Archive for the ‘Court Decisions’ Category

Supreme Court to Review Claim Construction

April 2, 2014

The Supreme Court has agreed to hear another patent case, Teva Pharms. USA, Inc. v. Sandoz, Inc.  In this case, the Court will determine whether factual findings underpinning claim construction rulings should be reviewed de novo or only for clear error.

You will recall that the Federal Circuit recently considered this issue in Lightning Ballast v. Phillips and decided by a vote of 6-4 to continue its current practice of de novo review.  In that case, Judge O’Malley issued a scathing dissent of the majority opinion by Judge Newman where she called out judges for changing their long held positions.

In July, the Federal Circuit issued an extensive opinion in Teva v. Sandoz that included a number of rulings on various issues in the case.  The one that Teva decided to pursue to the Supreme Court was the ruling on the definiteness of various claims at issue.  A number of claims were held to be invalid as being indefinite, while another set of claims was held to be sufficiently definite to withstand an invalidity charge on that basis.  To determine whether the claims met the legal standard of definiteness, the Federal Circuit had to construe a number of claim terms.  Following its precedent, it did so de novo.

The Supreme Court will now determine whether the de novo standard is correct.

This case adds yet another to the Supreme Court’s growing list of patent cases that it has been reviewing in recent years.  The Court’s argument calendar for the current term is full, so this case will be argued during the October 2014 term, with a decision expected by early 2015.

Federal Circuit Holds That Claim Construction Should Should Continue to Be Reviewed De Novo

February 21, 2014

The Federal Circuit has issued its long-awaited opinion in Lightning Ballast Control LLC v. Phillips Electronics N.A. Corp.  By a 6-4 decision, the en banc court held that claim construction should remain a matter of law with no deference accorded to the district court judge’s findings on appeal.

Majority Opinion

NewmanJudge Newman wrote the opinion for the court and relied extensively on uniformity and finality as reasons to retain the current system.  She argued that different cases involving the same patent may result in different conclusions as to the meaning of claim terms if the Federal Circuit had to decide the cases with deference to the rulings of the trial court judges.  This would result in increased uncertainty, costs, and litigation.  The public needs to know definitively what a patent claim means.  Thus, the Federal Circuit should rule on the issue for all the world and not just the parties at hand.

Judge Newman’s opinion relies extensively on stare decisis, the principle that courts should adhere to their previous decisions and not overrule them unless absolutely necessary.  She goes on to state that there is no real impetus to overrule the previous case holding that claim construction is a matter of law to be reviewed de novo on appeal and nobody has provided a workable solution if such an impetus did exist.

Finally, Judge Newman spends a great deal of time attempting to rebut the arguments raised by the dissent that the de novo rule is extremely unpopular and leads to tremendous uncertainty in claim construction appeals.  This seems to be a serious factual dispute between the judges in the majority and those in dissent.

Concurrence

lourieJudge Lourie filed a concurring opinion where he made several interesting arguments.  First, he said that there are really not factual disputes with respect to claim construction.  Although there are a number of actors involved in the patent process, such as hired experts that really don’t know what was meant by the patent terms anyway.  Hired scientific experts do not lie, so the judge’s determination of a witness’s credibility is irrelevant.

Next, he argues that, yes, claim construction rulings are considered on appeal de novo, they aren’t really.  The Federal Circuit provides informal deference to the district court judge’s ruling.  The Federal Circuit will affirm the district court when appropriate and reverse when appropriate.  These points are somewhat baffling to me.

Dissent

O'MalleyJudge O’Malley (a former district court judge) wrote at great length and rather scathingly for the four dissenting judges.  She argued that a cursory review of the history of de novo review of claim construction demonstrates its error.  There are clearly determinations of underlying factual issues that are entitled to deference on appeal.

When a case is wrongly decided, as the case that dictated de novo review on appeal was, stare decisis does not require the court to adhere to the erroneous decision.  Indeed, en banc review is precisely for overruling such decisions.

The judges in these opinions seem to have gotten a bit personal.  Judge Newman emphasizes that the rule upheld in this case has been settled for 15 years, while Judge O’Malley indicates that it has been a short time.  Judge O’Malley cites Judge Newman’s views from the earlier decision where Judge Newman criticized the de novo review as ignoring the underlying factual issues involved in claim construction.  Judge O’Malley seems shocked that several members of the majority in today’s opinion, including Judge Newman, were among the harshest critics of the de novo review rule.

The result in this case is indeed shocking.  The overwhelming majority of the patent community recognizes that it makes little sense for judges that are far afield on appeal get to determine whether the trial court correctly determined underlying factual issues related to claim construction.

It is likely that this case is headed to the Supreme Court.

Supreme Court to Hear Several Patent Cases

January 10, 2014

USSupremeCourtWestFacadeThe Supreme Court has agreed to hear two patent cases before the end of the current term.

Limelight Networks, Inc. v. Akamai Techs., Inc.

In 2012, a divided en banc Federal Circuit permitted divided infringement, where it takes more than one party to perform all of the steps of a claimed process, but only for induced infringement.  The court held that infringement can be found in cases where (1) a party performs some of the steps of a patented method and induces another party to perform the remaining steps; and (2) where a party induces multiple third parties to collectively perform the steps of a patented method, but no single party has performed all of the steps itself.   The knowledge requirement for inducement to infringe a patent claim means that collaborating parties cannot “accidentally” infringe.  A significant minority of the court argued that the statute requires a single entity to perform all of the steps for there to be infringement.

Nautilus, Inc. v. Biosig Instruments, Inc.

This case relates to the statutory requirement that applicants particularly point out and distinctly claim their invention.  This is referred to as the “definiteness” requirement of claims.

Sometimes the words used in a patent claim can be subject to multiple reasonable interpretations.  The Federal Circuit has ruled that such claims are only indefinite under the statute if they are “not amenable to construction” or are “insolubly ambiguous.”  This means that a patent claim is only ambiguous if one of skill in the art would read the claim and not know what the boundaries of the claim are based on review of the specification and prosecution history.

In Nautilus, the question is whether one of skill in the art can determine the meaning of the claim requirement that electrodes be in a “spaced relationship”.  The Federal Circuit, applying its standard, ruled that the term can be sufficiently understood and the claim is not indefinite.

The Supreme Court will address whether the Federal Circuit is using the correct standard for this determination.

The cases will probably be argued in April with decisions expected by the end of the term in June.

Supreme Court to Review CLS Bank

December 9, 2013

Last week, the Supreme Court granted certiorari in CLS Bank v. Alice Corp.  This was the case where the 10 member en banc Federal Circuit could not garner sufficient votes for any kind of precedential opinion on whether certain computer-related claims constituted patentable subject matter.  The Supreme Court will review the two sentence per curiam opinion of the court, as well as the numerous concurring and dissenting opinions of the judges.

The question presented for the appeal:

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?

Unfortunately, the Supreme Court’s recent forays into patentable subject matter have not added clarity to this area of law.  Bilski didn’t really change anything or give any real guidance for business method patents.  In Prometheus, the Court seriously confused patentable subject matter with obviousness and patentability.  They did do a bit better with isolated DNA in Myriad.

The Court should probably choose which cases to review a bit more wisely.

Oral argument in CLS Bank will take place in the spring with a decision expected by the end of the current term in June.

The PTO’s Authority to Overrule Court Decisions

November 7, 2013

The Federal Circuit has denied a petition for rehearing en banc on the question of whether the PTO has the authority to overrule district court and Federal Circuit decisions.  Fresenius USA, Inc. v. Baxter Int’l, Inc.

The saga of this case is entering its second decade.  Fresenius originally sued Baxter for a declaratory judgment that U.S. Patent No. 5,247,434 was invalid.  The district court held otherwise and the Federal Circuit affirmed that decision.

During the pendency of the litigation, the PTO reexamined the patent and found it to be invalid as obvious based on substantially the same prior art used in the litigation.  On appeal, the Federal Circuit relied on the differing burdens of proof between the two proceedings to affirm the PTO’s finding of invalidity.  Judge Newman wrote a vigorous dissent from the panel decision.

The Federal Circuit has now denied a petition to rehear the case en banc by a narrow vote of 6-4 (with Judges Chen and Hughes not participating in the decision).  Judge Dyk, joined by Judge Prost, wrote an opinion concurring in the denial to rehear the case.  His position seems to be that infringement damage awards can be erased upon a finding of invalidity, even years after final court decisions have been affirmed on appeal.

Judge O’Malley, joined by Chief Judge Rader and Judge Wallach, wrote a dissent where they argued that the invalidity determination by the PTO would preclude infringement damage awards going forward, but the finality of the earlier court decisions means that those damage awards cannot be erased by a PTO determination.  That is, the PTO is free to re-judge a patent’s invalidity, even over the same prior art reviewed by the courts, but the PTO is not permitted to overrule a final judicial determination of infringement and damages.

Finally, Judge Newman, who wrote a vigorous panel dissent, wrote another dissent on this issue.  She argued that the PTO is not permitted to overrule court decisions.  That is, she argued that once the courts have finally ruled on an issue such as invalidity over a particular piece of prior art, the PTO is not permitted to second guess the court and issue a different ruling.  Executive agencies are not permitted to overrule Article III court decisions.

This case creates a serious litigation mess.  Accused infringers are encouraged to seek multiple avenues of relief in the hope of winning at the PTO if things aren’t going well in litigation.  This decision seems to suggest that district courts should stay proceedings where there is a parallel PTO proceeding in the case.

Filing a False Declaration Constitutes Inequitable Conduct

October 10, 2013

Earlier this week, the Federal Circuit affirmed a district court’s judgment that a patent was unenforceable due to inequitable conduct.  Intellect Wireless, Inc. v. HTC Corp.

After the Federal Circuit’s opinion in Therasense, it is widely thought to be much more difficult to prove inequitable conduct than under the court’s prior standard that seemed to be a moving target.  In this case, the court made clear that filing a declaration with clearly false statements will still result in an inequitable conduct holding.

In Intellect Wireless, during prosecution of the application that resulted in the patent at issue in the case, the inventor filed a declaration under 37 C.F.R. § 1.131 to ante-date or swear behind a reference.  This means that the inventor sought to remove a piece of prior art by demonstrating an earlier invention date (something that can no longer be done under the AIA’s first-to-file system).

In the declaration, the inventor averred that “the claimed invention was actually reduced to practice and was demonstrated at a meeting . . . in July of 1993.”  In reality, the invention was never actually reduced to practice, i.e., was never actually constructed or made.  The court held that, absent curing the unmistakably false declaration, this alone establishes materiality under the test for inequitable conduct.

To cure a false declaration, the applicant is required to expressly advise the PTO of the misrepresentation and specifically point of the error.  The applicant must point out to the PTO what the correct facts actually are.  This requirement requires the applicant to be quite unequivocal in the correction.

In this case, the court found that the applicant, despite filing additional “corrective” declarations, did not meet this standard.  The corrective declaration further obfuscated the truth by continuing to refer to prototypes and product brochures, when no such prototypes or products shown in the brochures existed.  There were still references to bringing the product to commercialization and to actual reduction to practice.

Furthermore, the court found that the applicant had a specific intent to device the PTO.  The submission of a declaration that included clearly fabricated examples showed the applicant’s intent to deceive the PTO.  This intent was further demonstrated by a pattern of misleading the PTO with false declarations in related patent applications that referred to prototypes that did not exist or that clearly could not perform the claimed functions.

Inequitable conduct is clearly not dead as a defense.  This particular set of facts was particularly egregious.  It continues to demonstrate that candor with the PTO is required under the duty of disclosure.

Supreme Court to Hear Two More Patent Cases

October 1, 2013

USSupremeCourtWestFacadeThis morning, the Supreme Court issued orders granting certiorari in two more patent cases that it will hear during the October 2013 Term.

Highmark, Inc. v. Allcare Health Management Systems, Inc.

Section 285 of the Patent Act permits a trial court to award attorneys’ fees to the prevailing party in “exceptional” cases.  What exactly constitutes an exceptional case?  Typically, these would be cases where a party engages in misconduct, cases involving inequitable conduct, or cases where the party’s allegations or defenses are “objectively baseless.”  As you might expect, these determinations are highly fact specific.

What is the standard of review on appeal?  Factual determinations by a trial court are typically reviewed for “substantial evidence” or clear error.  This means that, when reviewing the record, is there sufficient evidence to support the trial court’s decision (usually for jury verdicts) or did the trial court commit clear error?  If there is substantial evidence or the trial court did not commit clear error, the appellate court should affirm the judgment even if the appellate judges might have decided the issue differently.

In Highmark, a divided Federal Circuit panel held that these determinations should be subject to de novo review; that is, the appellate court should give no deference to the trial court’s factual findings and simply rule on the issue itself anew.  The court denied en banc review by a vote of 6-5.  Judge Moore filed a lengthy dissent from that denial.

The question the Supreme Court will decide is whether determinations of objective reasonableness by a trial court under § 285 are entitled to deference.

Octane Fitness, LLC v. Icon Health & Fitness, Inc.

In this case, the petitioner seeks to challenge the Federal Circuit’s standard for determining whether a case is exceptional under § 285.  The petitioner argues that it is more difficult for a defendant to be awarded attorneys’ fees than for a plaintiff bringing an infringement suit.  The standard is higher and encourages companies to bring spurious lawsuits alleging infringement.

The Federal Circuit dismissed this cross-appeal in a single paragraph in its opinion in the case.

The Court will hear arguments in these cases in the coming months with decisions expected by the spring.

HT:  Hal Wegner.

Patent News Update

September 27, 2013

There have been a number of patent-related news items making their rounds recently.

PTO to Stay Open in Event of Government Shut Down

Hal Wegner shared a memo from Acting PTO Director Teresa Rae to PTO employees that the agency will use its reserve funds to remain open for at least several weeks in the event of a government shut-down on Tuesday.

Dear Colleagues,

As you know, the Obama administration is working diligently with Congress to try to ensure that the federal government remains open and continues to do its work on behalf of the American people. However, I wanted to inform you that even in the event of a government shutdown on October 1, 2013, the United States Patent and Trademark Office will remain open, using prior year reserve fee collections to operate as usual for at least a few weeks. We continue to assess our fee collections compared to our operating requirements to determine how long we would be able to operate during a government shutdown; we will update you as more definitive information becomes available.

Because the USPTO maintains sufficient carryover funding from prior fiscal years, our agency can and will stay open for business for a period of time using these available reserves. During that time we will all continue to conduct our duties and serve our Nation, by processing the patent and trademark applications that drive our country’s innovative economy. Should we exhaust these reserve funds before the government shutdown comes to an end, USPTO would have to shut down at that time, although a very small staff would continue to work to accept new applications and maintain IT infrastructure, among other functions.

I realize you likely have many more questions. As new information becomes available, we will inform you promptly and thoroughly. Your respective business unit managers will also be reaching out to you to provide further clarification, as needed.

I thank you for your hard work, and the continuing dedication you demonstrate to the American people.

Sincerely,

Terry Rea

Congress Continues to Seek More Patent Reform

Patently-O has provided analysis and review of a patent reform bill discussion draft introduced by House Judiciary Chair Bob Goodlatte (R-VA).  The purpose of the bill, according to Rep. Goodlatte is to end “[a]busive patent litigation” specifically by “patent trolls.”

The bill would repeal the right of a civil action against the PTO to obtain a patent, substantially narrow the estoppel provisions of post-grant review, require the PTO to construe patent claims as a court would during post-grant and inter partes proceedings, codify obviousness-type double patenting, expand the scope of covered business methods for review, eliminate patent term extension after the filing of an RCE, and overturn the Supreme Court decision that patent malpractice suits belong in state court.

Other provisions in Rep. Goodlatte’s bill are similar to other bills seeking to reduce patent litigation abuse and patent troll tactics.  The bill would raise patent infringement pleading requirements, require the award of attorneys’ fees to prevailing parties (and against all interested parties), limit discovery prior to a court’s claim construction ruling, require companies asserting patents to disclose all interested parties, require courts to stay infringement suits against customers until suits against manufacturers are resolved, and protect creditor-licensees from foreign bankruptcies by IP owners.

Supreme Court Patent Cases

The Supreme Court’s October 2013 Term begins Monday, October 7.  The Court is scheduled to hear oral arguments in Medtronic v. Boston Scientific Corp. on November 5.  The question that Court will consider in that case is whether a declaratory judgment plaintiff has the burden to prove non-infringement against a patent owner.  The Federal Circuit ruled that the DJ plaintiff does bear the burden of proof.

The Court is considering or will consider petitions in a number of other patent cases as well.

Akamai v. Limelight.  The Court issued a CVSG order in this case in June where it asked for the views of the Solicitor General as to whether it should hear this case.  Akamai concerns multi-party infringement where more than one party completes all of the steps required in a patent claim.  The issues relate to both direct infringement and indirect infringement (inducement or contributory infringement).

Alice v. CLS Bank.  An en banc Federal Circuit could not garner a majority to determine whether the computer-related claims in this case were patent eligible subject matter.  A plurality of the court affirmed the district court’s holding that they were not.

WildTangent v. Ultramercial.  The Federal Circuit has twice held that the internet monetization claims in this case do constitute patent eligible subject matter.  The Supreme Court had earlier asked the Federal Circuit to reconsider its opinion in light of the Mayo v. Prometheus decision.

Senate Finally Confirms Todd Hughes

September 25, 2013

todd_hughes_judge_appeals_courtYesterday, the Senate confirmed Todd Hughes to a seat on the Federal Circuit by a vote of 98-0.  Hughes becomes the first openly gay federal appellate court judge.

The confirmation provides the court with its full allocation of 12 active judges for the first time since Judge Alvin Schall took senior status October 5, 2009.  Along with 6 judges on currently on senior status, the Federal Circuit is now the best equipped it has been in many years.

While Judge Hughes does not have extensive intellectual property experience, he has argued numerous cases at the Federal Circuit while serving as Deputy Director of the Commercial Litigation Branch of the Civil Division at the United States Department of Justice.  He has worked in the Justice Department since 1994 in the Commercial Litigation Branch.  He has extensive experience before the Court of Federal Claims, as well as the Federal Circuit and Court of International Trade.

Federal Circuit Fight Over Patentable Subject Matter Continues

September 10, 2013

Last week, a sharply divided panel of the Federal Circuit ruled that certain claims asserted by Accenture were invalid as not directed to patentable subject matter.  Accenture Global Services GmbH v. Guidewire Software, Inc.

Accenture had appealed a district court’s ruling that the claims of U.S. Patent No. 7,013,284 were invalid as not directed to patentable subject matter.  The district court had ruled that system claims 1-7 were invalid, as were method claims 8-22.  Accenture only appealed the ruling on the system claims, not the method claims.

The system claims were directed to computer programs for handling insurance related tasks.  The system claims include a combination of computer components including an insurance transaction database, a task library database, a client component, and a server component, which includes an event processor, a task engine, and a task assistant.

Majority Opinion

lourieJudge Lourie, joined by Judge Reyna, issued the majority opinion that the system claims were indeed invalid.  He relied extensively on the court’s plurality opinion in CLS Bank.  He argued that CLS Bank set forth a two step process for determining patent eligibility.  First, the court must determine whether the claimed invention falls within one of the statutory classes set forth in § 101.  Then, the court must determine whether the claim falls within one of the judicially-created exceptions, such as being an abstract idea.  Does the claim pose a risk of preempting an abstract idea?  Does the claim contain “additional substantive limitations . . . narrow, confine, or otherwise tie down the claim so that, in practical terms, it does not cover the full abstract idea itself”?

Next, Judge Lourie argued that the majority of the judges in CLS Bank had reasoned that when the system claims closely track the method claims and do not add additional meaningful limitations, they will rise and fall together.  He seemed to argue that because the method claims were not appealed–and the determination of their ineligibility is therefore conclusive–that Accenture is now estopped from arguing that the system claims are patent eligible.  He then proceeds to dismiss each of the limitations listed above that are not included in the method claims as “minor differences in terminology.”

Accenture also argued for reversal in light of the court’s upholding the claims in Ultramercial v. Hulu.  Interestingly, the panel in that case also included Judge Lourie and Chief Judge Rader.  The difference was that the third member was Judge O’Malley, instead of Judge Reyna.  How much of a difference does panel composition make to the outcome of these cases?  In any event, Judge Lourie distinguished Ultramercial based on the fact that in that case, there had not yet been claim construction or discovery.  The procedural posture of the case must make all the difference.

Dissent

Judge RaderNot surprisingly, Chief Judge Rader issued a vigorous dissent.  He argued against every point that Judge Lourie made.  Every claim can be stripped down to its core and characterized as an abstract idea.  CLS Bank was not a precedential decision, as it did not garner a majority of the court.  Therefore, the court cannot rely on it.

The failure of Accenture to appeal the method claims does not estop it from arguing that the system claims are patent eligible.  No precendent requires such a result.  Parties should be encouraged to narrow issues for appeal, not required to appeal every issue for fear of estoppel.

System and method claims do not necessarily stand or fall together.  They must be analyzed separately, as reaffirmed by Ultramercial.  A nearly unanimous court has rejected this procedure.

Finally, Judge Rader reviewed the claim limitations themselves and would find the claims to be patent eligible.  He notes that through these opinions the court has not provided any guidance on what is and what is not patent eligible subject matter.

Analysis

The patentable subject matter debate is getting ridiculous to the point that it is nearly impossible to advise clients as to what is and what is not patent eligible.  How do you tell your client that it depends on which judges comprise the panel when your case is appealed to the Federal Circuit?  Let’s knock off all the nonsense and use the other provisions of the statute to eliminate patents that are not novel, are obvious, or are abstract.


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