INVENTIVE STEP

A Federal Circuit panel had reversed a district court opinion that related to patent eligibility of computer-related claims.  The details of the patent are related in my earlier post, but the salient issue is that the patent included method, system, and computer-readable media claims.  The panel divided over the issue with Judges Linn and O’Malley reversing the district, while Judge Prost dissented.  The court agreed to hear the case en banc.

Today, the 10 member en banc court overruled the panel decision and affirmed the district court.  If you were looking for precedent, however, you will be disappointed.  Here is the entire per curiam opinion:

Upon consideration en banc, a majority of the court affirms the district court’s holding that the asserted method and computer-readable media claims are not directed to eligible subject matter under 35 U.S.C. § 101.

An equally divided court affirms the district court’s holding that the asserted system claims are not directed to eligible subject matter under that statute.

In other words, a majority of the court holds that the method and computer-readable media claims are not patent eligible, but they can’t agree on the reasoning.  The court divided 5-5, however, on the patent eligibility of the system claims.  In such a case, an appellate court affirms the lower court; the tie goes to the runner so to speak.

After that brief opinion, however, an additional 120+ pages are allocated to concurring and dissenting opinions that apparently could not garner a majority.

Judges Lourie, Dyk, Prost, Reyna, and Wallach

Judges Lourie, Dyk, Prost, Reyna, and Wallach filed a concurring opinion where they laid out the analysis they would use for the claims at issue.

First, it must be determined whether the claims fit within one of the four statutory classes:  process, machine, manufacture, composition of matter.  Next, does the claim pose the risk of preemption of an abstract idea?  The claim must include an inventive concept, a genuine human contribution.

In applying this analysis to the claims-at-issue, this group of 5 judges would hold that none of the claims are patent eligible.

Chief Judge Rader and Judges Linn, Moore, and O’Malley

Next, Chief Judge Rader and Judges Linn, Moore, and O’Malley filed an opinion concurring-in-part and dissenting-in-part.  Chief Judge Rader and Judge Moore agree with the majority that the method and computer-readable media claims are not patent eligbile, while Judges Linn and O’Malley would find all of the claims to be patent eligible.

This opinion notes that the exceptions to patent eligibility are “laws of nature, natural phenomena, and abstract ideas.”  In crafting these exceptions, the Supreme Court was concerned with the “monopolization of the basic tools of scientific and technological work” and impede innovation more than promote it.

The opinion notes that claims must be “meaningfully limited.”  For computer-related claims, this means that the otherwise abstract idea must be performed in a “specific way” on the computer or be performed on a “specific computer.”  The computer must perform a meaningful role in the performance of the invention.  The court must be careful not to consider novelty, obviousness, or section 112 issues when determining patent eligibility.

Judge Moore filed an opinion dissenting-in-part that was joined by Chief Judge Rader and Judges Linn and O’Malley.

Judge Moore is very concerned that the exception to patent eligible subject matter is getting too large and that a very large number of currently valid patents may be implicated.  She describes the court as “irretrievably fractured” over the issue of patent eligibility.  The Supreme Court only seems to review cases where it is going to rule the claims to be patent ineligible.  She seems to urge them to review this case and hold otherwise.

She is extremely critical of Judge Lourie’s opinion.  She indicates that he strips away all known features from the claims in his search for an “inventive concept.”  This is, of course, continuing the confusion between § 101 and §§ 102 and 103 of the Patent Act.

Judge Newman

Judge Newman filed an opinion concurring-in-part and dissenting-in-part.  Judge Newman is concerned over the added uncertainty to patentees now that patent eligibility seems to be a completely separate litigation issue.  She decries the division over the issue on the court and that it will not provide any guidance to patent owners.  She would hold all of the claims in this case to be patent eligible.

Judges Linn and O’Malley

Judges Linn and O’Malley filed a dissenting opinion.  They note that no claim construction analysis was conducted in this case and it comes to the court on a grant of summary judgment of patent ineligibility.  The defendant in the case has agreed to a much narrower construction of the claims than they have been given by the court.  Based on the sparse record, they would hold all of the claims to be patent eligible.

Finally, Chief Judge Rader provided “additional reflections” where he reviews other patent eligibility cases with which he has been involved.  He leaves us with a mantra to ponder:

When all else fails, consult the statute!

The Federal Circuit issued as order today that it will reconsider whether to grant any deference to a district court’s claim construction ruling.  Lightning Ballast Control LLC v. Philips Electronics North America Corp.

Since the late 1990′s, the Federal Circuit has treated claim construction–the determination of what the various words and phrases in a patent claim mean–as a matter of law.  This means that the court had reviewed lower court determinations de novo.  This means that the Federal Circuit would determine the meaning of the claim terms with no consideration of how the district court construed the terms.  Needless to say, the reversal rate of such determinations is very high.

When an appellate court reviews a lower tribunals factual findings, by contrast, the reviewing court grants deference to the lower court’s determination.  They will instead review factual findings for clear error.  After all, the lower court actually reviewed the evidence and listened to the witness testimony.  The appellate court is merely reviewing the written record of what happened.  The lower court is a better judge as to the credibility of the testimony or evidence.

Claim construction often includes a determination of underlying facts such as prosecution history statements and how one of ordinary skill in the art would actually understand a claim term.

While there has been a call to revisit the de novo review standard for years, the court has generally resisted these advocates for change.  The time has finally come to readdress the issue.  The court’s order requests the parties to address three questions:

a. Should this court overrule Cybor Corp. v. FAS Technologies, Inc., 138 F.3d 1448 (Fed. Cir. 1998)?

b. Should this court afford deference to any aspect of a district court’s claim construction?

c. If so, which aspects should be afforded deference?

When Congress passed the America Invents Act last year, it changed the false marking statute.  Previously, the statute provided for qui tam actions, meaning that anyone could sue for false marking and receive half of any damage award from the court.  This created a spate of false marking cases where lawyers and others were filing and requesting large amounts of damages.

The America Invents Act amended the statute to be more in line with most other causes of action.  The new statute required the plaintiff to show actual injury or harm in order to bring suit for false marking.  In effect, competitors (or maybe deceived consumers) would be the only parties with standing to bring such suits.  The controversial aspect of the law is that the change was made retroactively, meaning that many of the suits that were pending in various courts when the law was enacted suddenly required dismissal due to lack of standing by the plaintiff.  Brooks v. Dunlop Mfg. was one such case.

The plaintiff sued Dunlop in September 2010 under the previous version of the false marking statute.  Once the America Invents Act was enacted in September 2011, the defendants moved to dismiss the case due to lack of standing by the plaintiff.  After hearing arguments on whether the retroactive nature of the change of the law violates the Due Process Clause or the Takings Clause of the Constitution, the district court dismissed the case last December.

On appeal, the Federal Circuit held that Congress had a rational basis for changing the law on a retroactive basis.  In the legislative history of this section of the law, Congress made it clear that it was concerned with perceived abuses and inefficiencies from litigation under the old version of t he law.  Congress was also concerned with the constitutionality of the earlier version of the law that did not require actual injury to the plaintiff to bring suit.

The court also rejected Brooks’s argument that the filing of a qui tam action under the old law created a binding contract with the United States that Congress could not repudiate by changing the law.

This case should bring to an end a great deal of false marking cases.

In July, a divided Federal Circuit panel held a large number of patent claims directed to a computer-related invention to be eligible subject matter under § 101 of the Patent Act.  The court performed a claim construction analysis on the various limitations of the claims to determine the scope and content of the claims.  The court then considered each entire claim as a whole to determine whether the it contained patent eligible subject matter.

At the time of the opinion, I noted that, while I agreed with the opinion, the court seemed to add uncertainty to this area of law.  Judge Prost’s “common sense” approach in the dissent added to the notion that whether an invention is patent eligible seems to depend on the composition of the panel hearing the appeal.

Yesterday, the court ordered the original opinion withdrawn and that it will hear the case again en banc.  Specifically, the court will consider two questions:

a. What test should the court adopt to determine whether a computer-implemented invention is a patent ineligible “abstract idea”; and when, if ever, does the presence of a computer in a claim lend patent eligibility to an otherwise patent-ineligible idea?

b. In assessing patent eligibility under 35 U.S.C. § 101 of a computer-implemented invention, should it matter whether the invention is claimed as a method, system, or storage medium; and should such claims at times be considered equivalent for § 101 purposes?

The “plague” of inequitable conduct being argued by every accused patent infringer may indeed be over.  After the Federal Circuit’s decision in Therasense, it seems that it will be extremely difficult to prove the defense.  The court showed that again yesterday in 1st Media, LLC v. Electronic Arts, Inc.

In 1st Media, the patent applicant received a PCT search report on an application that was identical to a pending US application that had been allowed by the examiner, but the Issue Fee had not yet been paid.  The search report included a prior art reference that was cited as “particularly relevant” to the application; it was not submitted in the US application. 

Similarly, the patent applicant had filed a second US application on the same day as the application for the patent-at-issue in the case (the ’946 patent).  The second application was very similar to the ’946 patent.  The claims of the second application were rejected over another prior art reference.  In response to the rejection, the applicant canceled the rejected claims and allowed the others to issue.  The prior art reference from the second application was also not submitted to the PTO with respect to the ’946 patent.

Finally, the applicant filed a continuation-in-part (CIP) application of the second US application.  The claims of this application were also rejected over a third prior art reference.  The applicant amended the claims to distinguish this reference as well, which was also not submitted to the PTO with respect to the ’946 patent.

Under the duty of disclosure, the patent applicant had to submit the new reference (and the search report) to the PTO, right?

During an infringement suit, the defendants defended on the basis that the ’946 patent was unenforceable due to inequitable conduct, specifically arguing the failure to submit these references to the PTO.  The patent attorney and inventor testified that they did not think of submitting the references to the examiner and considered the inventions to be distinct enough that it was not required. 

Although the district court found this testimony not credible, there was no evidence of the specific intent of either to withhold the references.  The district court held that the inventor and patent attorney knew the references were material and did not provide a good explanation for not submitting them to the PTO.

The Federal Circuit, citing Therasense, reversed.  Inequitable conduct requires the “separate requirements” of (1) “the patentee acted with the specific intent to deceive the PTO”; and (2) the non-disclosed reference was but-for material.

To prove the first prong, the defendant must prove “that the applicant knew of the reference, knew that it was material, and made a deliberate decision to withhold it.”  (emphasis in original).  The court can no longer infer the specific intent to deceive merely because the applicant knew of the reference and knew that it was material.  The patent owner need not provide a good faith explanation of its conduct until the defendant has met its burden of proving the specific intent.

The defendants in 1st Media admitted that they had no direct evidence of an intent to deceive.  Instead, they argued (the pre-Therasense standard) that based on the circumstances, the patent owner must have intended to deceive the PTO (it can be inferred).  It is this fact that is fatal to the inequitable conduct defense in this case.

Ultimately, for all of the references, the evidence supports only that [the inventor and patent attorney] (1) knew of the references, (2) may have known they were material (which this court does not reach), and (3) did not inform the PTO of them. But that is not enough. As Therasense made clear, a defendant must prove that an applicant (1) “knew of the reference,” (2) “knew it was material,” and (3) “made a deliberate decision to withhold it.” . . . It is the last requirement that is missing from the record developed in this case.