Okay, that’s true but… you’ll have to read here to see if he was upset about patent fees or something else.
Tag Archives: Supreme Court
285 at the Supreme Court
Dennis has a great summary on the main page. We had a debate here a while back where my view was the First Amendment was irrelevant. I think the Supremes agree:
MR. PHILLIPS: Well, I have no doubt that Congress could well, I’m not sure about in all cases.
JUSTICE SCALIA: I mean, if it can do that, there’s certainly no First Amendment problem.
MR. PHILLIPS: Well, I’m not sure I concede that in all cases. I do think in the run of the mill cases, but when you’re talking about a situation where the assertion is that the conduct of the litigation, the bringing of the litigation itself is inappropriate
JUSTICE SCALIA: That’s an English rule. It used to be our rule. I don’t see how you can possibly say that it’s unconstitutional to make the loser pay.
JUSTICE KENNEDY: This is not your best argument. (Laughter.)
MR. PHILLIPS: It is not my best argument, I appreciate that.
Supreme Court on Fee Shifting – A review of Oral Arguments in Octane Fitness and Highmark
By Dennis Crouch
Octane Fitness v. Icon Health & Fitness (SCOTUS 2014); Highmark v. Allcare Health Mgmt. (SCOTUS 2014) (Transcripts: HighmarkTranscript; OctaneTranscript)
Today, the Supreme Court heard oral arguments in the paired fee-shifting cases of Octane Fitness and Highmark that focus on the proper standard for an exceptional case finding by a district court under 35 U.S.C. § 285 and the proper standard of review on appeal. In Octane Fitness, petitioner asks the Court to lower the standard for proving an exceptional case. In Highmark, petitioner asks for deference to lower court exceptional case findings. In both cases, the Federal Circuit sided with the patentees who lost their infringement actions. In Octane Fitness, the Federal Circuit confirmed that the case was not “exceptional” while in Highmark, a divided Federal Circuit reversed an exceptional case finding based upon a de novo appellate review that gave no deference to the district court’s finding that the lawsuit was objectively baseless.
In the U.S., each party to litigation ordinarily pays its own attorney fees regardless of the case outcome. In the patent litigation context, this changes as 35 U.S.C. § 285 provides an avenue for awarding “reasonable attorney fees to the prevailing party” in “exceptional cases” at the discretion of the lower court. However, discretion only goes so far, and the Federal Circuit’s standard for classifying an “exceptional case” has been critiqued as too rigid, tough, and pro-patentee.
The first case heard today was Octane Fitness. Arguing on behalf of Octane, Rudy Telscher’s main focus was on moving the away from the “objectively baseless” standard to something that is easier for a successful defendant to prove. However, the debate quickly descended into a theoretical discussion of the proper adjective – moving between whether the case was “meritless;” “objectively meritless;” “without substantial merit;” “low likelihood of success;” “unreasonable;” “unreasonably weak;” “a little bit lower than [the Rule 11] standard” and “something more than frivolous.”
Justice Scalia helped cut through the problem somewhat by noting that really what Octane is seeking is a totality of the circumstances test:
JUSTICE SCALIA: Mr. Telscher, it occurs to me that you really cannot answer the question of what adjectives should be attached to “meritless.” And the reason you can’t is, since it is a totality of the circumstances test, that is only one factor and it doesn’t have to be an absolute degree of meritlessness. Even in a I assume you would say that even in a very close case, if there has been outrageous litigation abuse by the other side, the court would be able to say: My goodness, I’ve never seen lawyers behave like this. You’re going to pay the attorneys’ fees for the other side. Couldn’t the court do that?
MR. TELSCHER: That’s absolutely correct, your Honor.
JUSTICE SCALIA: So then how can we possibly define “meritless”? We can’t, because it goes up and down, even in a case where it’s a close case. It could still be exceptional.
MR. TELSCHER: It’s the degree of the unreasonable nature of the case as one factor.
And, in this sense, Octane agrees with the US Government that fees should be awardable whenever the totality of the circumstances indicates that fees are “necessary to prevent gross injustice.”
In a colloquy with Justice Kagan, Octane identified what it sees as a non-exhaustive list of factors to be considered, including (1) whether the case is meritless; (2) bad faith; (3) litigation misconduct; (4) other equitable considerations; (5) anything else that “bears on the gross injustice and uncommon nature of the case.” In addition, Octane argued that the fact that the patentee “never made a product under [the] patent” should be considered as well. Arguing for the U.S. Government, Roman Martinez added that advancement of “objectively unreasonable legal arguments” should also be considered as a factor and, in its own, sufficient for a finding of exceptional case. In his summary, Mr. Telscher did a nice job of summing this up as saying that the exceptional case question is really about “how extreme” the conduct needs to be before it is considered exceptional.
One difficulty is that the Justices had difficulty squaring this laundry list of potentially sufficient factors with the legislative history that the statute is designed to prevent “gross injustice.” In the eyes of the justices (or at least in their questions), gross injustice seems to suggest something more serious than these more mundane factors. Although both parties and the US Government agree that the “exceptional case” standard should follow a gross injustice standard, Justice Scalia offered a predictable negative outlook on that standard since its establishment is largely based upon legislative history.
Ordinarily, the Supreme Court gives no deference to appellate court decisions. However, here Chief Justice Roberts jumped into the debate to consider the role of deference to the appellate panel in this case based upon the congressionally mandated role of the Federal Circuit in unifying patent law.
CHIEF JUSTICE ROBERTS: [W]hy shouldn’t we give some deference to the decision of the Court that was set up to develop patent law in a uniform way? They have a much better idea than we do about the consequences of these fee awards in particular cases. And since we’re just as Justice Kennedy pointed out dealing with adjectives, you know meritless, frivolous, exceptional why don’t give some deference to their judgment?
MR. TELSCHER: Well, I think we need to look at the basis of the judgment.
On that point, the Government responded favorably to the idea that the Federal Circuit could be given deference on some issues, but the internal inconsistencies on this particular issue mean that deference doesn’t make sense here:
MR. MARTINEZ: I think if the Federal Circuit had had a consistent view over its history or if the Federal Circuit were not internally divided on this issue, that may be a consideration. Deference might be more appropriate. But here there is no consistent history and the Federal Circuit, as we’ve seen in Kilopass, is divided.
Here, Chief Justice Roberts may be considering whether the Federal Circuit should be thought of more like an expert agency who would receive some amount of deference for its rulemaking (i.e., precedential decisions).
In the oral arguments, Justice Alito attempted to focus in on exceptionality and noted that, for most district court judges, all patent cases are unusual and – as such – may have no basis for determining whether a particular case is exceptional as compared with the ordinary patent case.
An important issue in the Octane fitness case that was only subtly discussed is also whether clear-and-convincing evidence is required to prove an exceptional case or is a preponderance of the evidence sufficient.
Carter Phillips argued on behalf of the respondent here; arguing that – absent other misconduct – that the case must have been “objectively baseless” in order to be deemed exceptional under Section 285.
One interesting aspect of the decision focused on the applicability of the Supreme Court’s decision in Prof’l Real Estate Investors v. Columbia Pictures Indus.,508 U.S. 49 (1993) and Noerr immunity.
MR. PHILLIPS: Well, I think you could argue that there is at least a First Amendment concern that’s in here;
CHIEF JUSTICE ROBERTS: First Amendment concern, what, to bring a patent case?
MR. PHILLIPS: Well, access to the courts, access to the courts. Any time you talk about imposing multimillion dollar fee awards at the end of the litigation, particularly if you do it on a fairly arbitrary basis.
JUSTICE SCALIA: Do you think Congress could not require the loser to pay in all cases?
MR. PHILLIPS: Well, I have no doubt that Congress could well, I’m not sure about in all cases.
JUSTICE SCALIA: I mean, if it can do that, there’s certainly no First Amendment problem.
MR. PHILLIPS: Well, I’m not sure I concede that in all cases. I do think in the run of the mill cases, but when you’re talking about a situation where the assertion is that the conduct of the litigation, the bringing of the litigation itself is inappropriate
JUSTICE SCALIA: That’s an English rule. It used to be our rule. I don’t see how you can possibly say that it’s unconstitutional to make the loser pay.
JUSTICE KENNEDY: This is not your best argument. (Laughter.)
MR. PHILLIPS: It is not my best argument, I appreciate that.
On the other hand, if you if you go back and look at Christiansburg. In that case the Court also didn’t treat it as a First Amendment issue, but it still recognizes an important policy of trying not to have too much interference with access to
When Justice Breyer entered the argument, he implicitly pushed Mr. Phillips to recognize that the USPTO has issued many bad patents but that the associated presumption of validity of the patents is a setup that makes it very hard to show a case is objectively baseless even when it is pretty clear that a patent is invalid. Philips responded simply that the filing of a frivolous claim should be seen as objectively baseless and that the present case was not such a case.
Phillips also gave his talk on how the “patent troll” debate is really nonsense and that there is nothing to see here:
MR. PHILLIPS: First of all, as I say, the plaintiff this you know, there’s a reason why you don’t see advertisements on television when Saiontz & Kirk says, If you think your patent has been infringed, call us. Why? Because there’s not a long line of people who can bring plaintiffs’ patent cases. They are expensive to litigate, and the ultimate effect and you have to get an expert, and at the end, you put your patent into validity [risk].
Apart from that, however, the court did not appear to focus on the “troll” issue in any depth.
= = = =
The Highmark argument came immediately following that of Octane Fitness. The second cases focuses on the standard of appellate review for the objectively baseless question and so, obviously depends upon the outcome in Octane Fitness. Certainly, if the court moves toward a “totality of the circumstances test” then more deference would be given to district court judges in their determination. That makes Highmark the trailing decision here and likely less important.
Neal Katyal argued on behalf of petitioner Highmark who is asking the court to give deference. Katyal is a former Acting Solicitor General of the US and also brother to Fordham Law School IP Professor Sonya Katyal. The basic argument that whether or not the party’s position is reasonable is a question of fact that, once decided, should be given deference on appeal. The US Solicitor’s office also supported Highmark here arguing for deference. Don Dunner argued on behalf of the respondent here
Disjunction in IP Litigation: Patent Courts are not Copyright Courts
By Dennis Crouch
In the last four months of 2012 about 4,000 intellectual property lawsuits were filed in federal courts. Of these, about 2,000 were patent cases along with 1,000 copyright and 1,000 trademark cases. Patent litigators are well aware of the ongoing popularity of the Eastern District of Texas and the rising popularity of the Delaware court. I wanted to look at how that concentration is different on the copyright and trademark side. It is easy to draw two quick conclusions from the case filings. First, I note that the most popular patent infringement jurisdictions are among the least popular jurisdictions in the other two areas. Very few copyright or trademark cases are filed in EDTX or DDEL. Second, I can conclude that the patent litigation cases are much more highly concentrated in a smaller number of jurisdictions than that of either copyright or trademark. (One measure of this is that the top three patent jurisdictions have 59% of the patent cases while the top three copyright and trademark jurisdictions have 32% and 28% respectively). Part of the explanation for the high concentration of patent cases is the clustering of NPE cases that involve a single plaintiff against multiple defendants filed before a single court. However, I would suggest that the driving explanation is simply the popularity of EDTX and DDEL. The appellate courts provide even more disjunction between the IP regimes since almost all of the patent litigation appeals are heard by the Court of Appeals for the Federal Circuit whereas that court sees very few copyright or trademark infringement actions. Likewise, the appellate courts that hear the most copyright and trademark appeals never hear patent appeals. As I have written previously, the bulk of governmental money spent on administering intellectual property rights goes through the US Patent & Trademark Office (PTO) — an executive agency housed within the Department of Commerce. The US Copyright Office, however, is not part of the administration but rather is housed within the Library of Congress, which itself is managed by Congress rather than the President. Thus the US Copyright Office does not officially represent the Administration or shape Administration policy.
All of this is an odd setup – especially with the rising and overlapping market role for intellectual property rights. From a theoretical standpoint, it is unclear whether the fractured structure leads to rights that are either too strong or too weak. What we can tell is that the structure leads to a lack of coordination of the various IP systems within the US.
For its part, the US Supreme Court has an almost regular practice of doing a comparative analysis in its intellectual property cases that considers how a particular issue is handled in other areas of IP law. Harmony in these areas is part of what the court calls a ‘carefully crafted balance.’ To this end, the court has recognized that the scope and coverage offered by patent law is relevant to the relevant scope and coverage of copyright and trademark protection. Likewise, in the upcoming fee-shifting cases, we can expect that the court will use copyright and trademark precedent as a guide. Perhaps unfortunately, few lower courts have the cross-IP-jurisdictional experience of the US Supreme Court that would be necessary to reasonably draw the same types of parallels.
The chart below shows the most-popular 25 jurisdictions for case filings in the final four months of 2012.
Thanks to LexMachina for this data.
Upcoming Supreme Court Arguments
By Dennis Crouch
- Exceptional Case Awards: The Supreme Court will be hearing oral arguments on February 26, 2014 in two patent infringement cases that both concern shifting of attorney fees under the “exceptional case” standard of 35 U.S.C. § 285. The Federal Circuit has traditionally been resistant to fee shifting awards – especially in cases where an accused infringer is the prevailing party. In Octane Fitness, petitioner asks the Court to lower the standard for proving an exceptional case. In Highmark, petitioner asks for deference to lower court exceptional case findings. We can expect that the Supreme Court will eliminate the Brooks Furniture test – at least as it is strictly applied.
- Patentable Subject Matter: On March 31, 2014, the Supreme Court will hear oral arguments in the software patent case of Alice v. CLS Bank. The case has the potential of drawing dividing line between what types of software are patentable and what types of software are not patentable. I am quite pessimistic that the result proposed by the Supreme Court will be fairly implementable by the US Patent Office.
- Indefiniteness: On April 28, 2014, the Supreme Court will hear oral arguments in Nautilus v. Biosig. That case questions the standard for challenging issued patents on indefiniteness grounds. We can expect that the Supreme Court will lower the standard for proving indefiniteness – down from “insolubly ambiguous” to a more “reasonable” standard. This has the potential of impacting a substantial number of patents that have issued with claim terms that intentionally flirt with ambiguity. Indefiniteness is regularly confused with over-breadth. Patent attorneys role moving forward will be in finding ways to draft broad but well defined claims
- Divided Infringement: On April 30, 2014, the Supreme Court will hear the joint infringement case of Limelight v. Akamai that posits the question whether the elements of infringement-by-inducement require a single entity who, based upon the inducement, performs all elements of the claimed invention. The Federal Circuit ruled that the single-entity rule of direct infringement should be relaxed for inducement and instead that the relevant question is whether the alleged inducer did indeed induce performance of all elements of the patented claim. Although the Supreme Court may prove some tweaks, I believe that the Federal Circuit approach here should carry the day.
Attorney Hal Wegner follows upcoming cases and regularly post various notices here: http://www.laipla.net/category/wegners-writings/
Heightened Pleading Requirements: Patent Reform through the Supreme Court and Judicial Conference
By Dennis Crouch
In the cases of Twombly (2007) and Iqbal (2009) (Twiqbal), the Supreme Court substantially raised the pleading standard for federal cases by requiring that the pleadings allege sufficient detail to demonstrate that their claims are “plausible.” These cases have had a dramatic impact on civil litigation in Federal courts. This is evidenced by the fact that these cases have been cited in over 10,000 decisions over the past few years.
Patentees filing infringement actions have not been directly affected by the modified precedent because of a quirk of federal civil procedure. The FRCP appendix includes a form patent infringement complaint and FRCP Rule 84 indicates that the “forms in the Appendix suffice under these rules.” The patent infringement complaint form (Form 18) is incredibly bare-bones and basically only requires an allegation that the plaintiff has rights in the patent and that the defendant is infringing the patent. Based upon the scheme set up by the Rules Enabling Act (1934), the Judicial Conference proposes any amendments to the rules of civil procedure; those proposals are then approved by the Supreme Court and then reviewed by Congress before becoming law.
Within the next couple of years, this form complaint rule is likely to change, either by action to change the rules proposed the Judicial Conference or else by Congressional legislation.
In fact, in the Judicial Conference Advisory Committee has already proposed elimination of FRCP Rule 84 and the form complaints. [Link] The result would be that Twiqbal would apply to patent infringement complaints. Although this change would not raise complaint pleading standards to that of the Goodlatte proposal, it still represents a major heightening of that initial pleading hurdle.
In its proposed rule change, the Judicial Conference Advisory Committee explains its proposal with reference to patent law:
A further reason to abrogate Rule 84 is the tension between the pleading forms and emerging pleading standards. The pleading forms were adopted in 1938 as an important means of educating bench and bar on the dramatic change in pleading standards effected by Rule 8(a)(2). They — and all the other forms — were elevated in 1948 from illustrations to a status that “suffice[s] under these rules.” Whatever else may be said, the ranges of topics covered by the pleading forms omit many of the categories of actions that comprise the bulk of today’s federal docket. And some of the forms have come to seem inadequate, particularly the Form 18 complaint for patent infringement. Attempting to modernize the existing forms, and perhaps to create new forms to address such claims as those arising under the antitrust laws (Twombly v. Bell Atlantic, 550 U.S. 544 (2007)) or implicating official immunity (Ashcroft v. Iqbal, 129 S.Ct. 1937 (2009)), would be an imposing and precarious undertaking. Such an undertaking might be worthwhile if in recent years the pleading forms had provided meaningful guidance to the bar in formulating complaints, but they have not.
The point here is that the pleading standards are outdated and today offer a loophole for certain plaintiffs without any justification for such a loophole.
The committee goes on to make a clear misstatement that “few if any lawyers consult the forms when drafting complaints.” Rather, in the patent infringement world, it is knowledge of that form that serves as the basis for many patent complaints. However, that misstatement does not sink the proposal in any way.
The proposal here is at an early stage and is open for comments until February 15, 2014. Once the comments have been received, the Judicial Conference Advisory Committee will then reconsider its proposal and then potentially move forward with a set of final rules that would then need approval from the Judicial Conference Standing Committee, the Judicial Conference, the Supreme Court, and Congress (implicitly). For any rule change to take effect this calendar year, the Supreme Court’s promulgation of the rules would need to be effective by May 1, 2014.
SmartGene v. ABL: Foreshadow of the Supreme Court in CLS Bank?
By Dennis Crouch
SmartGene v. ABL (Fed. Cir. 2014) (nonprecedential)
35 U.S.C. 101 is a foundational patent law statute that defines the scope of patent eligibility. The statute states that:
Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.
Section 101 is written in broad and open terms and has been seen as providing notice that patent law is not intended to be limited to any particular forms of technology.
In interpreting the statute, the Supreme Court has added an additional set of subject matter eligibility restrictions only nominally grounded in the statute. Most notable, these include proscriptions against the patenting of abstract ideas, natural phenomenon, and products of nature. Also excluded from eligibility are “mental processes.” It is somewhat unclear from precedent whether these mental processes are whole included within the abstract idea construct or whether instead there are some mental processes that would be excluded even though not considered abstract ideas.
Here, ABL’s patents cover a diagnostic method that basically pulls information from three separate knowledge bases, ranks the results and provides advisory information related to those results. As claimed these steps use a “computing device” to generate and provide the results. The patents also include computerized “system” claims; computer program claims; and sorage-medium claims that are all designed to facilitate the practice of the method. See U.S. Patent Nos. 6,081,786 and 6,188,988.
In 2008, SmartGene filed for declaratory judgment of invalidity and also filed a reexamination request with the USPTO. The PTO considered the prior art and confirmed patentability. However, the District Court ruled that all of the patented claims were invalid as ineligible under Section 101. Rather than walking through each claim of each patent, the District Court (1) first held that, for eligibility purposes, Claim 1 of the ‘786 patent (the method claim) was representative of all claims in the patents and (2) then found that claim ineligible under § 101. The district court wrote that the claim does “no more than describe . . . an abstract mental process engaged in routinely, either entirely within a physician’s mind, or potentially aided by other resources in the treatment of patients.”
On appeal, the Federal Circuit has affirmed in a non-precedential decision written by Judge Taranto and joined by Judges Lourie and Dyk. Famed eligibility defender Robert Sachs of Fenwick represented the Patentee whkle Fred Samuels (Cahn & Samuels) represented the DJ Plaintiff.
The Federal Circuit first considered the district court’s process in holding all claims from both patents ineligible based only upon consideration of one claim from one patent. The court affirmed the district court finding based upon a waiver principle.
On to the meat of the 101 analysis, the Federal Circuit began with a citation to CyberSource:
This conclusion [of ineligibility] follows from CyberSource Corp. v. Retail Decisions, Inc., where, based on earlier precedents, this court held that section 101 did not embrace a process defined simply as using a computer to perform a series of mental steps that people, aware of each step, can and regularly do perform in their heads.
The court went on to write that mental processes are not eligible nor are processes that use basic computer functionality to implement mental processes unless the invention specifies “new physical components” or other steps “defined other than by the mentally performable steps.”
For these princples, the court relied heavily on Supreme Court precedent of Benson, Flook, and Mayo as well as the appellate decisions of CyberSource as well as In re Grams, 888 F.2d 835, 840-41 (Fed. Cir. 1989) and In re Meyer, 688 F.2d 789, 794-95 (C.C.P.A. 1982).
The discussion of Mayo in the decision is interesting in the way that the court draws close parallels between the way laws of nature and abstract ideas should be interpreted:
Mayo demanded that, when a claim involves an abstract idea (or, in Mayo itself, a law of nature), eligibility under section 101 requires that the claim involve “enough” else—applying the idea in the realm of tangible physical objects (for product claims) or physical actions (for process claims)—that is beyond “well-understood, routine, conventional activity.” 132 S. Ct. at 1294, 1298, 1299. The claim here does not do so. It calls on a computer to do nothing that is even arguably an advance in physical implementations of routine mental information-comparison and rule-application processes. In this context, the concern about preempting public use of certain kinds of knowledge, emphasized in Mayo, is a grave one.
It appears from Myriad, that the process for determining the product-of-nature exclusion is somewhat different since there, the court allowed the patentee to obtain protection for a DNA sequence whose physical differences from the naturally occurring sequence were due to well-understood, routine, and then conventional laboratory processes.
Is a mental step an abstract idea?: The court punts on this question and instead writing that:
[M]ental processes and abstract ideas (whatever may be the precise definition and relation of those concepts) are excluded from section 101. Whatever the boundaries of the abstract ideas category, the claim at issue here involves a mental process excluded from section 101: the mental steps of comparing new and stored information and using rules to identify medical options.
The analysis here pessimistically fits the approach leading abstract idea jurisprudence that traditionally fails to explain the scope and bounds of the abstract idea category but finds that the particular invention in question fits within the category.
Judge Taranto: This decision is important because it was written by Judge Taranto. Although there was not tremendous doubt in his position, Judge Taranto did not participate in the CLS Bank en banc fiasco that resulted in no majority opinion. Judge Taranto’s participation would have likely shifted the balance in favor of a majority opinion ruling strongly against subject matter eligibility of software claims that do not add new “technology.”
Judge Taranto is also important because, of all the Federal Circuit judges, he likely best understands the pulse of the Supreme Court and I will not be surprised when the Supreme Court decision in CLS Bank parallels this one.
Supreme Court Reverses Federal Circuit: Holds that Patentees Always have Burden of Proving Infringement
By Dennis Crouch
Medtronic v. Mirowski, ___ U.S. ___ (2014) [CaseText]
In a unanimous opinion, the US Supreme Court has reversed the Federal Circuit – holding that the patentee has the burden of proving infringement even in declaratory judgment actions by a licensee in good standing. I had previously noted that the Federal Circuit decision here was “odd” and likely to be rejected by the Supreme Court. The case should generally be seen as further emboldening licensees to challenge their licensed patents.
Medtronic has licensed a number of implantable heart stimulator patents from Mirowski. While still paying royalties (into an escrow account) and remaining in good-standing as a licensee, Medtronic filed a declaratory judgment action asserting that its products were not covered by the patent and that it therefore owed no contract damages. Prior to 2007, the Federal Circuit had ruled that a licensee in good standing had no declaratory judgment standing. However, in MedImmune, Inc. v. Genentech, Inc., 549 U. S. 118 (2007), the Supreme Court held that Article III’s case-or-controversy requirement can be satisfied by the fact that a licensee faced the threat of suit if it ceased making payments).
The district court sided with Medtronic – finding that Mirowski failed to prove infringement. However on appeal, the Federal Circuit vacated – holding instead the ordinary burden of proving infringement shifted in declaratory judgment cases a licensee in good standing. On writ of certiorari the Supreme Court has decided that the district court’s analysis is the better course of action and now holds that:
[W]hen a licensee seeks a declaratory judgment against a patentee to establish that there is no infringement, the burden of proving infringement remains with the patentee.
The Supreme Court based its decision on three notions: (1) the Patentee ordinarily bears the burden of proving infringement; (2) the Declaratory Judgment Act is only procedural; and (3) the burden of proof is a substantive aspect of the claim. Following this triple premise, the court concluded that the filing of a declaratory judgment action could not shift the burden of proof.
= = = =
The decision is fairly short, but has a few interesting aspects.
First, the court provided a policy-based analysis that calls-to-mind the problems faced by many accused infringers who receive a demand letter or broadly written complaint alleging infringement:
[The Federal Circuit rule can] create unnecessary complexity by making it difficult for the licensee to understand upon just what theory the patentee’s infringement claim rests. A complex patent can contain many pages of claims and limitations. A patent holder is in a better position than an alleged infringer to know, and to be able to point out, just where, how, and why a product (or process) infringes a claim of that patent. Until he does so, however, the alleged infringer may have to work in the dark, seeking, in his declaratory judgment complaint, to negate every conceivable infringement theory.
It is this same sentiment that has been driving a movement to increase the pleading standards in patent cases.
Second, the court re-iterated its historic position that patent rights should be open to challenge as a mechanism for maintaining a well-balanced patent system.
The public interest, of course, favors the maintenance of a well-functioning patent system. But the “public” also has a “paramount interest in seeing that patent monopolies . . . are kept within their legitimate scope.” Precision Instrument Mfg. Co. v. Automotive Maintenance Machinery Co., 324 U. S. 806 (1945). A patentee “should not be . . . allowed to exact royalties for the use of an idea . . . that is beyond the scope of the patent monopoly granted.” Blonder-Tongue Laboratories, Inc. v. University of Ill. Foundation, 402 U. S. 313 (1971). And “[l]icensees may often be the only individuals with enough economic incentive” to litigate questions of a patent’s scope. Lear, Inc. v. Adkins, 395 U. S. 653, 670 (1969). The general public interest considerations are, at most, in balance. They do not favor a change in the ordinary rule imposing the burden of proving infringement upon the patentee.
Read the decision here: https://casetext.com/case/medtronic-v-mirowski
= = = =
Can License Terms Privately Change The Baseline Rules Set Here?: An ongoing and open question is whether the rules regarding licensee standing and burdens are hard-and-fast or instead whether they should are to be treated as default rules that can be altered by contracting parties. As an example, a licensee could agree (as part of a license agreement) not to file a declaratory judgment action challenging patent rights while in good standing or could agree that in a DJ action the licensee had the burden of proving non-infringement. The open question is whether these private contractual provisions would be deemed unenforceable on public policy grounds. Although open, the implicit suggestion from the decision is that those provisions would be unenforceable. I draw that conclusion from the court’s positive citation of Lear, Precision, and Blonder-Tongue.
= = = =
Standing: The Supreme Court began the opinion with a discussion of jurisdiction that seems to step-back somewhat from its recent decision in Minton v. Gunn. The particular question raised was whether the case was a patent lawsuit or instead merely a contract dispute. If the former, then the case is heard in Federal Court and by the Federal Circuit. If the latter, then the case would be in state court unless there the parties exhibit diversity jurisdiction and, a diversity case would have been appealed through a regional circuit court of appeals rather than to the Federal Circuit.
Subject matter jurisdiction over a declaratory judgment action is ordinarily based upon whether the complementary coercive action brought by the DJ defendant would necessarily present a federal question. Franchise Tax Bd. of Cal. v. Construction Laborers Vacation Trust for Southern Cal., 463 U. S. 1 (1983).
Here, the Supreme Court determined that the potential coercive action was patent infringement. The court based its conclusions upon its reading of the license that gave power to Mirowski to terminate the contract and sue for patent infringement if Medtronic stopped paying royalties. According to the Supreme Court, it is of no matter that Mirowski could instead sue for contract damages – a result that would have been much more likely. In its Amicus Brief, Tessera wrote:
Because there was simply no chance that the licensee suddenly would abandon the contractual dispute resolution procedure after nearly twenty years when it could resolve the very same patent issues within the contractual framework, and when both licensed patents were, in any event, set to expire within a year, a coercive patent infringement action by the licensor cannot reasonably be said to have been anticipated or threatened at the time of the initial filing.
The Supreme Court here rejected Tessera’s argument:
The relevant question concerns the nature of the threatened action in the absence of the declaratory judgment suit. Medtronic believes—and seeks to establish in this declaratory judgment suit—that it does not owe royalties because its products are noninfringing. If Medtronic were to act on that belief (by not paying royalties and not bringing a declaratory judgment action), Mirowski could terminate the license and bring an ordinary federal patent law action for infringement. Consequently this declaratory judgment action, which avoids that threatened action, also “arises under” federal patent law.
With this ruling, the Supreme Court has thrown another wrench in federal patent jurisdiction doctrine.
Supreme Court on Intellectual Property
The Supreme Court agreed today to hear four new intellectual property cases this session: Two patent cases, a copyright case, and a trademark case:
- Nautilus v. Biosig Instruments (13-369): what is the proper standard for indefiniteness.
- Limelight Networks v. Akamai Technologies (12-786): Does inducement require underlying direct patent infringement infringement by another as a prerequisite to liability.
- ABC, Inc., v. Aereo, Inc. (13-461): when does an internet transmission count as a “public performance” under the copyright laws?
- POM Wonderful v. Coca-Cola (12-761): Who has standing to challenge a food or beverage label as misleading or false under the Lanham Act.
The cases should all be decided by the end of June 2014.
US Government Suggests that Supreme Court Reject Federal Circuit’s Divided Infringement Jurisprudence
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/
Supreme Court: The Right to a Jury Trial on Obviousness
By Dennis Crouch
Soverain v. Newegg (on petition for writ of certiorari)
After a trial on the merits, Judge Davis (E.D.Tex.) found that the accused infringer (Newegg) had presented insufficient evidence of obviousness and refused to let that issue go to the jury. Instead, the judge awarded a directed verdict for the patentee (Soverain) that the asserted claims were not invalid as obvious. The jury went on to find Newegg liable for infringement and awarded $2.5 million in damages and also found the patent not anticipated. Following trial, the district court denied Newegg's motion for new trial on obviousness grounds. On appeal, the Federal Circuit took the almost unprecedented stance of reversing the non-obviousness decision. One reason for the rarity of a full-reversal (rather than vacatur) is largely explained by the substantial factual foundation that serves as the basis of an obviousness decision. In its opinion, the Federal Circuit couched its discussion in terms of questions of law – following the Supreme Court's lead from KSR International Co., v. Teleflex, Inc., 550 U.S. 398 (2007). In that case, the Supreme Court was able to make the legal conclusion that the asserted claims were obvious because the factual underpinnings of obviousness were seemingly not in material dispute.
In its petition for writ of certiorari, Soverain focuses on the Seventh Amendment right to a jury trial and argues that the Federal Circuit's approach effectively and improperly redefines obviousness as a pure question of law.
Question Presented:
Whether the Federal Circuit's effective redefinition of obviousness as a pure question of law, allowing it to resolve disputed factual questions in the first instance on appeal, violates the Seventh Amendment and this Court's precedent.
Here, Sovarain points to a number of factual issues that the Federal Circuit identified as questions of law, including assessing credibility of the witnesses, resolving conflict between witness testimony resolving the teaching of prior art references.
The Seventh Amendment provides that:
In Suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved…
The Seventh Amendment "preserve[s]" the "common law" right to jury trial and, as a consequence, presents an oddball test that roughly asks whether the cause of action at issue was (or is analogous to) a common law cause of action that was tried before an English jury back in in 1791 and then whether the particular trial decision in question is one that was (or would have been) decided by a jury. See Markman v. Westview Instruments, Inc., 517 U.S. 370 (1996).
The Supreme Court has indicated that patent infringement lawsuits where the patentee is seeking damages are cases at law protected by the Seventh Amendment right to a jury trial. However, as far as I know, the Supreme Court has never held that the right to a jury particularly to an obviousness challenge or to the underlying factual conclusions that serve as the basis for an obviousness decision. 1800's cases do suggest that the factual underpinnings to the "invention" requirement are subject to a jury determination. See, for example, Battin v. Taggert, 58 U.S. (17 How.) 74 (1854); and Turrill v. Michigan S. & N. Ind. R.R. Co., 68 U.S. (1 Wall.) 491 (1864) ("[T]here was an important question of fact which should have been left to the jury, whether … any of the prior movable pressblocks … were substantially the same as the machine of the patentee."). However, the 1952 Patent Act expressly eliminated the doctrine of invention in favor of the new doctrine of obviousness. In its last foray into this area, the Supreme Court recognized in Markman that claim construction included both questions of fact and questions of law, but ultimately determined that no fundamental right to a jury trial existed for that doctrine.
An interesting inside issue here is that Judge Newman has been a strong proponent of the right to a jury trial on obviousness. See Newell Cos. v. Kenney Manufacturing Co., 864 F.2d 757 (Fed.Cir. 1988) (J. Newman dissenting from holding that ultimate question of obviousness may be decided by judge over party's objection). However, it was Newman who found Soverain's patent obvious in the present case. In the 1988 Newell case, the majority held that the patentee has no right to a jury trial on obviousness unless the factual underpinnings are in dispute.
The defendant was, of course, entitled to have a jury summoned in this case, but that right was subject to the condition, fundamental in the conduct of civil actions, that the court may withdraw a case from the jury and direct a verdict, according to the law if the evidence is uncontradicted and raises only a question of law.
Of course, Judge Nies did not walk through the weeds of history (as required by the Supreme Court) to arrive at this answer but instead only looked to the "fundamental notion" that there is no right to a jury decision regarding a question of law. See also, In re Lockwood, 50 F.3d 966 (Fed. Cir. 1995) (Nies, C.J. writing in dissent) (arguing that a patent is a public right created by Congress and "[a] constitutional jury right to determine validity of a patent does not attach to this public grant") (mandamus vacated without opinion by the Supreme Court).
Focusing back, the Soverain petition does not ask the Supreme Court to overrule Newell, but rather to merely limit courts ability to unilaterally expand take would-be factual question and then make those factual conclusions under the guise of legal determinations. Soverain writes:
The Federal Circuit's decision to take for itself questions this Court has reserved for the trier of fact has significant consequences that threaten the stability and predictability of the patent system. This decision shifts the boundary between the ultimate legal question of obviousness and the underlying factual questions. It thus paves the way for district courts and other panels to decide factual questions and undermines the role that the jury and procedural safeguards play in ensuring that hindsight bias does not skew the analysis of obviousness. By downplaying the factual component of obviousness, the Federal Circuit's decision also erodes the clear and convincing evidence standard for proving invalidity, which this Court reaffirmed in Microsoft Corp. v. i4i Limited Partnership, 131 S. Ct. 2238 (2011).
I also see this case as asking for clarification of the KSR decision in terms of what elements of the "common sense" analysis should be considered determinations rightfully before a jury. I suspect that the brief strategically avoided that issue because the Federal Circuit is a much riper target for review than a recent unanimous and popular Supreme Court opinions.
In an amicus brief supporting the petition, Professor Eileen Herlihy argues that the Federal Circuit systematically gets Seventh Amendment questions wrong and needs to be set straight by the Supreme Court. Herlihy has written two articles on how the Seventh Amendment should be applied to patent cases.
- Download Soverain Cert Petition 10.16.2013
- Download Herlihy Mossoff 7th Amendment amicus brief Soverain v. Newegg
- Download Brief of i4i Limited Partnership
- Download 13-477acMDBCapitalGroup
Is Software Patentable?: Supreme Court to Decide
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.
Supremes Deny Cert in Sony v. First Media: Update
The petition is here. The 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.
Update: the rest of the briefs are here (response to petition), and the SG's brief is here.
I still don't think Therasense is a proper construction, and I also still think the issue of its retroactivity could still lurk out there for someone to raise…
Supreme Court Action Today
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.
= = = = =
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.
= = = = =
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”?).
= = = = =
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/
What is an Exceptional Case such that Court Should Award Attorney Fees?
By Dennis Crouch
Earlier this week, I commented on the two attorney-fees cases pending before the US Supreme Court:
- Octane Fitness, LLC v. ICON Health & Fitness, Inc., Docket No. 12-1184; and
- Highmark Inc. v. Allcare Health Management Sys., Docket No. 121163.
Both cases stem from the same perspective that the “exceptional case” requirement for attorney fees is too narrowly construed by the courts and especially by the Federal Circuit. See 35 U.S.C. § 285.
I noted in the prior post that the predecessor of Section 285 was first enacted in a 1946 Patent bill. The 1946 law was substantially similar to the current law (enacted in 1952) with the major difference that the 1946 act expressly gave the court “discretion” to award attorney fees to the prevailing party while the 1952 act removed that “discretion” term and instead indicated that the fee may be awarded “in exceptional cases.”
The Senate Report associated with the 1946 statute indicates that the statute is not intended to make fee awards an “ordinary thing in patent suits” but instead to reserve such awards for “gross injustice.”
It is not contemplated that the recovery of attorney’s fees will become an ordinary thing in patent suits, but the discretion given the court in this respect, in addition to the present discretion to award triple damages, will discourage infringement of a patent by anyone thinking that all he would be required to pay if he loses the suit would be a royalty. The provision is also made general so as to enable the court to prevent a gross injustice to an alleged infringer.
S. Rep. No. 1503, 79th Cong., 2d Sess. (1946), reprinted in 1946 U.S. Code Cong. Serv. 1386, 1387.
When the 1952 act was passed, the House Committee Report briefly mentioned the “exceptional case” amendment to the statute – indicating that the phrase “‘in exceptional cases’ has been added as expressing the intention of the present statute as shown by its legislative history and as interpreted by the courts.”
In several cases, the Federal Circuit has considered the standard and, after some debate, decided in Eltech Systems Corp. v. PPG Industries, Inc., 903 F.2d 805 (Fed. Cir. 1990), that the exceptional case standard should be the same for both prevailing plaintiffs and for prevailing defendants – writing: “we now reach the question and determine that there is and should be no difference in the standards applicable to patentees and infringers who engage in bad faith litigation.” The Eltech Systems case was then cited positively by the Supreme Court in Fogerty v. Fantasy, 510 U.S. 517 (1994) as justification for a party-neutral approach to fee shifting in copyright cases.
We note that the federal fee-shifting statutes in the patent and trademark fields, which are more closely related to that of copyright, support a party-neutral approach. Those statutes contain language similar to that of [17 U.S.C.] § 505, with the added proviso that fees are only to be awarded in “exceptional cases.” 35 U.S.C. § 285 (patent) (“The court in exceptional cases may award reasonable attorney fees to the prevailing party”); 15 U.S.C. § 1117 (trademark) (same). Consistent with the party-neutral language, courts have generally awarded attorney’s fees in an evenhanded manner based on the same criteria. For patent, see, e.g., Eltech Systems Corp. v. PPG Industries, Inc., 903 F.2d 805, 811 (Fed. Cir. 1990) (“[T]here is and should be no difference in the standards applicable to patentees and infringers who engage in bad faith litigation”). For trademark, see, e.g., Motown Productions, Inc. v. Cacomm, Inc., 849 F.2d 781, 786 (2nd Cir. 1988) (exceptional circumstances include cases in which losing party prosecuted or defended action in bad faith); but see Scotch Whisky Assn. v. Majestic Distilling Co., 958 F.2d 594 (4th Cir.) (finding in the legislative history that prevailing defendants are to be treated more favorably than prevailing plaintiffs), cert. denied, 506 U.S. 862 (1992).
Fogerty at note 12.
Of course, the problem with a party-neutral approach is that it can only be applied at a certain high level of granularity or abstractness. Since patentees and accused infringers make systematically different argument and have systematically different strategies, the particular causes of exceptional case findings tends to be different. Thus, losing infringers most often pay fees based upon ongoing willful and reckless infringement while losing patentees most often pay fees for suing on patent obtained through inequitable conduct or for bringing baseless lawsuits. At that low level of granularity, the differences are such that it is difficult to compare whether a party-neutral approach is being applied.
Notes:
Thanks to John Pinkerton at Thompson & Knight for providing me with this legislative history from the 1946 Act.
Supreme Court’s New Patent Cases
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.
Federal Circuit Rejects Supreme Court Original and Exclusive Jurisdiction over State-vs-State Inventorship Disputes
By Dennis Crouch
A highlight of this opinion is Footnote 1 of Judge Moore’s dissenting opinion that states “The majority baldly asserts that issues of patent ownership and inventorship are not sufficiently grand for the Supreme Court to resolve in the first instance. That is not our decision to make. It is for the Supreme Court to itself decide.”
= = = = =
University of Utah v. Max-Planck-Gesellschaft (Fed. Cir. 2013)
In 2011, University of Utah (UUtah) filed a federal lawsuit under 35 U.S.C. § 256 to correct the inventorship of U.S. Patent No 7,078,196. That patent is directed to Small Interfering RNAs (siRNAs) and methods of creating those molecules that are the current study of intensive genetic therapy research.
According to USPTO records, the patent is owned collectively by the Max-Planck Institute as well as MIT, the Whitehead Institute and the University of Massachusetts. Dr. Brenda Bass – a UUtah professor – alleges that Dr. Thomas Tuschl – a UMass Professor – incorporated her ideas into his patent but then did not name her as an inventor. All of these assignees were named as defendants in the complaint filed in Federal District Court.
The appeal raises interesting issues of civil procedure, federalism, and sovereign immunity. The 11th Amendment to the U.S. Constitution generally provides sovereign immunity to state governments from any cause of action in Federal Court brought by citizens of another state or country. However, the 11th Amendment does not provide for immunity in state-vs-state actions. Rather, the U.S. Constitution provides that “In all [Federal] Cases . . . in which a State shall be Party, the supreme Court shall have original Jurisdiction.” Art III, §2, cl. 2. Following the constitutional guidance, the jurisdictional statutory code provides that the “Supreme Court shall have original and exclusive jurisdiction of all controversies between two or more States.”
Rather than fighting the battle in District Court, UMass (a state institution) argued that the case brought by UUtah (another state institution) should be seen as a state-vs-state conflict that should go directly to the Supreme Court in the matter of first instance.
In order to avoid that result (but still reach the same result), UUtah dropped UMass as a defendant and instead list the leaders of UMass (including its president Robert Caret) as the defendants. Based upon that change, District Court Judge Saris held that the case should no longer be seen as a state-vs-state case and that, as a consequence, the Supreme Court did not have exclusive original jurisdiction. Judge Saris also found that correction of inventorship was not a “core sovereign interest sufficient to make this a dispute between States,” but that the case could proceed against the named officials under the Ex parte Young doctrine. Particular to this case is that the remedy demanded was an order directing the USPTO to correct inventorship rather than calling for any monetary or injunctive relief against the state.
Although the district court case is not final, the Federal Circuit took an immediate appeal under the Collateral Order Doctrine.
On appeal, the Federal Circuit has affirmed – finding that “UMass is not a real party in interest under the Supreme Court’s caselaw.” Although both the Constitution and Statute appear clear, the US Supreme Court has been reluctant to take cases such as this and has thus added requirements that the case be “serious,” “dignified,” and raising “important” federalism concerns. In addition, the Supreme Court has considered whether there are other avenues for relief. And, both of the competing states must be indispensable parties to the lawsuit.
On this notion, UMass argues that UUtah is seeking the property of UMass (i.e., its patent) and that is sufficient to make UMass a real party that cannot be “plead around.”
Agreeing with UMass, the Federal Circuit instead held that the case is about “inventorship” and the identity of the individual inventor of a patent is not a “core sovereign interest” that need be raised directly to the Supreme Court. In addition, the Federal Circuit agreed that the formal shift from suing the University to suing the University President in his Official Capacity was sufficient to evade the state-vs-state setup. Finally, the appellate panel found that UMass (a patent owner) is not an indispensable party to the case since its interests are being adequately protected by the other co-owners and its named officials.
In reality, UUtah UMass [Updated] likely does not want the Supreme Court to directly hear the case. Rather, the strategy here is that the University is largely betting on the likelihood that the Supreme Court would decline to exercise jurisdiction – effectively ending the case.
= = = = =
Writing in Dissent, Judge Moore vigorously disagreed with the majority’s holding.
The majority erroneously holds that a patent-ownership dispute between two state universities is not a “controversy between two or more States.” It then compounds this error and holds that a patent owner is not an indispensable party to an action that seeks to reassign title to the patents-in-suit. I respectfully dissent.
I. Subject Matter Jurisdiction
The district court lacks jurisdiction over UUtah’s claims against the UMass Officials because those claims raise a dispute between two States, Utah and Massachusetts. Article III of the U.S. Constitution vests the Supreme Court with original jurisdiction over cases in which a State is a party. As § 1251(a) expressly states: “The Supreme Court shall have original and exclusive jurisdiction of all controversies between two or more States.” There is no dispute that UUtah and UMass are instruments of Utah and Massachusetts, respectively, and that a suit between those institutions could only be brought in the Supreme Court. The majority, however, concludes that § 1251(a) does not apply here because UUtah elected to sue the UMass Officials rather than UMass. That conclusion is incorrect.
To determine if a suit implicates the Supreme Court’s exclusive original jurisdiction, we look “behind and beyond the legal form” of the claim and determine “whether the State is indeed the real party in interest.” Arkansas v. Texas, 346 U.S. at 371. The majority agrees with this general proposition but holds that the UMass Officials, not UMass, are the real parties in interest. I disagree.
This case involves a dispute between UMass and UUtah over who owns the rights to the Tuschl II patents. UMass is the assignee of the Tuschl II patents and UUtah “wants to own the patents.” UUtah is pursuing that interest through a correction of inventorship claim under 35 U.S.C. § 256 and a corresponding request for an order that UUtah owns the patents. … UUtah also alleges in its complaint that it “should be the sole owner or an owner” of the Tuschl II patents. It specifically requests that the court “order assignment of all right title and interest” in the patents to UUtah. Indeed, the majority recognizes (1) that UUtah specifically requested that the court assign it all rights to the Tuschl II patents and (2) that UUtah will obtain the rights to the patents if it prevails on its correction of inventorship claims. This is a dispute about ownership, plain and simple.
UUtah cannot recast the nature of this dispute by suing the UMass Officials as stand-ins for UMass. Indeed, the majority never holds that the UMass Officials have any interest in this proceeding. Nowhere does the majority suggest that the UMass Officials are “parties concerned” that may be subject to a correction of inventorship action under § 256(b). . . .
Section 1251(a) contains “uncompromising language”: the Supreme Court has original and exclusive jurisdiction over “all controversies between two or more States.” Mississippi v. Louisiana, 506 U.S. 73, 77, 113 S.Ct. 549, 121 L.Ed.2d 466 (1992). The majority errs when it concludes that § 1251(a) does not apply to this dispute because the “State has no core sovereign interest” in inventorship or patent ownership. Maj. Op. at 13–15. The majority’s “core sovereign interests” test is at odds with the plain language of the statute, which contemplates “all controversies” between states fall within 1251, not just those involving core sovereign interests. There is simply no basis to limit the statute in such a way.
Moreover, requiring a core sovereign interest to implicate the Supreme Court’s exclusive jurisdiction erodes the Court’s discretion to decide which controversies it will hear. The existence of the Supreme Court’s exclusive jurisdiction and its discretion to exercise that jurisdiction are separate concepts. The Court’s exclusive original jurisdiction extends to “all controversies between two or more States.” 28 U.S.C. § 1251(a). The Court, however, is not required to exercise its jurisdiction over every controversy. The Court tends to exercise its jurisdiction sparingly, depending upon the nature of the interest of the complaining State, the seriousness and dignity of the claim, and the availability of another original forum to resolve the dispute. Mississippi v. Louisiana, 506 U.S. at 76–77. The concept of a “core sovereign interest” has roots in opinions that address whether the Supreme Court will decide to exercise its jurisdiction over a dispute, not whether the Court’s exclusive original jurisdiction over the controversy exists. See id. at 77; Texas v. New Mexico, 462 U.S. 554, 570, 571 n. 18, 103 S.Ct. 2558, 77 L.Ed.2d 1 (1983); Connecticut ex rel. Blumenthal v. Cahill, 217 F.3d 93, 109 (2d Cir.2000) (collecting cases). The majority’s conflation of those two concepts strips the Supreme Court of its discretion to decide if a case is sufficiently serious to exercise jurisdiction over it. It reallocates that power to the lower courts—who will decide which subset of cases—those implicating core sovereign interest—will be presented to the Supreme Court. FN1
The majority finds support for its decision in the Second Circuit’s split decision in Cahill. With all due respect, even if we adopt the flawed logic of the majority in Cahill, this case would still fall within the Supreme Court’s exclusive jurisdiction in § 1251. The majority correctly recognizes that, generally, a State is the real party in interest if ” the effect of the judgment would be to restrain the Government from acting, or compel it to act.” Maj. Op. at 14 (quoting Cahill, 217 F.3d at 106). But the majority nevertheless concludes that UMass is not the real party in interest because a judgment to correct inventorship “will not require or restrain UMass from acting.” Id. at 13. This is not correct.
A judgment in UUtah’s favor will restrain UMass’s ability to act. If successful, UUtah will be declared sole owner of the Tuschl II patents and UMass will have no interest in them. UMass will not be able to license or assign the patents. And UUtah will be able to exclude UMass from practicing the inventions claimed in the patents. Patent rights are the quintessential right to restrain. The effect of this judgment will be to prevent UMass from exploiting the Tuschl II patents or the technologies they cover. This certainly “restrain[s] the Government from acting.”
UUtah alternatively requests that Dr. Bass be found to be a co-inventor. A finding that Dr. Bass is a co-inventor of the Tuschl II patents will result in UUtah co-owning those patents. The effect of the judgment would be that UUtah could practice or license the patents without UMass’s consent and without having to account to UMass. See 35 U.S.C. § 262. The judgment would thus restrain UMass from asserting its rights in the Tuschl II patents against UUtah or any of UUtah’s licensees. Again, this restrains UMass from acting.
The majority ignores these effects on UMass. Without explanation, the majority asserts that UMass will only be “more or less affected by the decision” and that transfer of the Tuschl II patents to UUtah will “not deplete the state treasury.” Maj. Op. at 15. This is incorrect. A correction of inventorship by the PTO will give UUtah an ownership interest in the Tuschl II patents by operation of law and dilute or revoke UMass’s property interest. Indeed, as the majority also recognizes, UUtah expressly asks the court to order the reassignment of the patents to UUtah. The central effect of a judgment in UUtah’s favor will be to deplete the assets of the current owners of the Tuschl II patents, one of whom is UMass. UMass is thus the real party in interest in this case.
This is a dispute between two state universities over who owns a valuable patent portfolio—a dispute over property ownership. As undesirable as it may be, we are bound to follow the plain language of § 1251(a): “The Supreme Court shall have original and exclusive jurisdiction of all controversies between two or more States.” It is up to the Supreme Court to decide if it wants to exercise its exclusive jurisdiction over this controversy. We should not contort the statute to avoid a perceived injustice FN2 that would result if the Court declined to exercise jurisdiction over UUtah’s claims.
UUtah initiated an action that seeks to obtain UMass’s interest in the Tuschl II patents. That is a controversy between two States and can only be brought in the Supreme Court. Accordingly, we should reverse the district court’s decision that it had jurisdiction over UUtah’s claims against the UMass Officials.
II. Indispensable Party
The majority’s holding that UMass is not an indispensable party to this action is incorrect. We have held that when a plaintiff brings a declaratory judgment action seeking to invalidate a patent or hold it not infringed, the patentee is both a necessary and indispensable defendant in that action. A123 Sys., Inc. v. Hydro–Quebec, 626 F.3d 1213, 1217–19, 1220–22 (Fed.Cir.2010); Enzo APA & Son, Inc. v. Geapag A.G., 134 F.3d 1090, 1094 (Fed.Cir.1998). It would be nonsensical to suggest that all patent owners must be joined in a suit seeking to invalidate the patent, but they need not be joined in a suit over patent ownership. Indeed, § 256(b) requires a court, before it orders a correction of inventorship, to provide “notice and hearing of all parties concerned,” i.e., those with an “economic stake” in the patent. Chou, 254 F.3d at 1359–60. We should apply our general rule that all co-owners must be joined in an action that affects their patent. See Ethicon, Inc. v. U.S. Surgical Corp., 135 F.3d 1456, 1467 (Fed.Cir.1998).
The majority instead holds that UMass is not an indispensable party because UUtah joined “all of the Tuschl Patent owners except UMass,” each of whom are “jointly represented by legal counsel.” Maj. Op. at 21. It is not enough that UMass and the named defendants “share the same overarching goal” of defeating UUtah’s inventorship and ownership claims. A123 Sys., 626 F.3d at 1221 (holding that absent patentee was an indispensable party when the named party had “overlapping” but not “identical” interests).
The majority deviates from our longstanding requirement that all patent owners be joined, citing an exception created in Dainippon Screen Manufacturing Co. v. CFMT, Inc., 142 F.3d 1266 (Fed.Cir.1998). It is true that, like Dainippon Screen, the named defendants here are represented by common counsel. But the majority omits the “highly relevant” facts from Dainippon Screen—the absent party was a wholly-owned subsidiary of the named party and was created by the named party to enforce the patents-in-suit. 142 F.3d at 1267–68, 1272–73. We allowed the suit to go forward because “the parties’ interests in the asserted patents were not just common, but identical.” A123 Sys., 626 F.3d at 1221 (discussing Dainippoin Screen ).
There is no party in this suit which represents UMass’s interest in the Tuschl II patents. Other defendants also have an interest in the patents, but they do not represent UMass’s interest. Indeed, their interests may well diverge. For example, the non-UMass defendants may choose to settle with UUtah in a way that diminishes UMass’s rights, such as stipulating that Dr. Bass is the sole inventor of the Tuschl II patents in exchange for ownership interests in the patents. That risks extinguishing UMass’s rights to the patents without UMass participating in the lawsuit.
The majority further claims that defendant Alnylam can represent UMass’s interest because UMass “handed sole and exclusive control of this suit over to Alnylam.” Maj. Op. at 21. That right, however, is conditional. If there is a conflict of interest, Alnylam loses its right to control UMass’s defense. Id. The agreement thus contemplates that Alnylam and UMass may not have identical interests. Because UMass does not have identical interests with any of the named defendants, it is an indispensable party in this case. I dissent from the majority’s contrary holding.
Joint Infringement Case Moves Toward Supreme Court Review
By Dennis Crouch
Limelight Networks, Inc. v. Akamai Technologies, Inc., Docket Nos. 12-786 and 12-960 (Supreme Court 2013)
Limelight and Akamai have proposed dueling questions to the Supreme Court. Limelight, the accused infringer, asks: “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 patentees Akamai and MIT ask: “Whether a party may be liable for infringement under either section of the patent infringement statute, 35 U.S.C. §271(a) or § 271(b), where two or more entities join together to perform all of the steps of a process claim.” These questions involving the fundamental definitions of patent infringement have been stewing for a number of years, and this case stems directly from the Federal Circuit’s fractured en banc decision in 2012.
The Supreme Court today has indicated some interest in the case by calling for the views of the US Solicitor General. The Supreme Court may see the case as an extension of its decision in Global-Tech Appliances, Inc. v. SEB, S.A, 2011 U.S. LEXIS 4022 (U.S. May 31, 2011). That case focused on the intent requirements infringement-by-inducement.
= = = = =
The asserted claim from U.S. Patent No. 6,108,703 is below:
19. A content delivery service, comprising:
replicating a set of page objects across a wide area network of content servers managed by a domain other than a content provider domain;
for a given page normally served from the content provider domain, tagging the embedded objects of the page so that requests for the page objects resolve to the domain instead of the content provider domain;
responsive to a request for the given page received at the content provider domain, serving the given page from the content provider domain; and
serving at least one embedded object of the given page from a given content server in the domain instead of from the content provider domain.
Apparently in practice, the “tagging” step is performed by Limelight’s customers and limelight therefore argues that there cannot be infringement because no single entity practices each and every step of the claimed invention.
Thus, the basic setup is that Limelight performs all-but-one of the elements of the claimed invention and then encourages its customers to perform the missing stem. Limelight wins this case with a holding of non-infringement under the BMC/MuniAuction line of cases because infringement under 271(a) requires a single entity that causes performance of each and every element of the claimed invention and since Limelight did not cause its customers to perform the missing step. Likewise, under those cases inducement under 271(b) fails because the cause-of-action requires proof of underlying direct (271(a)) infringement. On the other hand Akamai argues that the BMC/MuniAuction rules are too restrictive. Rather, Akamai argues that the single-entity requirement of 271(a) direct infringement is too narrow and that inducement under 271(b) should not require underlying direct infringement. For its part, the Federal Circuit took a somewhat middle-ground and only held that inducement does not require underlying direct infringement so long as a single entity induced all of claimed elements.
Supreme Court Adds Antitrust Consideration to Patent Settlements.
By Dennis Crouch
FTC v. Actavis, Inc. (Supreme Court 2013)
In a 5-3 Decision authored by Justice Breyer, the US Supreme Court has held that a rule-of-reason analysis applies to determine whether a reverse-payment patent settlement violates federal antitrust laws. The FTC had asked the court to go further and rule that reverse payments are presumptively unlawful. A major factual question going forward in patent-settlement antitrust cases will be whether the patentee settled its lawsuit in order to avoid testing a patent’s weakness. Without additional pro-competitive benefits, such a settlement can be deemed anticompetitive under a rule-of-reason.
The conservative dissent written by Chief Justice Roberts argued that patent rights should be seen as an exception to the antitrust laws and that a patentee should have the right to enforce its patents and to settle its patents without regard to the anti-competitive nature of any settlement.
The result here is that the antitrust implications should be considered for any major patent settlement. In addition, the decision opens the door further for antitrust action against patent enforcement entities willing to settle cases at rates below the likely litigation costs of the accused infringers.
As my law school antitrust professor Randy Picker notes on twitter, the decision admittedly does not offer any clear guidance for how the rule of reason will apply in cases moving forward. Picker writes: applying the “rule-of-reason [on] remand, with the patent overlay and Hatch-Waxman present, will be brutal.” The majority opinion says go-to-it: “We therefore leave to the lower courts the structuring of the present rule-of-reason antitrust litigation.”
Read the opinion: /media/docs/2013/06/12-416_m5n0.pdf
Supreme Court to hear another Case Involving Licensees in Good Standing who Challenge Patent Rights
By Dennis Crouch
Medtronic Inc. v. Boston Scientific Corp., Docket No. 12-1128 (Supreme Court 2013)
The Supreme Court has granted a writ of certiorari in a license dispute involving giants of the medical device world – Medtronic and Boston Scientific. Medtronic has licensed defibrillator patents owned by Mirowski Family Ventures and now controlled by Boston Scientific as exclusive licensee. U.S. Reissue Patent Nos. RE38,119 and RE39,897. Medtronic’s license gives it the right to challenge the patent in court even while still under license. That right to challenge is also supported by the Supreme Court’s 2007 decision in MedImmune. And, in a 2007 court filing, Medtronic did challenge the license – alleging that its new products did not infringe the patents in question.
Normally, the patentee has the burden of proving infringement. The odd ruling in this case came when the Federal Circuit flipped that normal approach and held instead that the burden shifts to the DJ plaintiff when the case involves a licensee-in-good-standing suing for declaratory judgment of non-infringement. The Supreme Court will now consider whether that burden shift is appropriate – and in all likelihood will reject the Federal Circuit’s decision 9-0.
Medtronic asks the following question:
In MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 137 (2007), this Court ruled that a patent licensee that believes that its products do not infringe the patent and accordingly are not subject to royalty payments is “not required … to break or terminate its … license agreement before seeking a declaratory judgment in federal court that the underlying patent is … not infringed.”
The question presented is whether, in such a declaratory judgment action brought by a licensee under MedImmune, the licensee has the burden to prove that its products do not infringe the patent, or whether (as is the case in all other patent litigation, including other declaratory judgment actions), the patentee must prove infringement.
One question that the court needs to answer is whether its rules regarding licensee standing and burdens are hard-and-fast or instead whether they should be treated as default rules that can be altered by contracting parties.
Hal Wegner of Foley writes that the case will be briefed over the summer and heard early in the October 2013 Term.