Tag Archives: Supreme Court

The Supreme Court’s Alice Decision on Patent Eligibility of Computer-Implemented Inventions: Finding an Oasis In the Desert

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Guest Post by Donald S Chisum, Director of the Chisum Patent Academy and author of Chisum on Patents.

In Alice (June 19, 2014), the Supreme Court held that the two step framework for determining the Section 101 patent-eligibility of a patent claim, which the Court previously articulated in the 2012 Mayo decision on the patentability of a diagnostic method, applied to computer-implemented inventions.  Thus, one determines: (1) does the claim recite an ineligible concept (natural phenomena, natural law or abstract idea), and (2) if so, does the claim recite sufficient additional elements to make the claim one to an application of the concept, rather than to the concept itself?

On Mayo step one, Alice held that the claims at issue were to an abstract idea, an “intermediated settlement.”  On step two, it held that “merely requiring generic computer implementation” did not “transform that abstract idea into a patent-eligible invention.”  Thus, claims to a method, a computer system configured to carry out the method, and a computer-readable medium containing program code for performing the method all fell invalid under Section 101.

I considered but then reconsidered entitling this comment “Alice in Wonderland.”  For, indeed, the Supreme Court’s chain of decisions creating a judicial exception to the statute defining patent eligible subject matter (35 U.S.C. § 101) and holding unpatentable claims to algorithms and abstract ideas, stretching from Benson in 1972 to Alice in 2014, is wondrous.  But I will not here review the “big picture,” including the fundamental flaws in the chain; I and others have already done that.

Instead, my focus is on the “small picture,” the every day problem: does the Alice opinion provide some meaningful guidance to fill the near void left by the Court in its prior Mayo and Bilski decisions?  Those decisions provided no definition of an “abstract idea” (or “law of nature”) and little direction on, precisely, how much “more” was required for the transformation.

The Court’s fuzz left stranded in a desert of uncertainty an array of feet-on-the-ground decision makers, from inventors to rights owners to patent professionals drafting and amending claims to examiners to PTO officials to licensing negotiators to litigators to district court judges to federal circuit judges to treatise authors.

Positive news.  At least on first analysis of Alice, I find some additional guidance, perhaps enough to lead us toward an oasis in the desert.

In particular, the Alice opinion supports the following proposition:  a novel and unobvious solution to a technical problem is not an “abstract idea,” and a claim drawn to such a solution, even if broad, is not subject to the Mayo framework (though, of course, it is subject to scrutiny for disclosure support).

The Alice opinion does not state the proposition directly.  The Court expressly indicated that it did not need to “delimit the precise contours of the `abstract ideas’ category” because the concept at issue was so similar to that in Bilski.  But the proposition is fairly inferred from the Court’s rejection of the patent owner’s argument that the intermediated settlement concept in its claims was not an “abstract idea” within the implicit exception to Section 101 and from its novel description of the prior Diehr decision.

Based on prior Supreme Court cases and language in Mayo, the patent owner argued that the definition of “abstract ideas” for Section 101 was: “preexisting, fundamental truths that exist in principle apart from any human action.”  The Court disagreed because that definition did not fit Bilski, which held that risk hedging was an abstract idea. Hedging was a “longstanding commercial practice” and a “method of organizing human activity,” but not a “truth” about the natural world that “always existed.”  Hedging and the similar concept of intermediated settlement were abstract ideas because they were “fundamental economic practices.”

Thus, concepts that constitute abstracts ideas fall into two categories.  First are mathematical equations, mathematical formulae and algorithms (at least ones of a mathematical nature, and, I would emphasize, not all algorithms are mathematical or numerical).  Second are methods of “organizing human activity,” at least if they constitute a fundamental economic practice “long prevalent in commerce.”

What’s left out of the “abstract idea” category?  The Court in Alice declined to say explicitly, but there are hints in its discussion of the 1981 Diehr decision in connection with the second Mayo step.  The Court noted that Diehr had held a computer-implemented process for curing rubber was patent eligible, not because it involved a computer but rather because “it used that equation in a process designed to solve a technological problem in `conventional industry practice.”  It reiterated: “the claims in Diehr were patent eligible because they improved an existing technological process, not because they were implemented on a computer.”  In contrast, the claims in Alice did not “improve the functioning of the computer itself” or “effect an improvement in any other technology or technical field.”

The Court had discussed and distinguished the Diehr case before, in both Bilski and Mayo, but never on the basis that Diehr entailed a technological improvement.  Thus, the Alice discussion of Diehr in terms of a solution to a technical problem is important new ground.

Hence there are strong grounds for the proposition that a patent claim reaches a safe harbor from Section 101 abstract idea scrutiny, including the Mayo second question for an “inventive concept,” if the claimant establishes that the claim is directed to a solution of a technological problem.  This definition of abstract idea as excluding applied technology accommodates the case law treating pure mathematical statements, economics and finance, and schemes of a non-technical character (“methods of organizing human activity”) as “abstract ideas” that must be include additional elements to achieve patent eligibility (Mayo step two).

Is this shift in focus to “technological” an oasis of greater clarity?  No doubt there will be arguments about what is technological and what is not.  But there are at least three advantages to the verbal change.  First, technology is the historic core of the patent system, especially given  the Constitutional phrase “useful Arts,” which is 18th century terminology for “technology” in 21st century terminology.  Thus, an inquiry about the technological is much less of an alien intruder than prior Supreme Court language about the abstract idea exception to Section 101.  Second, evaluating the Section 101 abstract idea prohibition in terms of technological versus non-technological conforms to the language Congress used in Section 18 of the America Invents Act in setting up special PTO review of business method patents.  Finally, a technology test aligns the United States standard with the language used in Europe and elsewhere to address exceptions to patent eligible subject matter.

Supreme Court asks for SG’s Views on Hearing Another Inducement Case

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Commil USA v. Cisco Systems (Supreme Court 2014)

In its decision on this case, the Federal Circuit offered three separate opinions, with Judge Prost authoring a majority opinion and Judges Neman and O’Malley each dissenting-in-part (each disagreeing with a different part of the majority opinion). See Jason Rantanen, Commil v. Cisco: Issues of validity “may” negate intent for inducement, Patently-O (2013). Professor Rantanen writes:

The primary issues addressed by the court [involved] a pre-Global-Tech jury instruction [on induced infringement] and the appropriateness of considering validity when determining whether the accused party possessed the requisite state of mind for inducement of infringement.  All three judges on the panel agreed that the jury instruction was both erroneous and prejudicial while Judges Prost and O’Malley agreed that issues of validity may be considered in the intent inquiry.

Both parties petitioned the Supreme Court for review and the high court has now given those petitions a breath of life by requesting that the Solicitor General file an amicus brief providing its views on whether a grant of certiorari is warranted. If certiorari is granted, the case would be heard next term.

Commil (the patentee) asks: 

1. Whether the Federal Circuit erred in holding that a defendant’s belief that a patent is invalid is a defense to induced infringement under 35 U.S.C. § 271(b).

2. Whether the Federal Circuit erred in holding that Global-Tech v. SEB, 131 S.Ct 2060 (2011) required retrial on the issue of intent under 35 U.S.C. § 271(b) where the jury (1) found the defendant had actual knowledge of the patent and (2) was instructed that “[i]nducing third-party infringement cannot occur unintentionally.”

The appellate panel ordered a partial retrial on the issue of induced infringement.  Cisco (the accused infringer who lost the original trial) asks:

Whether, and in what circumstances, the Seventh Amendment permits a court to order a partial retrial of induced patent infringement without also retrying the related question of patent invalidity.

Supreme Court: To Be Valid, Patent Claims Must Provide Reasonable Certainty Regarding the Claim Scope

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By Dennis Crouch

Nautilus v. BioSig (Supreme Court 2014) [New download here: 13-369_k53m]

Patents provide exclusive rights that are defined by a set of claims. The claims spell out the metes-and-bounds of the invention being claimed and are designed to put the world on notice of what is and what is not infringement. To facilitate this notice function of patent claims, the patent statute requires that the “claims particularly point[] out and distinctly claim[] the subject matter which the inventor or a joint inventor regards as the invention.” 35 U.S.C. § 112(b). The courts have wrapped these requirements in a doctrine known as indefiniteness. A patent claim that fails the test of indefiniteness is deemed unpatentable, invalid, and unenforceable.

Most patent claims have some amount of ambiguity in their scope. The question before the court in this case is how much is too much? Through a series of cases, the Federal Circuit has implemented was arguably a stiff test of indefiniteness – making it quite difficult to find a claim invalid as indefinite. As the Supreme Court writes:

According to the Federal Circuit, a patent claim passes the §112, ¶2 threshold so long as the claim is “amenable to construction,” and the claim, as construed, is not “insolubly ambiguous.”

In its opinion here, the Supreme Court found that the insolubly ambiguous fails to apply the statutory requirement noted above. In its place, the court has created a new test as follows:

A patent is invalid for indefiniteness if its claims, read in light of the specification delineating the patent, and the prosecution history, fail to inform, with reasonable certainty, those skilled in the art [at the time the patent was filed] about the scope of the invention. . . . .

The standard we adopt accords with opinions of this Court stating that “the certainty which the law requires in patents is not greater than is reasonable, having regard to their subject-matter.” Minerals Separation, Ltd. v. Hyde, 242 U. S. 261, 270 (1916). . . .

It cannot be sufficient that a court can ascribe some meaning to a patent’s claims; the definiteness inquiry trains on the understanding of a skilled artisan at the time of the patent application, not that of a court viewing matters post hoc. To tolerate imprecision just short of that rendering a claim “insolubly ambiguous” would diminish the definiteness requirement’s public-notice function and foster the innovation-discouraging “zone of uncertainty,” against which this Court has warned.

On remand, the Federal Circuit will decide whether the particular claims at issue here meet that test.

In the decision, the court highlights the reality that the old rule offers an incentive for patentees to intentionally “inject ambiguity into their claims.” The new standard is intended to help eliminate that standard.

Key points and ongoing issues from the opinion:

  • The addition of a reasonableness inquiry into the analysis means that indefiniteness appears to be moving be moving away from a question of law and into factual territory. The issue has traditionally been seen as part-and-parcel of claim construction, but now has the potential of being shifted to a question for trial. Of particular note here is the Supreme Court’s reluctance to decide the particular case and its allusion to the notion that the result “may turn on evaluations of expert testimony.” (quoting Markman).
  • The Supreme Court indicates that “a patent” will be invalid based upon the failure of its claims. The longstanding practice of the Federal Circuit is that indefiniteness is done on a claim-by-claim basis, but here the court suggests that approach should change.  Assuming that indefiniteness is still considered on a claim-by-claim basis, one outcome of this decision is that it adds additional value to patents with multiple claim formulations.
  • The Supreme Court indicates that any ambiguity should be considered “at the time the patent was filed” and also that the patent’s prosecution history are important in the consideration. What is unclear then is whether the court intended to mean that the consideration should be at the patent issuance, the application actual filing date, the application’s effective filing date (taking into account priority claims to prior filed applications), or the date that the claims in question were filed / amended.

Oregon Supreme Court Permits Patent Firm to Claim Privilege Over Communications with Internal Counsel

Ethics,

Given the conversation in posts below about interpreting statutes, this case is interesting for reasons beyond the issue involved.  In Crimson Trace Corp. v. Davis Wright Tremaine LLP (Or. May 30, 2014), the court held that a law firm could claim privilege over communications between a lawyer who was concerned about litigating a patent case where one of the firm’s own lawyers was accused of inequitable conduct and the firm’s in-house lawyers.

The court noted that some courts had recognized a “fiduciary exception” to privilege, which basically bars a lawyer who owes a fiduciary duty to a client to assert privilege against it.  However, the court noted that those courts that had recognized this exception were in common law jurisdictions, not ones, like Oregon, where the scope of privilege and its exceptions were set by the legislature.  Given that the legislature had spoken on the subject, the Oregon court held that it was not free to make-up additional exceptions.

Of course, CLS bank will be just like it in that regard. ha, ha.

Supreme Court Rejects Expanded Inducement Doctrine

Patent

By Dennis Crouch

Limelight Networks v. Akamai Tech. (Supreme Court 2014)

In an 11-page unanimous opinion, the Supreme Court has rejected the Federal Circuit’s expansion of the inducement doctrine – holding instead that inducement must be tied to underlying direct infringement. The Patent Act provides that “[w]hoever actively induces infringement of a patent shall be liable as an infringer.”

[O]ur case law leaves no doubt that inducement liability may arise”if, but only if, [there is] . . . direct infringement.” Aro Mfg. Co. v. Convertible Top Replacement Co., 365 U. S 336, 341 (1961) (emphasis deleted).

One might think that this simple truth is enough to dispose of this appeal. But the Federal Circuit reasoned that a defendant can be liable for inducing infringement under §271(b) even if no one has committed direct infringement within the terms of §271(a) (or any other provision of the patent laws), because direct infringement can exist independently of a violation of these statutory provisions.

The Federal Circuit’s analysis fundamentally misunderstands what it means to infringe a method patent. A method patent claims a number of steps; under this Court’s case law, the patent is not infringed unless all the steps are carried out. This principle follows ineluctably from what a patent is: the conferral of rights in a particular claimed set of elements. “Each element contained in a patent claim is deemed material to defining the scope of the patented invention,” Warner-Jenkinson Co. v. Hilton Davis Chemical Co., 520 U. S. 17, 29 (1997), and a patentee’s rights extend only to the claimed combination of elements, and no further.

The opinion is harsh toward the Federal Circuit, but somewhat poorly written. In particular, the Supreme Court seems to have misunderstood that the Federal Circuit holding actually does require all steps of the method to be carried out in order for a finding for inducement. The Court questions:

What if a defendant pays another to perform just one step of a 12 step process, and no one performs the other steps, but that one step can be viewed as the most important step in the process? In that case the defendant has not encouraged infringement, but no principled reason prevents him from being held liable for inducement under the Federal Circuit’s reasoning, which permits inducement liability when fewer than all of a method’s steps have been performed within the meaning of the patent.

Of course, the Federal Circuit’s decision in this case would not allow infringement in this scenario either.

The Supreme Court recognized and concurred with the policy goal behind the Federal Circuit’s doctrine as serving to help prevent “a would-be infringer” from evading liability “by dividing performance of a method patent’s steps with another whom the defendant neither directs nor controls.” However, the Supreme Court concurred with other commentators that a primary cause of this concern stems from the Federal Circuit’s unduly strict “single actor” rule for determining direct infringement. Muniauction. The Court writes:

Any such anomaly, however, would result from the Federal Circuit’s interpretation of §271(a) in Muniauction. A desire to avoid Muniauction’s natural consequences does not justify fundamentally altering the rules of inducement liability that the text and structure of the Patent Act clearly require—an alteration that would result in its own serious and problematic consequences, namely, creating for §271(b) purposes some free-floating concept of “infringement” both untethered to the statutory text and difficult for the lower courts to apply consistently.

On remand, there is a good chance that the Federal Circuit will reconsider (and expand) the single-actor rule for direct infringement to more fully account for common law traditions of respondeat superior liability.

Supreme Court: In Copyright, Laches Cannot Preclude Actions Taken Within Three Year Statute of Limitations

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By Dennis Crouch

Petrella v. MGM (Supreme Court 2014)

Frank Petrella wrote a screenplay back in 1963 based on the life of Jake LaMotta and assigned rights to UA/MGM who made the movie Raging Bull. Under the old renewal system, renewal rights went to Petrella’s heir, Paula Petrella, who renewed the copyright in 1991 in a fashion that (seemingly) eliminates the prior license. In 1998 she informed MGM that its continued exploitation of the Raging Bull movie violated her copyright. Finally, in 2009, she did sue – alleging copyright infringement.

Copyright infringement has a three-year statute of limitations indicating that “No civil action shall be maintained under the [Act] unless it is commenced within three years after the claim accrued.” 17 U.S.C. §507(b). However, as in patent law, copyright follows a “separate-accrual rule” that sees each successive violation of a copyright as a new infringing act with its own statute of limitations. Thus, under the statute of limitations, MGM could be liable for its post-2006 actions such as copying and distributing the work.

In the lawsuit, MGM separately asserted the equitable defense of laches based upon the long and unreasonable delay in bringing suit.

In a 6-3 decision, the Supreme Court has sided with Petrella – finding that the statute of limitations does all the work on the question of liability – leaving latches only to potentially shape the remedy.

Laches, we hold, cannot be invoked to preclude adjudication of a claim for damages brought within the three-year window. As to equitable relief, in extraordinary circumstances, laches may bar at the very threshold the particular relief requested by the plaintiff. And a plaintiff’s delay can always be brought to bear at the remedial stage.

The court was clear that equitable estoppel may also apply, but that generally requires some affirmative act by the rights-holder (that leads to

In a footnote, the court draws some parallels with the six-year statute of limitations for collecting back-damages in patent law. 35 U.S.C. § 286. In a 1992 en banc decision, the Federal Circuit held that laches can be an additional bar to collecting back-damages even within the six-year limit. A. C. Aukerman Co. v. R. L. Chaides Constr. Co., 960 F. 2d 1020 (Fed. Cir. 1992) (en banc). Noting that decision, the Supreme Court here only remarked that “We have not had occasion to review the Federal Circuit’s position.”

One interesting aspect of the decision was the unusual split between the majority and dissent. Justice Ginsburg penned the majority opinion that was joined by Justices Scalia, Thomas, Alito, Sotomayor, and Kagen.  Justice Breyer dissented and was joined by Chief Justice Roberts and Justice Kennedy.

Court to Employer: No Paper, No Assignment

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By Dennis Crouch

Peregrine Semiconductor v. RF Micro Devices (S.D. Cal. 2014) (peregrine decision)

Interesting decision here involving patent ownership. Peregrine sued RFMD for infringement of several of its patents. However, during the course of the lawsuit the parties figures out that a former Peregrine worker – Robert Benton – should have been a named inventor on the asserted patents. Rather than siding with his former bosses, Benton instead assigned his rights to the defendant RFMD. The question in the case then is whether that assignment is proper or did the patentee already hold equitable title due to Benton’s employment.

Ownership of patent rights generally begin with the notion that the inventor begins establishing patent rights at the moment of conception. “The general rule is that an individual owns the patent rights to the subject matter of which he is an inventor, even though he conceived it or reduced it to practice in the course of his employment.” Banks v. Unisys Corp., 228 F.3d 1357 (Fed.Cir.2000). At the point of conception, the right is inchoate since no patent application has been filed or patent issued. However, courts typically allow assignment of that inchoate right through a written document. That rule could be seen in contrast to the traditional rule regarding other inchoate rights, such as a possibility-of-reverter, that could not be transferred inter vivos. In the 2011 Stanford v. Roche decision, the Supreme Court reiterated the basic law of inventor’s rights and the proposition that – absent an express assignment – an employer might not own its employees inventions even if those were accomplished during the course of the employment. “In most circumstances, an inventor must expressly grant his rights in an invention to his employer if the employer is to obtain those rights.” Bd. of Trustees of Leland Stanford Junior Univ. v. Roche Molecular Sys., Inc., 131 S.Ct. 2188 (2011) (citing United States v. Dubilier Condenser Corp., 289 U.S. 178 (1933)).

Peregrine made two arguments as to why such a transfer occurred and that it held at least equitable title to Benton’s patent rights: (1) a contractual promise to assign; and (2) the hired to invent doctrine.

No Paper à No Express Assignment: Courts have long specifically enforced contracts to assign patent rights – requiring a contracting inventor to follow through with that promise as opposed to requiring only the ordinary contract remedy of expectation damages. Peregrine’s problem is that it has no written evidence of such a contract formation. Peregrine’s business practice is to require all employees to sign an “Employment and Assignment agreement,” but Benton testified that he had no recollection of executing any such written employment agreement or assignment during his time working at Peregrine. Here, the court seemed to be swayed as well by the Patent Act’s statute of frauds that require any assignment of patent rights to be in writing.

A patent owner who seeks to assign his interest in the patent must do so in writing. 35 U.S.C. § 261; Sky Techs. LLC v. SAP AG, 576 F.3d 1374 (Fed.Cir.2009) (citing Akazawa v. Link New Tech. Int’l, Inc., 520 F.3d 1354 (Fed.Cir.2008)). Peregrine admits that it does not have any documentation of an Employment and Assignment agreement or Policy Manual signed by Benton.

Although I suspect that the court made the right decision here, the statute-of-frauds theory has some failings. First, the statute requires that assignments be in writing, but does not expressly require that contracts-promising-assignment be in writing. Further, courts can still enforce a “lost grant” despite the statute of frauds so long as there is sufficient evidence to prove that the grant existed. Here, however, that evidence appeared to be lacking.

What Exactly Was he Hired to Invent?: Peregrine also argued that Benton had a duty to assign his patent rights based upon the (Federal?) common law “hired to invent” doctrine as well as the California Labor Code § 2860. In California, the statutory provisions of § 2860 are seen as coextensive with the common law doctrine and applies when an employee is “hired to invent something or solve a particular problem.” The doctrine focuses on the specificity of the task assigned to the employee. As Don Chisum writes, “[t]he primary factor in finding an employment-to-invent is the specificity of the task assigned to the employee.” Here, the court cited a 1960s California decision distinguishing between work “narrowly directed by the employer towards the resolution of a specific problem” and work that is “generalized within a field.” With only the former creating an obligation to assign. See Banner Metals, Inc. v. Lockwood, 178 Cal.App.2d 643 (Cal.Ct.App.1960).

In this case the court found that Benton’s work appeared to be wholly within the field of semiconductor development, but generalized within that field. Importantly, the court noted that Benton worked on a variety of products during his employment and also spent time on non-inventing activities such as marketing and customer support. As such, the court ruled that Benton is unlikely to be bound by the hired-to-invent doctrine.

Hired-to-invent cases will always be somewhat squirrely since they are ordinarily raised only as a backstop when the employer’s written agreement failed and, as such, there is not likely to be written evidence particularly defining the reason why an individual was hired. This case fits that description.

Preliminary Injunction: Now, this case is only at the preliminary injunction stage. Peregrine had motioned for a preliminary injunction and that injunction was denied based upon the likelihood that Peregrine will not be able to prove its ownership. The denial also offers Peregrine the opportunity to immediately appeal this case to the Federal Circuit.

Supreme Court Reinstates $6.6 Million Attorney Fee Award

Patent, Supreme Court

Kobe Properties v. Checkpoint Systems (Supreme Court 2014)

Today the Supreme Court issued a GVR decision in this case:

The petition for a writ of certiorari is granted. The judgment is vacated, and the case is remanded to the United States Court of Appeals for the Federal Circuit for further consideration in light of Octane Fitness, LLC v. ICON Health & Fitness, Inc., 572 U. S. ___ (2014) and Highmark Inc. v. Allcare Health Management System, Inc., 572 U. S. ___ (2014).

In that case, a jury found the asserted patent infringed, invalid, and unenforceable and the district court judge had awarded $6.6 million in attorney fees to the defendants. On appeal, however, the Federal Circuit reversed based upon a finding that “the requirements of § 285 were not met” because the patentee’s lawsuit was not ‘objectively baseless.’ [See Rantanen, Failing the Objectively Baseless Standard]. In Octane Fitness, however, the Supreme Court recently held that the objectively baseless standard is improper and too strict.

Following the Supreme Court GVR, the fee award is now reinstated. On remand, the panel will likely be asked now to determine whether the district court’s findings were an abuse of discretion – which they likely were not.

Fee Shifting: First the Supreme Court, Now Congress

Attorney Fees, Fee Shifting, Patent, Supreme Court

By Dennis Crouch

In Octane Fitness, the Supreme Court gave discretion to district courts in determining whether to award attorney fees to the prevailing party. The court also lowered the bar for such a finding – both by removing the somewhat rigid limitations that had been imposed by the Federal Circuit and by rejecting the notion that clear and convincing evidence is a prerequisite foundation for such an award.

However, the decision will likely be seen as making an incremental change rather than being a watershed moment. The law remains that attorney fees should only be awarded in exceptional cases that involve misconduct or extreme behavior. Our long tradition in the US had avoided attorney fees except in rare cases and I do not see this court changing that tradition in any dramatic way. The point here is that even the new lower standards are a far cry from the presumptive award of attorney fees as have been proposed in Congress.

Enter Congress: Earlier this session, the House of Representatives passed H.R. 3309 (the Innovation Act) with broad bipartisan support. The bill includes a fee shifting provision that creates a presumption that fees will be awarded to the prevailing party unless the district court finds that the losing party’s position was “reasonably justified in law and fact or that special circumstances make an award unjust.” A parallel Senate proposal steps back slightly from the House version and would require a finding that the non-prevailing party’s conduct or position was objectively unreasonable.

The Senate version is intended to be a middle ground between the current law and what was passed in the House. As far as I know, Senator Leahy has not yet come-out in favor of either proposal but has stated his preference that discretion in the decision be given to district court in the decisionmaking process. One way to achieve Senator Leahy’s goals could be a simple modification of Section 285 – deleting “exceptional case” and adding “its discretion” as follows: “The court in exceptional cases
its discretion may award reasonable attorney fees to the prevailing party.”

The legislative proposals also have the creative element of helping ensure that the rule cannot be skirted by underfunding the patent enforcement entity. Rather, the proposal would allow for limited veil piercing in order to collect any attorney fees owed from investors and others with interests in the litigation.

One bottom line is that the proposed statutory changes would still push the law well beyond its (newly) current state. As such, I suspect that the push to include these provisions as key elements of patent reform will continue.

Supreme Court Takes-On Question of Joint Infringement

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By Dennis Crouch

[Transcript of Oral Arguments]

The Supreme Court heard oral arguments today in Limelight Networks Inc. v. Akamai Technologies, Inc. Limelight is best seen as part of a series of cases considering what it means to be an infringer. In particular, the court has struggled to determine what to do when one party performs a portion of a patented invention and then another party performs the remaining portion. In this setup, the parties are able to collectively benefit from the invention without being labelled infringers under the Federal Circuit’s strict single-entity-infringer rule. See BMC v. Paymentech (Fed. Cir. 2007). The BMC line of cases creates an avenue for avoiding infringement by properly dividing the corporate structure. That pathway is further solidified by our current age of distributed computing that allows for servers and systems to closely interoperate even though controlled by different parties. In this case, the invention is focused on a mechanism for quickly delivering video streams to lots of people over the internet by distributing servers. The patent spells out the entire method and system for accomplishing this result, but the defendant here each only practice a portion of the whole invention but expressly encourages its customers to perform the rest. In an admittedly biased way, the patentee’s attorney Seth Waxman explained the setup as follows:

Mr. Waxman: This case is not complicated. This case involves a four­ or five­step method in which Limelight performs all but one or two of the steps and tells its customers, if you want to use our service, you have to perform the other step. Here’s exactly how you do it. We have somebody 24 hours a day, seven days a week assigned to you to help make sure you do it the right way.

In Limelight, the Federal Circuit (sitting en banc) offered one outlet to limit avenues-of-infringement. Here, the appellate court held that an entity can be liable for inducing infringement if that party induces performance of the entire invention, even if no single party performed all of the elements. That holding is a shift in thinking – prior case law required evidence of underlying single-actor direct infringement as a pre-requisite to an inducement finding. The statute for inducement indicates simply that “whoever actively induces infringement of a patent shall be liable as an infringer.” 35 U.S.C. § 271(b). An interesting element of this case is that the Limelight originally indicated that it would reconsider the BMC doctrine regarding direct infringement. However, the en banc panel decided to limit its analysis only to the inducement theory. If Limelight is successful on appeal, the Federal Circuit may then have an opportunity to reconsider the single-actor rule for direct infringement under Section 271(a). More particularly, the Federal Circuit has applied a fairly strict agency doctrine rule, but other areas of law have allowed for a more liberal agency doctrine that would potentially capture the type of joint infringement alleged in this case.

The question presented is:

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 Section 271(a).

Aaron Panner argued on behalf of the petitioner Limelight (the accused infringer) and shared time with Assistant Solicitor Ginger Anders who filed a brief in support of the petitioner. Seth Waxman argued on behalf of the respondent-patentee Akamai. In the case, the US government took the middle-ground position that the patentee has the best policy argument but that the statute clearly supports reversal.

Focusing first on the policy issues, the court asked whether Limelight is asking for a rule that allows patentees to skirt infringement simply by altering its corporate structure:

CHIEF JUSTICE ROBERTS: Your position makes it pretty easy to ­­ to get around patent protection, doesn’t it? All you’ve got to do is find one step in the process and essentially outsource it or make it attractive for someone else to perform that particular step and you’ve essentially invalidated the patent.

MR. PANNER: I don’t think so, Your Honor. In the two following senses.

First of all, empirically speaking, there have not been very many cases in which this has proven to be a problem. It has been a long understood principle of patent claim drafting that method claims should be drafted from the point of view of a potential infringer so that all of the steps can be carried out by that potential infringer. And prospectively, certainly ­­ and given that this rule has been clearly articulated by the Federal Circuit now for many years, or at least several years, prospectively, the patent applicant has every incentive to draft claims from the point of view of a single potential infringer.

This ­­ the claim that’s at issue here, there’s no dispute. It could have been written in such a way that the steps would have been carried out by a single infringer and, indeed, that may have been the intent. . . .

JUSTICE SCALIA: I’m just arguing about whether the safe haven you have given us for patentees really exists. It doesn’t seem to me you can avoid the problem by simply requiring all the steps to be conducted by one person.

MR. PANNER: Well, Your Honor, in ­­ in my experience in ­­ in terms of dealing with patents that are written to technologies that do involve interaction, for example, between cellular phones and networks and content providers who are sending content to a phone, for example, it is very common to draft claims from the point of view of someone who’s participating in that process so that all of the steps will be carried out in that ­­ by that person. . . .

JUSTICE KAGAN: [N]otwithstanding what you said about 10 of 11 judges, it was clear that the judges thought that there was a real problem here in terms of an end run, and that they looked at this and said, well we could do it under 271(a) or we could do it under 271(b), and 271(b) seems a lot more natural and better for various reasons. But your sense in reading the opinion that all those judges who did it under 271(b) are just going to go back and do the exact same thing under 271(a).

Panner’s argument here does not seem like one that the judges would truly support – that the patentee wins or loses here based upon whether it correctly followed the proper claim-drafting trick.

Responding to the same issues, the US Government lawyer (Anders) recognized the “end run” problem as legitimate.

MS. ANDERS: I think the Federal Circuit was understandably concerned about allowing inducers to perform some stops of a process themselves to escape liability, but this Court has twice held in both Microsoft v. AT&T and before that Deep South v. Laitram that judicial concerns about gaps in 271’s coverage should not drive the Court’s interpretation of that provision. That is because any time that you close a gap in 271, expanding patent rights, you are invariably implicating competing concerns and it’s for Congress to resolve those concerns.

When his turn to speak, Waxman hit home the policy concerns:

MR. WAXMAN: Please make no mistake about what Limelight is asking you to do. Under Limelight’s theory, two or more people can divide up and perform the steps of any method claim, however drafted, without liability. . . . Let’s assume that there is disclosure and patenting of a cure for cancer or a novel treatment for cancer that involves, as they often do, the administration of different drugs sequentially. And two parties get together and say, I’ll administer Drug 1, you administer Drug 2, and we can take advantage of this marvelous patented process without paying anything ­­ giving anything whatsoever to the company that spent a billion dollars and 25 years developing.

Several of the Justices rightly recognized the potential notice problems of joint liability in a strict liability scenario. However, those fears are greatly reduced in the inducement context because liability requires knowledge that the acts being induced would constitute infringement. Waxman attempted to also allay those fears by referencing a common law knowledge requirement implied into joint-concert liability.

When the Federal Circuit decided this case, it appeared to be a new rule regarding inducement liability. In his appealing way, Waxman argued that it is not really new but rather it is a return to the common law notions that were disrupted by the Federal Circuit’s unnatural limitations on 271(a) joint liability that began in 2008.

JUSTICE SOTOMAYOR: [Is] this is a new rule by the Federal Circuit?

MR. WAXMAN: The answer is no. What is new is the 2008 ­­ beginning in 2008 jurisprudence in the Federal Circuit on 271(a) that unnaturally limited the common law attribution rules.

Very little time was spent on statutory construction – what is meant by the term “infringement” in 271(b)? Waxman does lay out his textual argument that infringement in 271(b) is not limited to “direct infringement under 271(a).” but rather offers the following notion:

MR. WAXMAN: A patentholder has the exclusive right to make, 15 sell, use, or offer to sell his invention during the term of the patent. That’s what sets out the metes and bounds of the property right. And any encroachment on that property right is an infringement. . . .

JUSTICE GINSBURG: An infringement without an infringer?

MR. WAXMAN: You can certainly have infringement without an actionable infringer, absolutely. Under anybody’s rule you can do that. The whole debate we have with the other side on the (a) question is how ­­ what attribution rules do or don’t apply. . . . .

JUSTICE SCALIA: What does ­­ what does (b) require? Does it require inducing an infringement or inducing an infringer?

MR. WAXMAN: Inducing an infringement. And I’ll give you a concrete example. Let’s say that there’s a five­step patented method that I know about, and I convince ­ I induce Mr. Panner to do steps 1, 2, and 3 and Ms. Anders to do steps 4 and 5. If I’m doing that because I know about the patent and I want to take advantage of their otherwise innocent performance collectively of the steps, at common law and at patent law, it was uncontroversial that I was liable. I was responsible.

Overall the oral arguments here are difficult to follow and thus the outcome is difficult to predict. The justices are rightly concerned that the their decision on 271(b) is dependent upon the meaning of joint infringement 271(a), but that may only be decided on remand.

JUSTICE ALITO: It’s ­­ it’s a good reason to think that the question before us really has no significance that I can think of unless the ­­ the Court of Appeals ­­ unless the Federal Circuit is right about [the limited scope of 271](a). . . . So you’re asking us to decide a question ­­ to assume the answer to the question on (a) and then decide a question on (b) that is of no value ­­ no significant ­­ maybe I don’t understand some other ­­ I don’t see some other situations where it would apply, and no significance unless the ruling on (a) stands, unless Muniauction is correct?

Waxman expressly suggested that the court go ahead and rule on the 271(a) issue (as it had suggested in a cross petition for certiorari) or simply remand the case to the Federal Circuit to decide the underlying 271(a) issue.

SCOTUS: District Courts Have Broad Discretion in Awarding Attorney Fees in Patent Litigation

Patent,

By Dennis Crouch

Octane Fitness v. Icon Health (Supreme Court 2014)

The Patent Act allows district courts to award attorney fees to the prevailing party in “exceptional cases.” 35 U.S.C. § 285. However, the Federal Circuit has repeatedly limited district court discretion in determining whether a particular case is exceptional. See Brooks Furniture Mfg., Inc. v. Dutailier Int’l, Inc., 393 F. 3d 1378 (Fed. Cir. 2005).

In a 9-0 decision, the Supreme Court has rejected the Federal Circuit’s Brooks Furniture test as “unduly rigid.” In its place, the Supreme Court returns discretion to the district courts in determining whether a case is exceptional based upon the general principle:

[A]n “exceptional” case is simply one that stands out from the others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated. District courts may determine whether a case is “exceptional” in the case-by-case exercise of their discretion, considering the totality of the circumstances [and without any] precise rule or formula for making these determinations.

Even without Section 285, courts hold the inherent power to impose fees on parties for bad behavior. Here, the court made clear that Section 285 should be construed to go beyond that inherent power – otherwise it would be merely superfluous.

The decision here is balanced in that it does not expressly favor plaintiffs or defendants; patentees or accused infringers. However, it has eliminated an important safe-harbor created by the Federal Circuit to protect plaintiffs. In the past, attorney fees were not allowed based upon filing a losing case unless the case was “objectively baseless.” In patent cases, that standard is difficult to meet because of all the avenues for ambiguity. That safe-harbor is now gone.

Finally, and importantly, the Supreme Court rejected the Federal Circuit’s rule requiring clear and convincing evidence before an award of fees. Here, the court held that there is “no specific evidentiary burden.” Rather, as mentioned, the decision is “a simple discretionary inquiry.”

= = = = =

Highmark Inc. v. Allcare (Supreme Court 2014)

In the Octane Fitness companion case, the Supreme Court also rejected the idea that exceptional case determinations should be reviewed de novo on appeal. Rather, consistent with the discretionary standard offered above, the appeal standard should focus on whether the district court abused that discretion. Typically, that is a difficult threshold to meet on appeal.

Both opinions were penned by Justice Sotomayor and unanimous.

Oral Arguments: Can the Supreme Court Force Clarity in Claim Scope?

Patent, Supreme Court, , ,

By Dennis Crouch

Nautilus v. Biosig (Supreme Court 2014) [Transcript of Oral Arguments]

On April 28, 2014, the Supreme Court heard oral arguments in the important indefiniteness case concerning a fitness monitor patent. In my estimation, most issued patents have claim terms that are arguably indefinite. The usual litigation resolution of that problem is through the process of claim construction. The patent statute requires A patent can be held invalid as indefinite under 35 U.S.C. §112(b) for failing to “particularly point[] out and distinctly claim[]” the invention. However, the Federal Circuit has repeatedly found that the invalid-as-indefinite doctrine is quite narrow and only applies when a term is “insolubly ambiguous” and when “reasonable efforts at claim construction result in a definition that does not provide sufficient particularity and clarity to inform skilled artisans of the bounds of the claim.”

The result of this policy is that it provides patentees an incentive to seek a claimset that includes some “solubly” ambiguous terms that create colorable infringement argument and whose scope retains malleability. We only learn the true scope of a claim once it is interpreted in court – an often only after an appeal to the Federal Circuit. One approach to push against this downward spiral would be to follow the contract canon of construing claims against the drafter. Another approach is what Nautilus suggests – make it easier to invalidate claims on indefiniteness grounds. At the same time, lowering the standard could open the door to a new intensity of linguistic-noodling by accused infringers.

In this case, two questions are presented:

1. Does the Federal Circuit’s acceptance of ambiguous patent claims with multiple reasonable interpretations—so long as the ambiguity is not “insoluble” by a court—defeat the statutory requirement of particular and distinct patent claiming?

2. Does the presumption of validity dilute the requirement of particular and distinct patent claiming?

Claim construction is an issue in the vast majority of patent infringement lawsuits and, over the years, the Federal Circuit has altered a district court’s claim construction in hundreds of different cases. In many of those, the district court’s opinion was a reasonable interpretation of the claim scope even if not what the Federal Circuit saw as the very best interpretation. In that framework, it is easy to see how the Nautilus focus on “multiple reasonable interpretations” could have a dramatic impact on the validity since all of those claims would seemingly be invalidated based upon the existence of multiple reasonable interpretations.

Predicting Outcome: The oral arguments suggest that the Federal Circuit’s “insolubly ambiguous” test will be thrown out as too strict. However, none of the Justices appeared interested in the seemingly too loose rule that would invalidate claims that are open to multiple reasonable interpretations. The middle ground of requiring claim scope be of “reasonable certainty” seems to be the likely course.

The claim term at issue in this case involves two electrodes of a heart monitor being in a “spaced relationship” with each other. The district court held that term indefinite because the patent did not include any parameters as to the scope of that space. On appeal, the Federal Circuit reversed, determining that the term was amenable to construction since the purpose of the space was recited in a whereby clause (to help remove EMG signals coming from a single hand). In particular, the court held that the term had an upper and lower bound: each half must be held within a hand and it cannot physically be infinitesimally small. Now, one interesting aspect that relates to prior functional-claim cases is that on reexamination, the examiner found that the functional whereby clause to be the crucial limitation that made the claim patentable. Federal Circuit cited and discussed Halliburton. However, the court did not address the Taboo against functional element at the point of novelty but instead cited to a list of Federal Circuit decisions holding that functional claim limitations are just fine.

The arguments: Patent litigator John Vandenberg argued on behalf of the petitioner Nautilus while appellate specialist Mark Harris argued for the patentee Biosig. Harris shared time with US Assistant Solicitor Curtis Gannon as amicus. Overall, the oral arguments were not highly elucidating the one major area of new ground covered was an analogy to Chevron analysis whose first step is to determine whether a statute is ambiguous (or silent) as to a particular issue. In Chevron, statutory ambiguity allows government agencies more leeway in interpreting the law. In this context, the ambiguity would lead to a patent being held invalid. However, the court was clearly not comfortable with that test essentially because it is too loose for the resulting reaction (patent invalidity). Of course, invalidating a patent claim does not involve the same level of drama as invalidating a congressionally mandated statute. Apart from the constitutional-political issues, the patent claim being invalidated is typically one of many claims within the patent and that patent is one of many covering the accused activity. In addition, unlike statutes, the party benefiting most from the patent has full control of the language used in the patent grant.

In the oral arguments, Vandenberg makes two compelling points: (1) that ambiguity in the patents is intentional but not justified; and (2) that its requested rule is parallel to that already applied by the USPTO:

MR. VANDENBERG: I think it’s important to remember here that there is no legitimate need or excuse for ambiguity in patent claims. Once the applicant has satisfied paragraph one [of section 112] and its strict requirements for describing the invention, it is easy to claim the invention particularly and distinctly. The only reason that there are so many ambiguous claims out there today is that patent attorneys are trained to deliberately include ambiguous claims. Ambiguous claims make the patent monopoly more valuable. Every patent attorney knows that. . . .

There is no legitimate need for ambiguous claims. There is a strong economic incentive for patent attorneys to draft ambiguous claims, not to put all their eggs in that basket. They want some clear claims in case some copyist comes along, but they want ambiguous claims so they can ­­ their client can treat it as a nose of wax later, as happened here. That is well established in the patent bar, that there is this strong economic incentive. But patent attorneys have ample tools to avoid ambiguous claims if this Court tells them that it will no longer be permitted. That ­­that is the key here, is that there’s a strong economic incentive. The patent attorney and the inventor are in the best position to avoid the ambiguity that Congress prohibits and therefore, the problem is, the Federal Circuit has blessed ambiguity with its test. And in order to stop all of the problems that the amici have pointed out that are caused by ambiguous claims, we submit this Court needs to be clear and go back to United Carbon and General Electric and to the statutory text and be clear that ambiguity is simply not permitted.

After a bit of dancing, Vandenberg began to hit his stride in a discussion with Justice Kennedy:

JUSTICE KENNEDY: Do you agree that the standard at the PTO, and let’s say that it’s whether or not ­­ the claim is definite if a person skilled in the art would be reasonably certain of its scope. Is the standard used by the PTO the same standard that the CA Fed ought to use?

MR. VANDENBERG: Yes, it is, Your Honor.

JUSTICE KENNEDY: All right, that’s a sensible answer, I think. Now, how does the presumption of validity bear on the application of that same standard in the court of appeals?

MR. VANDENBERG: The presumption of validity certain applies to this defense. It requires the challenger to raise the defense, to preserve the defense, plead it as affirmative defense, to make the initial argument as to why the claim is ­­

JUSTICE KENNEDY: Doesn’t that imply some deference on findings of fact?

MR. VANDENBERG: Your Honor, it would be rare for there to be, in an indefiniteness case, to be any underlying finding of fact. The ­­ the issue of indefiniteness is really subsidiary.

JUSTICE KENNEDY: That is, the presumption of validity, does that accord some deference to the PTO? And how would that apply or not apply here?

MR. VANDENBERG: It would apply ­­ it does not apply in this case. There are no fact findings out of the Patent Office regarding indefiniteness. But if there was ­­ the same indefiniteness issue came up and the Patent Office found, for instance, that a term of art, let’s say nanotechnology, biotechnology term of art had a particular meaning, then that fact­finding may be entitled to deference by the trial court.

However, indefiniteness itself is a legal determination. The Federal Circuit said that.

JUSTICE KENNEDY: So there’s no deference to the PTO as to that legal interpretation.

MR. VANDENBERG: No, Your Honor, no more than there’d be deference to the Patent Office claim construction or any other legal decision.

Mr. Harris began his argument defending the Federal Circuit, but immediately ran from the insolubly ambiguous language of that decision.

MR. HARRIS: The decision of the Federal Circuit should be affirmed for two reasons: First, that court correctly held that the test for definiteness is whether a claim puts a skilled artisan on reasonable notice of the boundaries of the invention, and secondly, whatever

JUSTICE SCALIA: If that’s what it held we wouldn’t have taken this case. I thought we took it because [the Federal Circuit used] some really extravagant language.

I mean, it’s one thing to run away from that language, as your brief does. It’s another thing to deny that it exists.

MR. HARRIS: Justice Scalia, we are not denying that those words exist, “insolubly ambiguous,” but what I think this court below, the Federal Circuit, in this case explained, and it’s explained consistently, is that that ­­ those two words are not the test all by themselves.

CHIEF JUSTICE ROBERTS: So it was fair, as I suggested earlier, nobody agrees with that formulation [of insolubly ambiguous]?

MR. HARRIS: Yes, I guess so, Your Honor. . . .

Beyond the particular quibble over language, Harris seems to provide a convincing case that, even under a lower standard, the Biosig claims are still definite because of the uncontroverted evidence provided that one skilled in the art at the time would have been able to understand the meaning of the claim.

The role of the US Government in this case is interesting because it is in some tension with President Obama’s ongoing initiatives to push for clarity in claim scope. However, Gannon (from USDOJ) did argue that the presumption of validity should not play a role in the claim construction process. And rather that the resulting validity of a claim should not impact which construction is chosen.

District Courts and Patent Cases, Part I

District Court, Patent, Rantanen

By Jason Rantanen and Joshua Haugo*

During the oral argument in Octane Fitness, Justice Alito asked an interesting question about the frequency at which district court judges hear patent cases.  In response to a comment from Mr. Telscher that “I do think district court judges see a lot of patent litigation,” Justice Alito asked:

Is that really true? There’s nearly 700 district judges in the country.  If we had a statistic about the average number of patent cases that a district judge hears and receives on, let’s say, a 5 ­year period, what would it be?

Oral Argument Transcript at 14 (full transcript available here).

The question was posed in such a way as to imply that patent cases were a rare occurrence for most district court judges, and since neither counsel nor research into secondary sources provided a ready answer, we pulled data from Lex Machina to seek some insight into this issue.

Since we were interested in frequency, we looked at the number of patent cases filed between 2010 and 2013 on a per judge basis.  Our analysis shows that while patent cases are relatively common generally, their distribution is indeed highly skewed.  Nevertheless, most active judges heard at least one patent case during the time and the median number of patent cases received per judge was higher than one might expect (it’s eight).  The below chart illustrates the number of patents cases received by each judge who was active during the 4-year time period, sorted by the number of patent cases received (i.e.: the judges who heard no patent cases are to the left and the judges who heard the most patent cases are to the right, with Judge Gilstrap being judge #760).  The chart cuts off at 100 cases received, but the line continues up with seven judges receiving more than 600 patent cases each (Judges Robinson, Sleet, Andrews, Schneider, Stark, Davis, and Gilstrap).

Figure 1Methodology: To obtain the data set, we ran a search on Lex Machina for all patent cases filed between 2010 and 2013.  We then copied the judge data from Lex Machina’s dynamic filter, giving us the number of patent cases per judge.  We obtained data on all district court judges (not just those that appeared in the Lex Machina search results) from the Federal Judicial Center.  This allowed us to filter the results to include only judges that met our criteria of “active” judges for the time period (i.e.: judges that were confirmed to a district court prior to 12/31/2013 and had not retired or been terminated until after 1/1/2010).  There were a total of 760 active district court judges between 2010 and 2013, although some were active for only a short time during the window we analyzed.  We were also able to limit our data set to only judges who were active for the entire time period (i.e.: who were confirmed to a district court prior to 1/1/2010 and who did not retire or take senior status prior to 12/31/2013); a chart using this data is below.

Background Statistics: In total there were 19,325 patent cases filed before 865 judges over the four year period.  The judge with the most patent cases was Judge Gilstrap of the Eastern District of Texas, who received 1,636 patent cases. Although several judges received an extraordinary number of cases, many judges that heard patent cases had only 1 patent case filed before them during the 4 year window we examined.  

Of the 19,325 total cases heard in District Courts, 18,061 cases were heard by 760 active judges.  The remaining 1264 cases were heard by 165 judges that were primarily senior status, although there were several appellate judges sitting by designation.  For this analysis, we did not include any cases filed before judges that were not active during at least some portion of the period.

There is one important caveat to this data: it reflects patent cases received by the judges.  As a result, it does not directly report on the number of patent cases actually heard by district judges (since sometimes case settle soon after filing), nor does it directly report perhaps an even more important statistic relating to Justice Alito’s questioning, that of judges’ experience rendering substantive decisions in patent cases.  This data does, however, provide some insight into these issues because we know that both figures cannot be greater than the number of patent cases received and (unless there is a particular selection bias operating in certain districts that affects settlement rates), it seems likely that the distribution of both patent cases heard and decided would follow a similar pattern.

Analysis: The average number of cases received by active judges was 23.8 cases over the span of four years, or almost 6 cases per year, while the median was 8 cases over the four-year span.  While the highest districts in terms of filings did affect the mean, removing the three highest (the Eastern District of Texas, Central District of California, and District of Delaware) still resulted in an average of 13.3 cases per judge.  Of the active judges, there were 71 that did not receive any patent cases within the window.  Thus over 90% of active judges received at least 1 patent case filed during the window.

Additionally, we looked at the numbers for judges that were active throughout the 4 year time period, in order to get a sense of what an average “active” judge might see.  These judges were commissioned prior to 1/1/2010 and had not been terminated or retired prior to 12/31/2013 (thus excluding both judges who were on the bench for only a part of the period and judges who took senior status during a portion of the period).  For this set, there were a total of 11,096 patent cases received by 434 judges.  The average number of cases received was 25.6 with a median of 11 cases over the four-year period.  Removing the top three districts from this data set still produced an average of 20 cases and a median of 10 cases received over the four-year period.  In total, only 28 of the 434 active judges did not receive a patent case during this time; over 93% of judges received at least 1 patent case.  The graph below shows a frequency chart of only judges that were active during all 4 years (the bar on the far right reflects the fifteen judges who received over 100 patent cases during the four-year period).

Figure 2 While the numbers suggest that patent cases are not unicorns, even outside of the top three districts, there also may be some merit to Justice Alito’s concern that at least a substantial number of District Court judges do not hear more than an occasional patent case, and thus may find it difficult to determine which cases are “exceptional” based on their past experience with other patent cases.  Of course the ultimate issue may not be one of determining whether a patent case is exceptional, but in simply determining whether a complex litigation suit is exceptional.  And as to that, as Mr. Telscher observed in response to Justice Alito’s questioning about numbers of patent suits received by district court judges, “I don’t know what that number is, Your Honor. But I know that district court judges carry a widely varying docket of different areas of law and are called upon to learn the law and assess the reasonableness of those positions.”

*Joshua Haugo is a second-year law student at the University of Iowa College of Law.

Edit: Michael Risch pointed out that there may be an effect depending on how Lex Machina counts transferred cases, which he estimates at 15-20% of cases.  I’m looking into the way that Lex Machina counts these types of cases: its database certainly includes both the transferor and transferee dockets, but it does not appear to count the transferor judge as being the “judge” of the case.  Instead, it appears to only count the transferee judge.  I’ll update the post once I have a better sense of this effect.

Edit2: Based on further investigations (and subject to confirmation from the folks at Lex Machina), Lex Machina counts both the transferring court and the transferee court; in other words, its not deduplicating.  The effect of this is to artificially inflate, perhaps by as much as 15-20%, the case counts below.  This causes me to echo the caution I noted originally: just because a judge “received” a case does not mean that he or she “heard” it, let alone on the substantive merits.

Edit3: Lex Machina confirmed that “each separately assigned civil action number is a case except, if it is an intradistrict transfer, we detag it so it does not count as a patent case.  In the event of a inter-district transfer, we will have one case with the outcome “procedural: interdistrict transfer” and the other case with whatever its outcome was.”  So what I observed above holds.

 

Supreme Court on Patent Law

Patent, Supreme Court


Only four years in, the 2010s have seen more Supreme Court patent cases than any decade since the 1960s. And, by the end of 2015, I expect that 1960 mark will also be surpassed. The record actually stretches back to the 1880s when the Court decided 145 patent cases. It was in that golden era of patent law that the Supreme Court defined many of the fundamental patent law doctrines that were later codified by Congress and that still exist in the law today. Almost every patent law question that arises today has already been addressed, in some way, by a 19th-century court.

More here in my LinkedIn Influencer post: Crouch, Supreme Court versus Patent Law.

 

Supreme Court to Consider De Novo Review of Claim Construction

Patent, Supreme Court,

By Dennis Crouch

Teva Pharmaceuticals USA, Inc. v. Sandoz, Inc. (Supreme Court 2014)

The Supreme Court has granted Teva’s petition for writ of certiorari on the issue of de novo review of district court claim construction. Rather than mounting a facial challenge to all de novo review, the petitioner here argues that, at minimum, a district court’s explicit factual conclusions should be given deference. The case will be heard next term.

The question presented is as follows:

Rule 52(a) of the Federal Rules of Civil Procedure provides that in matters tried to a district court, the court’s “[f]indings of fact . . . must not be set aside unless clearly erroneous.”

The question presented is as follows: Whether a district court’s factual finding in support of its construction of a patent claim term may be reviewed de novo, as the Federal Circuit requires (and as the panel explicitly did in this case), or only for clear error, as Rule 52(a) requires.

In its responsive brief, Sandoz re-characterized the question as follows:

Whether Federal Rule of Civil Procedure 52(a) requires an appellate court reviewing a district court’s construction of patent claims to defer to conclusions that are based on a litigation expert’s declaration that expressly contradicts the patent record.

The case involves Teva’s multi-billion-dollar drug Copaxone that is arguably covered by a set of nine different patents. The appellate decision by the Federal Circuit rejected the lower court’s claim construction and, as a consequence, found several of the patents invalid. The result is that the remaining patents expire in May 2014 rather than September 2015. Teva’s daily US sales of the drug are about $8 million.

I’ll speculate here that the result will be a unanimous rejection of the Federal Circuit’s no deference policy.

Supreme Court to Address Standard of Review for Claim Construction

Patent, Supreme Court,

This morning the Supreme Court granted Teva’s petition for certiorari in Teva Pharmaceuticals USA, Inc. v. Sandoz, Inc.  Teva’s petition presents the following issue:

Whether a district court’s factual finding in support of its construction of a patent claim term may be reviewed de novo, as the Federal Circuit requires (and as the panel explicitly did in this case), or only for clear error, as Federal Rule of Civil Procedure 52(a) requires.

This case will be heard next term.  You can find the briefs on Scotusblog: http://www.scotusblog.com/case-files/cases/teva-pharmaceuticals-usa-inc-v-sandoz-inc/

Edit: See above for Dennis’s more thorough discussion of the parties’ positions!

 

Supreme Court Opens Door on Unfair Competition Lawsuits

Patent, Supreme Court

By Dennis Crouch

Lexmark Int’l v. Static Control (Supreme Court 2014)

In a unanimous opinion penned by Justice Scalia, the Supreme Court has ruled that standing in §1125(a) false-advertising claims are not limited to competitors. Rather, it can be sufficient that a plaintiff have a commercial injury “flowing directly from the deception wrought by the defendant’s advertising.” The standing decision here is not testing the Constitutional limits of judicial power under Article III but rather is one of statutory interpretation. In particular, the statute provides that a cause of action is available to “any person who believes that he or she is or is likely to be damaged by such act [of false advertising].” Although expanding the scope of potential plaintiffs, the court seemingly continued to hold the line against giving the statute its plain English interpretation that would allow consumer class actions.

False Patent Infringement Claims: Of interest to patent attorneys, the alleged false advertising claims here involve public allegations of patent infringement. The court writes.

First, Static Control alleged that Lexmark disparaged its business and products by asserting that Static Control’s business was illegal. See 697 F.3d 387 (6th Cir. 2012) (noting allegation that Lexmark “directly target[ed] Static Control” when it “falsely advertised that Static Control infringed Lexmark’s patents”).

Under the Supreme Court’s interpretation of the law, those statements (with the requisite intent and resulting harm) can be sufficient to create a cause of action for false advertising.

Today’s Supreme Court [Land] Patent Decision

Patent, Supreme Court

by Dennis Crouch

Today the Supreme Court decided an interesting patent case in Brandt v. U.S. The patent at stake was a land patent that the Supreme Court here defined as “an official document reflecting a grant by a sovereign that is made public, or ‘patent.'”

The case involved an 83-acre plot in Wyoming owned by Marvin Brandt. The U.S. government originally owned the land as part of the 1803 Louisiana Purchase.  In order to expand rail-road coverage in the US, the Government offered a free right-of-way to RR builders. General Railroad Right-of-Way Act of 1875.  In 1911, the Laramie Hahn’s Peak & Pacific Railway Company (LHPP) took advantage of that offer and build a RR across the land that was later patented to Brandt’s.  Thus, in 1976, when the Brandt’s took fee simple ownership, that ownership was “subject to those rights for railroad purposes as have been granted to [LHPP], its successors or assigns.”  Finally, in 2004, LHPP (now part of Union Pacific) removed its tracks and expressly abandoned its right of way.  (more…)