err as often in a broadening as a narrowing direction, all things are clearly not equal.  Over 2/3 of the time, the district court's mistake was in going narrow.  On reflection, this should not be surprising.  A narrower interpretation often permits a district court to grant summary judgment of non-infringement and thereby get the case up to the Federal Circuit without having to put the parties and the court through the time and expense of a trial.  But given this nearly systematic bias, perhaps giving more deference to district courts will not be particularly helpful.

Krause Figure 6
Krause Figure 7
Additional charts and discussion are in the article.

We welcome any comments.

Thomas W. Krause is an Adjunct Professor of Law at the Georgetown Law Center and Special Counsel for Intellectual Property Litigation at the United States Patent & Trademark Office.  Heather F. Auyang is Senior Counsel at LTL Trial Attorneys in Redwood City, California. The views and opinions expressed herein are those of the authors and do not reflect the views or opinions of the United States Patent and Trademark Office or LTL Trial Attorneys.

 

Guest Post by Christopher Cotropia on Existing Deference in Patent Claim Interpretation

Patent, ,

Christopher Cotropia is a Professor of Law and the Austin Owen Research Fellow at the University of Richmond School of Law.  Below he highlights a few important conclusions from an empirical study on patent claim construction that he recently completed.  The full study is available here.



Is Patent Claim Interpretation Review Deference or Correction Driven?

Christopher A. Cotropia

The Federal Circuit’s now fifteen-year practice of reviewing lower court claim interpretation de novo is being reconsidered en banc in Lighting Ballast Control LLC v. Philips Electronics North America Corporation. Although the question of whether review should be de novo can be answered under a number of criteria, in patent cases it is commonly viewed as a tradeoff between certainty and correctness.  

With regards to certainty, the current belief is that de novo review results in great uncertainty in patent cases because litigants cannot predict the controlling claim construction in a case until the Federal Circuit makes its independent determination on appeal.  Giving district courts greater deference would, in turn, allow certainty as to claim construction to come earlier in patent cases.

In contrast, appellate review is in place, at least in part, to correct mistakes made by lower courts and ensure the “correct” result is reached in a given case. The more deference provided to lower courts, the less opportunity the Federal Circuit has to correct (or incorrect, depending on your view of the Federal Circuit) the decision.  Standard of review presents the question of who—that is which tribunal—is more likely to reach the correct answer regarding claim interpretation and, given claim meaning’s central nature to the patent dispute, the ultimate question of who should win the case.   

While many aspects of these issues need to be explored to determine the optimum standard of review (how much is greater certainty worth?, who is more likely to reach the correct answer?, and what is the correct answer we want to achieve?), there is value in establishing a baseline on both issues. Assuming the Federal Circuit’s claim construction is correct, it follows that de novo review results in greater correctness, albeit at the expense of possible increased uncertainty.  But both of these assumptions rest on the belief that the Federal Circuit currently engages in de novo review, currently provides no deference in practice, and arrives at the “correct” result in appealed cases, at least more often than district courts do on first pass.

In a new paper, I try to establish this baseline by collecting and analyzing Federal Circuit claim construction reviews over the last three-plus years.

At first blush, the results show there is a high level of certainty in claim construction appeals. The rate of affirmance of district court claim interpretations has been increasing since 2010.  And, in the first quarter of 2013, the affirmance rate has reached over 75%.   This data confirms that observed by Jonas Anderson and Peter Menell in 2011 for an earlier period.   

 

Cotropia Table 1

TABLE 1

 

However, a closer look as to which claim interpretations are affirmed and which are reversed shows little certainty at the Federal Circuit for particular types of cases.  Lower court decisions where the patentee ultimately wins are more likely to be subject to a claim construction reversal that, in turn, causes the alleged infringer to ultimately win (or at least gives them another shot on remand).

Cotropia Table 2

TABLE 2

And these claim construction reversals are even more likely in appeals of cases involving electronic, information technology, or business method patents where the patentee won below. The opposite is true in cases involving patentee wins in the biological and chemical technologies—the Federal Circuit affirms these constructions, and results, more often. 

 

Cotropia Table 3

TABLE 3

 

What appears to be certainty in all claim construction reviews is much more complex, with the Federal Circuit performing corrections in specific categories of cases.  And given that claim constructions are appealed in patentee wins and patentee loses at about the same rate, 46.67% to 45.94%, these findings about claim construction review are not likely driven by selection bias. Put simply, the Federal Circuit’s claim interpretation review is not driven solely, or perhaps at all, by deference, but instead is correction focused.

What does this data mean for Lighting Ballast Control?  A change in standard of review would have an impact—greater certainty, and less change on appeal, for particular types of cases.  This certainty would come at a cost—losing the current correction going on.  Answering whether this is truly a cost, specifically one that outweighs any certainty gained by changing the standard of review, is left for others, as is the meta-question of what the “correct” answer is in any patent claim construction case. 

This data also describes a Federal Circuit that is very different then commonly portrayed.  The Federal Circuit, when reviewing a district court’s claim interpretation, is not as patent-friendly as some would think.

A full version of the paper this post is based upon can be found here.

Subject Matter Eligibility Post-CLS Bank

Patent, , , ,

By Dennis Crouch

DDR Holdings, LLC v. Hotels.com, L.P., 2013 WL 3187161 (E.D.Tex. 2013)

In late 2012, jury agreed with DDR that its business method patents were being infringed upon and that the various defendants had failed to prove the claims invalid as either anticipated or obvious. The patents themselves are related to a method of “coordinated offsite marketing” of “internet websites.” U.S. Patent No. 7,818,399 and 6,993,572. The jury was not given the question of patentable subject matter under 35 U.S.C. 101. In a recent post-verdict ruling, Judge Gilstrap has also rejected Defendants’ Section 101 argument.

A typical claim in the patents is No. 17 from the ‘572 patent that reads:

An e-commerce outsourcing process comprising the steps of:

a) storing a look and feel description associated with a first website in a data store associated with a second website;

b) including within a web page of the first website, which web page has a look and feel substantially corresponding to the stored look and feel description, a link correlating the web page with a commerce object; and

c) upon receiving an activation of the link from a visitor computer to which the web page has been served, sewing to the visitor computer from the second website a composite web page having a look and feel corresponding to the stored look and feel description of the first website and having content based on the commerce object associated with the link.

In considering the claim scope, the Judge agreed with the patentee that the inventions embodied by the claims present “functional and palpable applications in the field of computer technology.” (Citing Research Corp). The judge also walked through the litany of “machine” elements required by the claims and concluded that the claim “also passes the machine-or-transformation test” and that conclusion strongly suggests patentable subject matter as “a useful and important indicator in the § 101 analysis.”

[The] claimed e-commerce outsourcing process requires [an] interaction between a data store storing a look and feel description of a web page and an activation of a link from a visitor computer to receive a composite web page. The method of an outsource provider also discloses a server that responds to activation by a web browser of a computer user by retrieving pre-stored data from storage, then generating and transmitting visual elements corresponding to the source page.

. . . .

As discussed above, the asserted claims disclose a specific set of physical linkages that involve a data store, server, computer, that together, and through the claimed interconnectivity, accomplishes the process of displaying composite web pages having the look and feel of the source web page. [Defendant] urges the Court to find the invention is only a business method of making two web pages look alike. While the ′572 and ′399 patents do, indeed, cover the concept of two web pages with visually corresponding elements, there is more to the asserted claims when considered as a whole. “Diehr emphasized the need to consider the invention as a whole, rather than ‘dissect[ing] the claims into old and new elements and then … ignor[ing] the presence of the old elements in the analysis.” Bilski. When the asserted claims are considered as a whole, the claimed invention lies in stark contrast to the facts of Bancorp. In Bancorp, the claimed “mathematical concept of managing a stable value protected life insurance policy” was found unpatentable as an abstract idea because mere mathematical computer was not dependent upon the computer components required to perform it. In contrast, the interactions and linkages of computer machinery to generate composite web pages in this case are integral to each of DDR’s asserted claims. Accordingly, the first prong of the machine-or-transformation test is satisfied. That being the case, this Court needs not address the transformation prong at this time.

Using the word “idea”: The word “idea” seems fairly abstract and thus potentially troublesome for a patentee. In this case, the inventor used the word “idea” repeatedly in his trial testimony. The defendants made the argument that the inventor’s language should serve as evidence that the claim is abstract. However, Judge Gilstrap rejected that argument as well:

The Court is also not persuaded that the inventor’s use of the word “idea” at least 25 times to describe his invention is evidence of unpatentable subject matter. The inventor’s testimony was given during a one week trial, and it is not unusual to explain a patent claim as a “gist” or “core idea.” Such testimony is not instructive that a claim is an abstract idea for purposes of § 101 patentability. Moreover, “all inventions at some level embody, use, reflect, rest upon, or apply laws of nature, natural phenomena, or abstract ideas,” yet, “too broad an interpretation of this exclusionary principle could eviscerate patent law.” Mayo.

In all likelihood, the case will soon move to the Federal Circuit for review.

===

Judge Gilstrap cited the recent fractured en banc decision in CLS Bank v. Alice only once and for the position posited by Judge Lourie that the statutory presumption of validity applies to the Section 101 analysis.

Contractual Override of Trade Secret Law

Patent, Trade Secret, , ,

By Dennis Crouch

Convolve and MIT v. Compaq and Seagate (Fed. Cir. 2013)

MIT has a long history with patent enforcement, including its historic link with Franklin Pierce Law Center (now UNH) and housing of the Lemelson-MIT Program. Of late, the not-for-profit institution has become quite a patent plaintiff. In addition to this case, MIT is the patent-owner-plaintiff in the Akamai and Ariad cases as well as many others. This case reaches back more than a decade when MIT and Convolve sued a group of defendants for both trade secret misappropriation and infringement of its U.S. Patent Nos. 6,314,473 and 4,916,635. In 2007, the Federal Circuit decided a prior appeal in this case on mandamus – In re Seagate Tech., LLC, 497 F.3d 1360 (Fed.Cir. 2007) (en banc) (holding that willful patent infringement at least requires showing of objective recklessness).

The present case began with a non-disclosure agreement and then failed license negotiation between Convolve and Compaq. The signal shaping technology in question is useful in computer read/write operations and Convolve agreed that Seagate (Compaq’s hard drive supplier) could be included in the conversation. No license was reached but Convolve and MIT sued two years later when the features (allegedly) showed up in Compaq/Seagate technology.

Contractual Override of Trade Secret Law: The main trade secret problem for Convolve in this case is the language of the non-disclosure agreement (NDA) that the parties signed. The agreement states that any confidential material or presentations must be particularly identified as confidential and Convolve was unable to show that it followed the procedures required by the NDA. In addition the trade secret claims regarding marketing information failed under NY law because NY trade secret law does not extend to marketing concepts. The Federal Circuit writes:

[B]arring waiver of the NDAs marking requirements (discussed below) we conclude that Seagate did not breach the NDA to the extent it may have appropriated the information disclosed. Because the disclosure of the information was not subject to the confidentiality obligations of the NDAs, moreover, barring some other basis upon which to predicate a promise of confidentiality (which we also discuss below) information relating to those ATSIs lost any trade secret status it might have had upon disclosure.

A major legal and practical point here, that should already be well understood, is that is that a contractual agreement to transfer otherwise secret information will override trade secret protections that may be in place.

Patent Infringement: The district court also dismissed the patent infringement side of the action based upon a finding of non-infringement. On appeal, the Federal Circuit vacated that decision – finding that sufficient factual dispute existed to allow the plaintiff to overcome the summary judgment motion of non-infringement for the ‘473 patent.

While a very close call, we find that Convolve presented enough evidence to preclude summary judgment on its inducement claims. Convolve did not merely demonstrate that the drives are capable of infringing, but provided evidence of specific tools, with attendant instructions, on how to use the drives in an infringing way. Unlike Fujitsu Ltd. v. Netgear, Inc., 620 F.3d 1321 (Fed. Cir. 2010), upon which the district court relied, the evidence here does not demonstrate that the infringing option in the Seagate drives was disabled by default. See Toshiba Corp., 681 F.3d at 1365 (analyzing the holding in Fujitsu). Accordingly, given the procedural posture in which the claim is presented to us, we conclude that Convolve may proceed with its inducement claims on remand.

Thus, on remand, the case will continue to determine whether the ‘473 patent was actually infringed.