Archive for the ‘Court Decisions’ Category

Supreme Court on Patentable Subject Matter

June 19, 2014

USSupremeCourtWestFacadeThe Supreme Court issued its opinion in Alice Corp. v. CLS Bank Int’l.  Unfortunately, the Court did not heed Chief Judge Rader’s admonition to “consult the statute” in holding that all claims are invalid as not directed to patentable subject matter.

Justice Thomas, writing for a unanimous Court, wrote that the claims of the patent “are drawn to the abstract idea of an intermediated settlement, and that merely requiring generic computer implementation fails to transform that abstract idea into a patent-eligible invention.”  The Court returned to the Bilski concept of “pre-emption” of an entire field of application.

Next, the Court unfortunately returned to the “framework” that it set forth in Prometheus where it conflated the concepts of patent eligibility with novelty and non-obviousness.  The Court referred to this framework as a two step approach.  First, it is necessary to determine whether the claims are directed to a patent ineligible concept (this seems to assume the answer), and then to determine whether the claims include “something more”, an inventive concept.  This is, of course, where the Court refers to the prior art to determine subject matter eligibility.

In Alice Corp., the Court determined that the claims are directed to the patent ineligible concept, the abstract idea, of an intermediated settlement.  The claims are merely directed to the use of a third party to mitigate settlement risk.  The Court held this to be akin to the hedging found to be abstract in Bilski.

Turning to the second step of Prometheus “framework”, the Court concluded that the method claims at issue merely require generic computer implementation, which fails to transform the abstract idea into a patentable invention.  Next, the Court refers to each of the claimed steps of the method and refers to them as merely “conventional.”  This is, again, code for “not novel or obvious.”  It seems that a prior art examination would have better resolved this question that subject matter eligibility.

Finally, the Court turned to the question of the patent eligibility of the computer system and computer-readable medium claims.  These were the claims that the Federal Circuit had the most difficulty with.  That court could not reach consensus on the system claims, as 5 judges found them eligible and 5 ineligible.  The Supreme Court did not find a meaningful distinction between the method and system claims, holding

the system claims are no different from the method claims in substance. The method claims recite the abstract idea implemented on a generic computer; the system claims recite a handful of generic computer components configured to implement the same idea.

Justice Sotomayor wrote a separate concurrence that was joined by Justices Ginsburg and Breyer.  She has taken Justice Stevens’ mantle from Bilski and would hold that a method of doing business do not qualify as a “process” under § 101.

Unfortunately, it seems that we’ve now come much too far to heed the admonition to “consult the statute.”

Judge Rader to Retire From the Federal Circuit

June 17, 2014

Judge RaderIn a rather bizarre series of events, Randall Rader has gone from chief judge of the Federal Circuit to former judge of the Federal Circuit in just a few weeks.

Prior to his appointment to the bench, Judge Rader served as counsel to the Senate Judiciary Committee, including the Subcommittee on the Constitution and the Subcommittee on Patents, Trademarks, and Copyrights.  In 1988, he became a judge on the US Court of Federal Claims, the court that hears monetary claims against the US government.  In 1990, President Bush elevated Judge Rader to the Federal Circuit.

Judge Rader served on the court with distinction, and also taught patent law and other advanced intellectual property law classes at various law schools in Washington, DC, Virginia, and others.  He is also a co-author of a widely used patent law casebook.  In 2010, he succeeded Judge Paul Michel as the sixth chief judge of the Federal Circuit.

Last month, news emerged that Chief Judge Rader sent an e-mail praising attorney Edward Reines, a partner at Weil, Gotshal & Manges, who argues regularly before the Federal Circuit.  The e-mail heaped praise on Reines and urged him to show the e-mail to others.

Shortly after the e-mail became public, Chief Judge Rader recused himself from a number of cases where he had heard arguments involving Reines.  He also publicly released a letter that he sent to his colleagues where he explained his recusals and apologized for “a breach of the ethical obligation not to lend the prestige of the judicial office to advance the private interests of others.”  He also realized that the e-mail could cause others to think that this attorney could unduly influence the Chief Judge in his judicial duties.

At nearly the same time, Judge Rader announced that he was stepping down as chief judge of the court, although his term was scheduled to run until 2017.  He would remain an active judge, but wished to spend more time teaching, lecturing, and traveling.

A few weeks later, Judge Rader has now announced his retirement from the court, effective June 30.  Although no reference to the e-mail was made in either Judge Rader’s stepping down as chief judge or in his retirement from the bench, one has to assume based on the timing that they are linked.  Judge Rader leaves behind a 24 year legacy of service on the court, including 4 years as chief judge.  That legacy appears somewhat tarnished in light of the ethical breach.

Chief Judge Prost

Judge Sharon Prost succeeded Judge Rader as the seventh chief judge of the Federal Circuit on June 1.  Chief Judge Prost, 63, was appointed to the court by President Bush in 2001 after also serving for 8 years as an attorney for the Senate Judiciary Committee.

Other Members of the Court

The retirement of Judge Rader will present another open seat on the Federal Circuit that has seen a great deal of turn over in recent years.  Several of the other 11 active members of the court are also eligible for retirement or senior status, should they so choose.

Chief Judge Prost, 63, joined the court in 2001 and is eligible for senior status in 2016.

Judge Pauline Newman, 86, joined the court in 1984 and is eligible for senior status.

Judge Alan Lourie, 79, joined the court in 1990 and is eligible for senior status.

Judge Timothy Dyk, 77, joined the court in 2000 and is eligible for senior status.

Judge Kimberly Moore, 46, joined the court in 2006.

Judge Kathleen O’Malley, 58, joined the court in 2010 after serving 16 years as a district court judge.

Judge Jimmie Reyna, 61, joined the court in 2011.

Judge Evan Wallach, 64, joined the court in 2011 after serving 16 years as a judge on the Court of International Trade.  He is eligible for senior status in November.

Judge Richard Taranto, 57, joined the court in 2013.

Judge Raymond Chen, 45, joined the court in 2013.

Judge Todd Hughes, 47, joined the court in 2013.

In addition, Judges H. Robert Mayer, 73, S. Jay Plager, 83, Raymond Clevenger, 76, Alvin Schall, 70, William Bryson, 68, and Richard Linn, 70, continue to serve on the court while in senior status.

Federal Circuit is Reversed, Twice

June 2, 2014

USSupremeCourtWestFacadeThe Supreme Court has issued two opinions in patent cases today, in both cases reversing the Federal Circuit.

Nautilus, Inc. v. Biosig Instruments, Inc.

In the first opinion, the Court was reviewing the Federal Circuit’s standard for indefiniteness.  As noted previously,  patent applicants must particularly point out and distinctly claim their invention.  The Federal Circuit used a legal standard for proving that a claim was indefinite that was very difficult to meet, erring on the side of the patent owner.  Justice Ginsburg delivered the opinion for a unanimous Supreme Court, which reversed the Federal Circuit standard.

We conclude that the Federal Circuit’s formulation, which tolerates some ambiguous claims but not others, does not satisfy the statute’s definiteness requirement. In place of the “insolubly ambiguous” standard, we hold that a patent is invalid for indefiniteness if its claims, read in light of the specification delineating the patent, and the prosecu­tion history, fail to inform, with reasonable certainty, those skilled in the art about the scope of the invention.

The Supreme Court has thus overruled the Federal Circuit’s “insolubly ambiguous” standard in favor of a “reasonable certainty” standard when the claims are read in light of the specification and prosecution history.

The Court remanded the case to the Federal Circuit for further determination of the patent in this suit.

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

In 2012, a fractured Federal Circuit permitted that multi-party infringement for induced infringement, even in the absence of a direct infringement by a single party.  This result was contrary to the general rule that a party can only be liable for inducement to infringe a patent if there is direct infringement of the patent.

A unanimous Supreme Court, per Justice Alito, has reversed the earlier Federal Circuit opinion.  He reasons that this case is really quite straight forward.  The Court reiterated that a party can only be liable for induced infringement if there is a direct infringement of the patent.

The Federal Circuit had previously decided in Muniauction that to infringe a method claim, the same entity must perform each step of the claim.  The parties dispute whether this holding was correct, but the Supreme Court refused to address that issue.  The Court did note, however, that if that is correct, there can be no liability for induced infringement either.  A party cannot be held liable for inducing conduct that is not itself infringement.  The Supreme Court was unpersuaded by analogies to other areas of tort law.

The Court’s holding in this case is quite simple.  If there is no direct infringement, there can be no induced infringement.  If the Federal Circuit revisits the definition of direct infringement, such as by overruling Muniauction to permit multi-party direct infringement, then there could possibly be multi-party induced infringement.  Until that time, the Court answers the question in the negative.

Supreme Court Rules on Patent Litigation Fees

May 5, 2014

USSupremeCourtWestFacadeLast week, the Supreme Court issued its decisions in Octane Fitness, LLC v. Icon Health & Fitness, Inc. and Highmark, Inc. v. Allcare Health Management Systems, Inc.  The question before the Court in the former case was the correct standard for an “exceptional case” under which a court may award attorneys’ fees and costs to the prevailing party.  In the latter case, the question was the correct standard of review on appeal.

Octane Fitness

As I discussed previously, 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?

The Federal Circuit had set a rather high standard for fee shifting under this provision.  That court held that a case is exceptional only in the circumstances where either (1) there has been some material inappropriate conduct, such as litigation misconduct or inequitable conduct at the PTO, or (2) the litigation has been brought in subjective bad faith and the allegations are objectively baseless.  These are indeed high standards to meet.

Now, the Supreme Court has stepped into the fray by unanimously holding that the Federal Circuit’s standard for when a case is “exceptional” is too high.

We hold, then, that an “exceptional” case is simply one that stands out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated.  District courts may determine whether a case is “exceptional” in the case-by-case exercise of their discretion, considering the totality of the circumstances.

The Court held that the Federal Circuit’s standard is so high that it makes § 285 largely superfluous.  Finally, the Court rejected the Federal Circuit’s requirement that the party seeking fees must prove its entitlement to them by clear and convincing evidence.

Highmark

Octane Fitness largely foreshadowed the outcome in Highmark.  The determination of when a patent case is “exceptional” appears to be largely fact specific, rather than a matter of law.  Unfortunately, when dealing with appeals, the Federal Circuit often misses this distinction, preferring that it review most anything de novo, i.e., without regard to the factual determinations by the district court.

A unanimous Supreme Court also reversed the Federal Circuit in this case.  The district court determination of whether a case is “exceptional” should be reviewed by the Federal Circuit for abuse of discretion.  This is a standard that gives more deference to the trial court.  This means that the appellate court cannot simply substitute its own opinion for that of the district court.  Instead, the appellate court may review the determination of the district court only when there is an error of law or a clear error of the facts.  Otherwise, the determination is within the discretion of the district court.  That makes sense given that the district court judge actually reviewed the evidence and observed the actions by the parties and witnesses at trial.

Fee Shifting

Patent Trolls.  We’ve talked about them a fair amount.  Many have argued that fee shifting is the way to deter spurious lawsuits brought by such entities.  Several members of Congress seem to agree.

At least partially in response to the Federal Circuit’s restrictive interpretation of  § 285, the House of Representatives passed the Innovation Act that seeks to change patent litigation in the US to a loser pays system in nearly all cases.  The Innovation Act would amend § 285 to state that a court “shall award” attorneys’ fees and expenses to the prevailing party unless the losing party’s position was “reasonably justified” or other special circumstances would make an award unjust.

The Supreme Court seems to have cleaned up this mess.  The discretionary standard seems better than an absolute standard.  These cases are not always cut and dry; sometimes they are close.  The proposed statutory revisions might have a chilling affect on parties in bringing legitimate cases.  Under the Supreme Court’s opinions, district courts can still use their discretion to sanction parties that bring bad cases.

My wife, Professor Kristen Osenga, wrote a piece at Prawfsblawg on this particular issue.

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.


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