Tag Archives: Federal Circuit

Federal Circuit Addresses Fee Shifting Statute–Kilopass Tech. v. Sidense Corp.

Posted on January 7, 2014 by | Comments Off on Federal Circuit Addresses Fee Shifting Statute–Kilopass Tech. v. Sidense Corp.

by: Robert Wagner, intellectual property attorney at Picadio Sneath Miller & Norton, P.C. ()

Federal CircuitWhile Congress continues to consider various bills that would make it easier for prevailing parties in patent cases to collect their attorneys’ fees from non-prevailing parties, the Federal Circuit is not sitting by quietly. In Kilopass Technology, Inc. v. Sidense Corp. (Case No. 2013-1193), the Court vacated and remanded a District Court’s decision not to award attorneys’ fees to a prevailing defendant. In an opinion written by Judge O’Malley, the Federal Circuit reviewed the Court’s jurisprudence on fee shifting and clarified the elements that must be met for a defendant that prevails.

Background

This case was a more typical competitor-on-competitor patent infringement lawsuit, rather than the “troll” variety that has been in the news of late. Kilopass and Sidense are competitors in the embedded non-volatile memory market. Kilopass became concerned that Sidense may infringe some of Kilopass’s patents after reviewing a Sidense patent application, so Kilopass hired a law firm to conduct an infringement analysis. Based on an initial review, counsel believed that there was a sufficient basis to send a friendly letter to Sidense, asking if it wanted a license and for an explanation of why it did not infringe. Sidense responded by pointing out differences between its design and the claims of the patent and declined a license.

After receiving Sidense’s response, counsel noted that his infringement analysis assumed that Sidense was making a product according to the design in its patent application, which is not always the case. He noted that if Sidense was making the product in a different way, it did not infringe (at least literally). He recommended that Kilopass try to find out how Sidense’s memory cells were made in order to better assess its potential infringement.

A Kilopass employee obtained further information that showed that Sidense was not making its memory cells the same way that it described in its patent application. With this information, counsel determined that Sidense was likely not infringing and that Kilopass would have a tough case.

Kilopass hired another law firm to conduct another analysis. The second firm preliminarily determined that Kilopass appeared to have a valid claim of infringement via equivalence, but that it needed to conduct a more detailed analysis to be sure. Counsel started this analysis, but was instructed by Kilopass to stop all work.

A team of engineers from Kilopass then concluded that Sidense infringed under the doctrine of equivalence after reviewing the patent and Sidense’s products. Kilopass filed suit approximately two years later.

During the litigation, the District Court found out that Kilopass was making inconsistent arguments regarding the proper claim construction before the Court and before the USPTO BPAI during a concurrent inter partes re-examination. The Court then chastised Kilopass for its gamesmanship. The Court ultimately granted summary judgment of non-infringement to Sidense, which the Federal Circuit summarily affirmed.

Sidense sought its fees, which the District Court ultimately denied because Kilopass performed substantial pre-filing investigations and obtained opinions from two different law firms and its own engineers that it had a non-baseless claim of infringement.

Federal Circuit’s Holding

The Federal Circuit ultimately vacated the District Court’s determination that an award of attorneys’ fees was not warranted and remanded for a further determination. In doing so, the Court clarified the current state of the law with respect to whether a court should award attorneys’ fees to a prevailing defendant in a patent infringement lawsuit.

The determination of whether to award fees is a two-step process, which must be shown by clear and convincing evidence. First, the prevailing defendant must show that the patentee’s claims of infringement were objectively baseless. Second, the defendant must show that the patentee brought the claims in subjective bad faith.

In assessing the subjective prong, a defendant does not have to show that the patentee knew its claims were baseless. A showing that it should have known based on the totality of the circumstances, which can include how objectively baseless the claims were, is sufficient. The Court noted that direct proof of subjective bad faith is often very difficult to come by, so indirect proof can be sufficient.

The Court reiterated that a showing of bad faith is required for an award of fees, although, had the panel been working on a clean slate and not bound by prior precedent, it may have found otherwise. Bad faith must be considered by viewing the totality of the circumstances. The Court also noted that in most cases the objective prong will likely be determinative of this issue, and the subjective bad faith requirement “may prove to have little effect.”

Interestingly, the Court considered whether clear and convincing evidence should be required to prove these elements. It ultimately concluded that it must, but did so based on the fact that it had to follow the precedent set by earlier panels.

Finally, the Court rejected Sidense’s proposal that fee shifting should be appropriate whether a patentee files a lawsuit having little likelihood of success. Unlike Sidense’s other arguments, the Federal Circuit did not seem inclined to expand liability in this fashion.

Conclusion

The Federal Circuit set forth a clearer statement of the law regarding awards of attorneys’ fees to prevailing defendants in patent infringement lawsuits. This was not a patent troll case, so the overtones and political issues associated with that topic were not present. The decision seemed to signal that the panel would have considered significant changes to the law but for the prior precedent that bound it. This may signal that this case is ripe for an en banc review. We shall have to wait and see.

The other take away is that the Federal Circuit is not going to tolerate patentees bringing weak cases, especially when counsel expresses in writing that infringement is unlikely. Patentees need to be cautious about bringing such suits, especially where it appears that literal infringement is not present.

Comments Off on Federal Circuit Addresses Fee Shifting Statute–Kilopass Tech. v. Sidense Corp.

Posted in Patents

Tagged , , , ,

Fed Circuit Excuses Late Payment of Maintenance Fee

Posted on September 26, 2013 by | Comments Off on Fed Circuit Excuses Late Payment of Maintenance Fee

by: Robert Wagner, intellectual property attorney at Picadio Sneath Miller & Norton, P.C. ()

The Federal Circuit issued an interesting decision this week in Network Signatures, Inc. v. State Farm Mut. Ins. Co., No. 2012-1492, that reversed a District Court’s finding of inequitable conduct based on a patentee’s late payment of a maintenance fee. The Court found that even though the patentee intentionally did not pay the maintenance fee, such a failure could be excused when the reason for not paying was based on an erroneous assumption that no one wanted to license the patent. Judge Newman wrote the opinion for the Court, joined by Judge Wallach. Judge Clevenger dissented.

Federal Circuit

Background

A scientist at the Naval Research Labs (NRL) obtained a patent relating to internet security. There did not appear to be any commercial interest in the patent, so NRL permitted the patent to lapse by not paying the 7.5-year maintenance fee. Unbeknownst to NRL, a company (Network Signatures) was interested in licensing the patent. The company attempted to contact NRL via phone and e-mail before the maintenance fee was due, but was unable to do so because NRL’s systems were not functioning properly. Network Signatures was finally able to reach NRL two weeks after the maintenance fee was due. At this point, NRL’s lawyer filed a petition with the PTO for delayed payment, asserting that the failure to pay was unintentional. The PTO granted the request, and NRL ultimately licensed the patent to Network Signatures.

Network Signatures sued State Farm for patent infringement. After discovery, State Farm moved for summary judgment on inequitable conduct, arguing that the failure to pay the maintenance fee was not unintentional. The District Court granted summary judgment, and Network Signatures appealed.

The Federal Circuit’s Decision

The Federal Circuit reversed. In doing so, it looked at the nature of the proceedings before the PTO. NRL’s lawyer submitted a standard form relating to late payments and checked a box indicating that the failure to pay was unintentional. The Court stated that “[w]e do not agree that this action constituted material misrepresentation with an intent to deceive.” The Court found no irregularities with NRL’s conduct after learning of Network Signatures’ desire to license the patent and that it was not improper to use the PTO’s forms (which did not require an explanation).

The dissent disagreed, and found that NRL intentionally allowed the patent to lapse. This was not the kind of unintentional delay that should be excused. While the dissent agreed with the District Court that State Farm had proven the first element of an inequitable conduct defense (material misrepresentation), the dissent found that the second element (specific intent to deceive) was a factual question that precluded summary judgment.

Conclusion

This is a rather odd decision. NRL clearly intended to allow its patent to lapse, but would not have done so but for a problem in communication. But, is this a “mistake of fact” that would excuse its abandonment? The majority failed to address the boundaries of the “mistake of fact” defense proffered by the patentee, and, instead, seems to have relied on the bare-bones nature of the PTO form used. This decision does not seem to provide much clarity as to what constitutes an “unintentional” abandonment of a patent.

Comments Off on Fed Circuit Excuses Late Payment of Maintenance Fee

Posted in Patents

Tagged , , , ,

The Battle Over the Seeds Continues

Posted on September 6, 2013 by | Comments Off on The Battle Over the Seeds Continues

by: Kelly A. Williams, a shareholder at Picadio Sneath Miller & Norton, P.C.

SeedsA coalition of famers, seed sellers, and agricultural organizations that challenged Monsanto’s patents on genetically-modified seeds is appealing a decision of the Federal Circuit on June 10, 2013 to the U.S. Supreme Court in Organic Seed Growers and Trade Asss’n v. Monsanto Co. (The petition for a writ of certiorari may be found here).  The plaintiffs filed a declaratory judgment action seeking a ruling of non-infringement and invalidity of Monsanto’s genetically modified seed patents. These are the same patents that Monsanto successfully enforced in Bowman v. Monsanto, which was decided by the U.S. Supreme Court on May 13, 2013. The Federal Circuit held that there was no justiciable case or controversy because Monsanto had made binding assurances that it would not take legal action against growers whose crops might inadvertently contain traces of Monsanto biotech genes, and the plaintiffs fell within this group.

Comments Off on The Battle Over the Seeds Continues

Posted in Patents, United States Supreme Court

Tagged , , ,

Fed Circuit Upholds Verdict and Sanctions Against NPE

Posted on August 20, 2013 by | Comments Off on Fed Circuit Upholds Verdict and Sanctions Against NPE

by: Robert Wagner, intellectual property attorney at Picadio Sneath Miller & Norton, P.C. ()

Federal CircuitThe Federal Circuit issued an opinion in Taurus IP, LLC v. DaimlerChrysler Corp. (No. 2008-1462), upholding a verdict in favor of a technology user in the continuing patent wars between non-practicing entities (NPEs) and companies. Judge Schall delivered the opinion of the Court, joined by Judges Prost and Reyna.

The case involved two separate actions—one for patent infringement and one for a breach of warranty involving a prior settlement agreement between the parties. In the patent action, the Federal Circuit affirmed the district court’s determination that Taurus’s patent was invalid, that defendants did not infringe, and that the case was exceptional because plaintiff failed to conduct proper due diligence and filed a frivolous lawsuit. In the breach of warranty action, the Court affirmed the finding that the court had jurisdiction over the parties, that plaintiff and related third parties (Orion IP, LLC and Erich Spangenberg) breached the warranty provisions, and that two of the third parties engaged in witness tampering. The Court affirmed-in-part and reversed-in-part the damage awards relating to defendants’ attorneys’ fees.

Background

The case has a rather long and convoluted history, starting with a different lawsuit back in 2004.

Orion (an NPE owned by Spangenberg) sued DaimlerChrysler and Mercedes in 2004. Prior to filing suit, it acquired the rights to a patent (the ‘658 Patent) that would be at issue in the later lawsuit. To resolve the 2004 case (which involved different patents), the parties entered into a settlement agreement in 2006. Under that agreement, Orion warranted that had not assigned any patent rights relating to the 2004 litigation. However, five days after filing the 2004 lawsuit, Orion assigned the ‘658 Patent to another of Spangenberg’s companies and did not disclose that fact.

In 2007, Taurus (another NPE) acquired the rights to the ‘658 Patent from one of the many Spangenberg companies. Taurus then filed suit against DaimlerChrysler and Mercedes 10 days later. This is the case that was on appeal before the Federal Circuit.

The ‘658 Patent involved a “a computer system for managing product knowledge related to products offered for sale by a selling entity.” Taurus alleged that defendants infringed the patent through their internal and external web sites that allowed customers to select various options on different car models and then see if any dealers had that configuration available for sale in the area.

The District Court’s Rulings

The district court issued a claim construction that was unfavorable to Taurus. The court then granted summary judgment in favor of defendants, finding that defendants did not infringe and that the asserted claims of the patent were invalid in light of prior art that pre-dated the earliest conception date that Taurus could prove. In addition, the court found that the case was an exceptional case that warranted an award of defendants’ attorneys’ fees.

The court found that Taurus failed to conduct a proper due diligence before filing suit, that there was no reasonable basis to believe that defendants infringed, and that Taurus needless prolonged the litigation in bad faith. The court then awarded over $1,600,000 in attorneys’ fees.

With respect to the breach of warranty claims, the court found that it had jurisdiction over all of the parties and denied Taurus and the third-party defendants’ attempts to dismiss the claims. A jury then found for DaimlerChrysler and Mercedes. On post-trial motions, the court found damages caused by the breach in the amount of almost $2,500,000 for the costs incurred to defend the patent infringement lawsuit and $ 1,300,000 in attorneys’ fees relating to the breach of warranty claims.

In addition, the court found that Erich Spangenberg and an attorney working with him attempted to tamper with a witness. The attorney used to represent DaimlerChrysler in prosecuting its patents, but left to work for one of Spangenberg’s companies during the course of the litigation. Spangenberg contacted the attorney and told him that he believed that one of DaimlerChrysler’s witnesses was going to commit perjury and that the attorney should take steps to deal with it. The attorney then called and sent the witness a letter “reminding” the witness of certain “facts.”  The attorney never indicated that he worked for Spangenberg.

When this contact came to light, the court conducted a closed hearing to address what happened and what should be done. The court ultimately concluded that (1) the communications were designed to intimidate the witness and influence his testimony, (2) that the attorney should have been screened from the case due to his prior employment with DaimlerChrysler, (3) that the “facts” were not supported by the record. As a sanction, the court prevented Spangenberg and his companies from evoking testimony refuting one of the elements to the breach of warranty claim.

The Federal Circuit Mostly Affirms

On appeal, the Federal Circuit affirmed all of the patent infringement-related issues in full. It upheld the claim construction, the non-infringement ruling, the invalidity ruling, and the award of attorneys’ fees.

With respect to the breach of warranty issues, the Federal Circuit largely affirmed, including the witness tampering sanctions, but did reverse on the issue of the damages for a lack of evidence presented at trial.

Conclusion

This was a fairly convoluted case before the Federal Circuit. While the lengthy opinion makes for an interesting read, there are some high-level take aways. First, Chief Judge Rader has repeatedly indicated that district courts should exercise their inherent and statutory powers to sanction NPEs and other litigants that bring frivolous patent infringement lawsuits. The district court apparently took that to heart and the Federal Circuit backed her up. Second, the failure to conduct appropriate pre-filing due diligence proved very costly to plaintiff. Finally, parties need to be very careful before communicating (or inducing another to communicate) with an opposing witness prior to testifying, as the sanctions can be devastating to a case.

Comments Off on Fed Circuit Upholds Verdict and Sanctions Against NPE

Posted in Patents

Tagged , , , ,

End of Experimental Use Exception? Hamilton Beach v. Sunbeam

Posted on August 14, 2013 by | Comments Off on End of Experimental Use Exception? Hamilton Beach v. Sunbeam

by: Robert Wagner, intellectual property attorney at Picadio Sneath Miller & Norton, P.C. ()

Hamilton BeachThe Federal Circuit issued an interesting decision today in Hamilton Beach Brands, Inc. v. Sunbeam Products, Inc. (No. 2012-1581). The opinion, written by Judge O’Malley and joined by Judge Bryson, invalidated a patent based on the patentee’s contractual agreement with its own supplier to purchase a product that utilized the patented invention more than one year before the date of the patent application.  The dissent, written by Judge Reyna, argued that this decision is inconsistent with the requirement that an offer for sale must by a commercial offer and that it will eviscerate the experimental-use exception.

Background

The patentee, Hamilton Beach, developed an improved slow cooker with clips to hold the lid of the cooker to the body of the cooker. Hamilton Beach’s original design had the clips mounted to the body. Sunbeam designed a competing version of the product with clips mounted to the lid. In response, Hamilton Beach filed a continuation patent application that specifically incorporated Sunbeam’s new design. This application eventually matured into the patent involved in the lawsuit.

In defense, Sunbeam argued that it did not infringe and that the patent was invalid as anticipated because Hamilton Beach introduced new matter into its continuation application and therefore could not take advantage of the earlier filing date. Sunbeam also argued that the patent was invalid due to an offer for sale more than one year before the earliest priority date.

More than one year before the original patent application was filed, Hamilton Beach issued a purchase order to one of its foreign suppliers, asking it to manufacture nearly 2,000 slow cookers based on Hamilton Beach’s specifications and designs. The supplier agreed to fulfill the order once it obtained a release from Hamilton Beach. The supplier’s confirmation occurred more than one year before Hamilton Beach filed its patent application. Hamilton Beach issued the release to its supplier within the one-year period before it filed its application, though.

The District Court ultimately agreed with Sunbeam on all three grounds, finding that Sunbeam did not infringe and that the patent was invalid.

The Federal Circuit’s Decision

A patent can be invalidated under 35 U.S.C. § 102(b)’s on sale bar provision “when two conditions are satisfied before the critical date: (1) the claimed invention must be the subject of a commercial offer for sale; and (2) the invention must be ready for patenting.” There is an exception to the on sale bar where the use is experimental in nature, which negates the commercial requirement of § 102(b).

The Federal Circuit only addressed Sunbeam’s on-sale bar argument, finding that the offer from Hamilton Beach’s supplier to manufacturer the slow cooker once it received the release was an offer for sale under § 102(b). Because this offer occurred more than one year before Hamilton Beach filed its patent application and Hamilton Beach clearly had specifications and drawings of its invention, the patent was invalid as anticipated.

It reaching its decision, the Court noted that there need not be a binding contract for purposes of § 102(b)—only an offer is required. Moreover, the Court found that there is no “supplier exception” to the on-sale bar.

The key dispute between the majority and dissent was whether Hamilton Beach’s purchase order should have been analyzed under the experimental use exception.

The majority stated that it was expressly not considering the experimental use exception because (1) Hamilton Beach never raised this argument and (2) the order of almost 2,000 slow cookers strongly suggested that the use was not experimental. The majority went out of its way to specifically state that this opinion has no bearing on that exception:

“Experimental use” is simply not at issue. There is, thus, no threat that this decision will have any impact on that defense; it certainly will not “eviscerate” that defense as the dissent fears.

The dissent disagreed, finding that Hamilton Beach had raised this issue and that there was sufficient evidence to suggest that the 2,000 units were being ordered in order to work out a defect in the design. The dissent further expressed concern that this ruling would “eviscerate” the experimental use exception and create havoc for companies that have third parties manufacture their goods.

Conclusion

It is somewhat difficult to predict how this case will be used in the future, but there are certainly some points to take away from it. First, companies need to be aware that contractual negotiations and offers with their own suppliers potentially can be used against them to invalidate their patents. This highlights the need to file provisional applications and keep track of the relevant dates so as not run into this issue. Second, where a use is experimental in nature, it is helpful to document its experimental nature for use later in litigation. Third, the majority fairly clearly states that this decision does not destroy or even implicate the experimental use exception, so that exception should still be available if properly raised at the trial court. Finally, this case highlights the importance of preserving this argument explicitly and clearly.

Comments Off on End of Experimental Use Exception? Hamilton Beach v. Sunbeam

Posted in Patents

Tagged , , , , ,

Federal Circuit Determines That It Has Jurisdiction to Hear Appeal Before Damages or Willfulness Determination

Posted on June 18, 2013 by | Comments Off on Federal Circuit Determines That It Has Jurisdiction to Hear Appeal Before Damages or Willfulness Determination

by: Robert Wagner, intellectual property attorney at Picadio Sneath Miller & Norton, P.C. ()

Federal CircuitIn an en banc decision in Robert Bosch, LLC v. Pylon Manufacturing Corp., No. 2011-1363, -1364, the Federal Circuit held that it has jurisdiction under 28 U.S.C. § 1292(c)(2) to hear an appeal of a jury’s determination of infringement even though the issues of damages and willful infringement have not been decided. Judge Prost was joined by Chief Judge Rader and Judges Newman, Lourie, and Dyk. Judges Moore and Reyna concurred with respect to an appeal where just the damages determination has not been made, but dissented with respect to appeals where the willful infringement determination has not been made. Judges O’Malley and Wallach dissented as to both.

The case had a rather unusual procedural path. In 2008, Robert Bosch sued Pylon Manufacturing for infringing its patents relating to wiper blades. Pylon moved the district court to bifurcate the issue of infringement from the issues of damages and willful infringement. The court granted the motion and stayed discovery with respect to both damages and willful infringement. The court entered partial summary judgment on some issues in favor of both parties, but found jury questions relating to some of the infringement and invalidity claims. The jury found that Pylon infringed the claims of the patents and that the patents were not invalid. The court denied Bosch’s motion for a permanent injunction. Bosch appealed, and the Federal Circuit, in an opinion written by Judge O’Malley and joined by Judge Reyna, reversed and remanded. The parties also appealed the infringement and invalidity decisions. After oral argument, the Federal Circuit, sua sponte, granted a rehearing en banc to determine whether the Court had jurisdiction to hear the appeal in the first place because the damages and willful infringement issues had not been decided.

Under 28 U.S.C. § 1292(c)(2), the Federal Circuit has jurisdiction to hear appeals “from a judgment in a civil action for patent infringement which would otherwise be appealable . . . and is final except for an accounting.” Thus, the question was whether the damages and willful infringement determinations fall within the rubric of an “accounting.”

In analyzing the history of the statute and the understanding of the term “accounting,” the Court determined that an accounting was “a proceeding that includes the determination of both profits and damages.” The Court further noted that historically such accountings were made by special masters, but that this limitation no longer applied, especially after the merger of law and equity occurred in the courts.

With respect to willful infringement, the Court found that historically the issue of enhancement of damages was determined as part of an accounting. Thus, the Court found that it had jurisdiction to hear appeals when the issues of both damages and willful infringement remain outstanding. The Court then returned the case to the panel to decide the appeal on its merits.

The dissent reached a different conclusion, finding that the historical precedent made clear that the term accounting in the statute did not apply to either the damage or willful infringement determinations. Judge O’Malley noted that “[i]n all other circuits and all other types of cases, the finality requirement plainly applies to outstanding damages determinations.” She cautioned that there was no justification for treating patent cases any differently.

Comments Off on Federal Circuit Determines That It Has Jurisdiction to Hear Appeal Before Damages or Willfulness Determination

Posted in Patents, Rules and Procedures

Tagged , , , , , ,

Is Software Patentable? Fed Circuit Isn’t Sure—CLS Bank v. Alice Corp.

Posted on May 21, 2013 by | 1 comment

by: Robert Wagner, intellectual property attorney at Picadio Sneath Miller & Norton, P.C. ()

Alice Tea PartyEarlier this month, the Federal Circuit issued its long-awaited en banc opinion on the patentability of software in CLS Bank International v. Alice Corporation Pty. Ltd., No. 2011-1301. In an ironic twist, the result is something more akin to Alice in Wonderland than the clear guidance patent practitioners were hoping for. The Federal Circuit issued a 135-page decision comprised of separate written opinions by Judges Lourie, Rader, Moore, Newman, and Linn, as well as an “Additional Reflection” by Chief Judge Rader, none of which commanded a majority. The end result was a one-paragraph per curiam opinion in which a majority of the Court determined that the particular method  and computer-readable media claims were not directed to patent eligible subject matter (for different reasons) and an equally-divided Court affirmed by default the District Court’s holding that the system claims were not patent eligible.

The Claims at Issue

Alice Corp. owned four patents relating to a computerized trading platform used for conducting financial transactions in which a third party acts as an intermediary to assure the first and second parties that they will both perform. If one of the parties cannot perform, the transaction is not completed and neither side risks non-performance of the other.

The patents contained method, computer-readable media, and system claims, all of which involved software aspects.

Judge Lourie’s Opinion

Judge Lourie, joined by Judges Dyk, Prost, Reyna, and Wallach, would have held that all of the claims were not directed to patent-eligible subject matter under 35 U.S.C. § 101.

The statute contains four eligible classes of inventions:

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.

35 U.S.C. § 101. He noted that the statute is to be interpreted broadly, but is also limited by three judicially-created exceptions that are not patent eligible: laws of nature, natural phenomena, and abstract ideas.

In determining whether something is patent eligible, Judge Lourie set forth a two-step process: (1) is the claimed invention a process, machine, manufacture, or composition of matter, and, if so, (2) does it fall within one of the three judicially-created exceptions? He acknowledged that this determination is easier said than done.

To determine whether it falls within any of the exceptions, courts are to answer two more questions: (1) does the claim pose any risk of preempting an abstract idea, and, if so, (2) are there substantive limitations that narrow, confine, or otherwise tie down the claim so that it does not preempt the full abstract idea?

Turning to the claims at issue, Judge Lourie broke them down into the “gist” of the invention and what, at heart, it was trying to claim. He concluded that all of the claims were attempting to claim the abstract idea of facilitating a trade through a third-party intermediary. In his opinion, none of the additional claim language provided any meaningful limitation on the claims.

Chief Judge Rader’s OPinion

Chief Judge Rader, joined in full by Judge Moore and in part by Judges Linn and O’Malley, would have held that the system claims are patent eligible, but the method and media claims are not (Judges Linn and O’Malley would have held that all the claims are patent eligible).

Chief Judge Rader focused on the judicially-created exceptions to § 101. Courts must determine whether a claim includes meaningful limitations that restrict the claim to an application, rather than claiming an abstract idea.  Claims are not meaningfully limited where it describes an abstract idea and simply adds “apply it” or if its purported limitations cover all possible ways to achieve the result.

A claim is meaningfully limited if it requires a particular machine to implement it or a particular transformation or where it adds limitations that are essential to the invention. “At bottom, where the claim is tied to a computer in such a way that the computer plays a meaningful role in the performance of the claimed invention, and the claim does not pre-empt virtually all uses of an underlying abstract idea, the claim is patent eligible.”

Chief Judge Rader cautioned that the patent-eligibility inquiry is different and distinct from other statutory requirements, such as non-obviousness, novelty, and enablement. Whether something is obvious is irrelevant to whether it is directed to patent-eligible subject matter. He also confirmed that the standard for proving a violation of § 101 is by clear and convincing evidence.

Taking this all together, he found that the system claims were directed to patent eligible subject matter—the claims recited a machine that performed specific transactions that was not a disembodied concept. However, the method and media claims he found to claim only an abstract concept.

Judge Moore’s Opinion

Judge Moore, joined by Judges Rader, Linn, and O’Malley, wrote to express her concern that Judge Lourie’s view would signal the end of all software patents as we know them. She believed that the five judges ignored precedent and have left the Court “irreconcilably fractured.”  She called for the Supreme Court to step in and resolve the issue.

She would have held that the system claims are directed to patent-eligible subject matter, as they include limitations relating to hardware and software, and were not limited to abstract ideas.

Judge Newman’s Opinion

Judge Newman, writing for herself, believed that the Court was overanalyzing the requirements of § 101. She stated that the inquiry should be simple and straightforward—does the invention fall within one of the four types of inventions allowed? If so, the patent-eligibility analysis ends and the other requirements for patentability kick in to determine whether a patent should be granted.

She also wrote to explicitly confirm that study and experimental use is not patent infringement. She was concerned that too many commentators were wrongly stating that patents would prevent individuals from conducting research or evaluating patented inventions.

Experimental use—such as experiments to (1) improve or build on patented subject matter, (2) compare patented subject matter with alternatives, (3) understand its mechanism, and (4) find new applications or modifications—is not infringement, regardless of whether it is for scientific knowledge or commercial potential.

Judge Linn’s Opinion

Judge Linn, joined by Judge O’Malley, would have found all of the claims to be directed to patent-eligible subject matter.

First Judge Linn was concerned that no claim construction was ever done in this case. The parties did agree that all of the claims required a computer to implement them. Having created this explicit tie to a machine, the claims were not directed to an abstract idea. He had grave concerns that the Court was rewriting the claims and ignoring limitations in order to distill down some essence of the claim, which he believed was improper.

Chief Judge Rader’s “Additional Reflections”

Chief Judge Rader also wrote some official “additional reflections,” which is highly unusual. He reflected on how the positions of the Judges have changed over the last 25 years, even though § 101 has not changed at all in that time period. He also reflected on the chaos of this opinion before concluding that “When all else fails, consult the statute!”

COnclusions—What to Make of All of This?

As a practical matter, this decision provides no precedential value. No rationale was able garner a majority of the Court. What it does signal is that the Federal Circuit cannot, at this, decide what to do with software patents. Five of the Judges (Lourie, Dyk, Prost, Reyna, and Wallach) appear hostile to software patents, while the other five (Rader, Moore, Linn, O’Malley, and Newman) are more receptive. Truly, one’s panel draw could be outcome determinative on appeals involving software patents.

Given the chaos, one could reasonably expect that the Supreme Court will have to step in and provide some clarity. Although, given its track record, even if it does grant cert on this case, it still might not provide clear guidance.

For some other, interesting views on this decision, see our friends at IPWatchdog (here, here, here, and here) and Patently-O (here).

1 Comment

Posted in Patents

Tagged , , , , , ,

Proper Pleading Standard Under Twombly for Patent Infringing Complaints–K-Tech Telecommunications

Posted on April 19, 2013 by | Comments Off on Proper Pleading Standard Under Twombly for Patent Infringing Complaints–K-Tech Telecommunications

by: Robert Wagner, intellectual property attorney at Picadio Sneath Miller & Norton, P.C. ()

Federal CircuitOn April 18, 2013, the Federal Circuit issued another decision in which it analyzed the interplay between the standard form patent complaint in Form 18 of the Federal Rules of Civil Procedure and the Supreme Court’s decisions in Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) and Ashcroft v. Iqbal, 556 U.S. 662 (2009). Form 18 suggests that a plaintiff can satisfy the pleading standards for alleging direct patent infringement with relatively minimal allegations. The Federal Circuit determined that the Supreme Court’s decisions in Twombly and Iqbal did not pre-empt the appropriateness of Form 18. This decision follows a prior one (R+L Carriers, Inc. v. DriverTech LLC, (In re Bill of Lading Transmission & Processing System Patent Litigation), 681 F.3d 1323 (Fed. Cir. 2012)), in which the Federal Circuit considered the same question (and ruled in the same way).

The Federal Circuit noted that Form 18 requires that a plaintiff make:

(1) an allegation of jurisdiction; (2) a statement that the plaintiff owns the patent; (3) a statement that defendant has been infringing the patent ‘by making, selling, and using [the device] embodying the patent’; (4) a statement that the plaintiff has given the defendant notice of its infringement; and (5) a demand for an injunction and damages.

The Federal Circuit further noted that “Federal Rule of Civil Procedure 84 states that ‘the forms in the Appendix suffice under these rules and illustrate the simplicity and brevity that these rules contemplate’” and that  the Advisory Committee Notes “make[] clear that a proper use of a form contained in the Appendix of Forms effectively immunizes a claimant from attack regarding the sufficiency of the pleading.”

The question the Court next considered was whether Twombly and Iqbal pre-empted Form 18 and Rule 84. It determined that “as we made clear in R+L Carriers, to the extent any conflict exists between Twombly (and its progeny) and the Forms regarding pleadings requirements, the Forms control.”

In addressing the sufficiency of the complaint, the Court noted that it is generally not necessary for a plaintiff to identify the precise product being infringed, especially in instances where that information is within the control of the defendant and not publicly available.

Having said that, the Court then back-tracked somewhat about the detail required to meet the pleading standards, indicating that the bare allegations required in Form 18 might not be sufficient, depending on the complexity of the case and what would be required to give a defendant sufficient notice of the claims being brought against it.

A complaint containing just enough information to satisfy a governing form may well be sufficient under Twombly and Iqbal. R+L Carriers, 681 F.3d at 1334 n.6. “Resolution of that question will depend upon the level of specificity required by the particular form, the element of the cause of action as to which the facts plead are allegedly inadequate, and the phrasing of the complaint being challenged.” Id. (citing Twombly, 550 U.S. at 564 n.10 (noting that forms governing claims for negligence require sufficient detail to permit a defendant to “know what to answer”)). And we think it clear that an implausible claim for patent infringement rightly should be dismissed.

Form 18 in no way relaxes the clear principle of Rule 8, that a potential infringer be placed on notice of what activity or device is being accused of infringement.

Moreover, the Court cautioned that mere compliance with Form 18 may not be sufficient to meet the ethical requirements for filing a patent infringement action—plaintiffs must still conduct the required due diligence under Rule 11.

Satisfaction of Form 18 does not guarantee compliance with Rule 11 of the Federal Rules of Civil Procedure. That a complaint alleges a plausible claim for patent infringement on its face and satisfies Form 18 does not immunize a plaintiff who fails to identify easily ascertainable evidence of noninfringement through appropriate pre-suit investigation.

It appears that the Federal Circuit felt constrained by the Rules of Civil Procedure and the pre-Twombly/Iqbal forms. Had Form 18 not existed, the Federal Circuit may have decided differently. That being said, until Form 18 is changed, litigants must consider the appropriateness of pleadings in the context of Form 18, and not just the Twombly and Iqbal standards. Providing sufficient particularity to provide notice to the accused infringer of the patents raised and the acts of alleged infringement is still the ultimate touchstone.

Comments Off on Proper Pleading Standard Under Twombly for Patent Infringing Complaints–K-Tech Telecommunications

Posted in Patents

Tagged , , , ,

Federal Circuit to Reconsider De Novo Claim Construction Review–Lighting Ballast Control Order

Posted on March 25, 2013 by | Comments Off on Federal Circuit to Reconsider De Novo Claim Construction Review–Lighting Ballast Control Order

by: Robert Wagner, intellectual property attorney at Picadio Sneath Miller & Norton, P.C. ()

Federal CircuitOn March 15, 2013, the Federal Circuit issued an order in Lighting Ballast Control LLC v. Philips Electronics North America Corp, Case No. 2012-1014, -1015, stating that an en banc panel of the Court will consider whether and to what extent it should afford any deference to a district court’s patent claim construction. The Federal Circuit is determining whether it will overrule its prior decision in Cybor Corp. v. FAS Technologies, Inc., 138 F.3d 1448 (Fed. Cir. 1998).

The Supreme Court, in Markman v. Westview Instruments, Inc., 517 U.S. 370 (1996), determined that claim construction is a matter of law exclusively for the courts, and is not a factual matter for juries (although it did recognize that claim construction is somewhat of a “mongrel,” having aspects that are both legal and factual). In Cybor, the Federal Circuit considered what the implication of that finding would be on how it, as an appellate court, would review a trial court’s construction of the claims in a patent. It concluded that because claim construction is a matter of law, it would review a district court’s construction of the terms in a patent de novo, meaning without any deference to the lower court’s conclusion. This has been the state of the law for some time now.

The implications of the Cybor decision are significant to patent holders and those accused of infringement. As a practical matter, parties to a lawsuit have come to view a district court’s claim construction as a somewhat intermediate position. After all, if the Federal Circuit will give no deference to the district court’s conclusions, there is a significant possibility that those conclusions could be reversed on appeal. Fair or not, the perception of the Federal Circuit among some practitioners is that a trial court’s claim construction only has a 50/50 chance of being affirmed on appeal. (For some interesting studies of Federal Circuit reversal rates, see here, here, and here). Many have complained that this uncertainty discourages settlement, because the “losing” side on the claim construction issue often feels that it will be “vindicated” on appeal.

On the other hand, by having the Federal Circuit have the “final say” on claim construction, it promotes more consistency and, hopefully, better results, as the Federal Circuit is often far more familiar with claim construction issues than many district courts and they (and their clerks) are often better versed in the technologies described in these patents.

Patent holders are also fearful that if claim construction is not reviewed de novo, an unfavorable claim construction by a district court may be very difficult to overcome and could affect how a particular term is construed in other patents held by the patentee. If the Federal Circuit has the final say, a patentee has more options. For instance, it can appeal to the Federal Circuit a get a fresh look at the issue, or it can settle the case with a realistic hope that the Federal Circuit in a later case would not be particularly beholden to how a district court in a previous case construed a claim term.

Thus, this case will be particularly important for parties in patent litigation. It will be very interesting to listen to the oral argument in the Lighting Ballast case and see what the Federal Circuit ultimately decides. This may, in the end, be another issue that the Supreme Court will decide to weigh in on.

Comments Off on Federal Circuit to Reconsider De Novo Claim Construction Review–Lighting Ballast Control Order

Posted in Patents

Tagged , , , , , , ,

Is Discovery Allowed in Inter Partes Re-examination? — Abbott Labs. v. Cordis Corp.

Posted on January 9, 2013 by | Comments Off on Is Discovery Allowed in Inter Partes Re-examination? — Abbott Labs. v. Cordis Corp.

by: Robert Wagner, intellectual property attorney at Picadio Sneath Miller & Norton, P.C. ()

Today, the Federal Circuit is hearing oral argument in Abbott Laboratories v. Cordis Corp. (12-1244) on an interesting issue of whether parties can subpoena documents or testimony in an inter partes re-examination proceeding before the USPTO under 35 U.S.C. § 24.

Federal CircuitCordis sued Abbott Labs and Boston Scientific alleging infringement of two patents. After the filing of the lawsuit, both defendants initiated separate inter partes  re-examination proceedings before the USPTO, which were merged. During this merged proceeding, Abbott Labs and Boston Scientific asserted that the patents were obvious and, therefore, invalid under 35 U.S.C. § 103(a). In support of this assertion, Abbott and Boston Scientific submitted affidavits from experts  supporting their position.

In response, Cordis attempted to serve subpoenas through the district court seeking evidence relevant to the question of obviousness. Cordis also filed a petition with the USPTO requesting that the Director of the USPTO clarify the USPTO’s rules with respect to the service of subpoenas under 35 U.S.C. § 24 in inter partes re-examinations.

Abbott Labs filed a motion to quash the subpoenas, arguing that (1) the inter partes re-examination procedures prohibit discovery, (2) 35 U.S.C. § 24 does not authorize the issuance of subpoenas because inter partes re-examinations are not “contested cases” within the meaning of the statute, (3) Cordis required USPTO permission before serving the subpoenas, and (4) the subpoenas were vexatious, untimely, and threatened to reveal confidential information.

Prior to oral argument on the motion to quash, the USPTO denied Cordis’s petition, concluding that no discovery is permitted in inter partes re-examinations. The district court then granted Abbott’s motion to quash, agreeing with the USPTO and finding that an inter partes re-examination is not a “contested case” for purposes of the statute. Cordis appealed to the Federal Circuit, which is hearing oral argument today on the issue.

It will be interesting to see how the Federal Circuit rules and whether it allows parties to inter partes re-examinations to engage in this form of limited discovery.

  • Copies of the parties’ briefs (along with the amicus brief of the United States) are available here.
  • An audio recording of the argument is generally posted within a day or so of the oral argument and can be found here when it is posted.

Comments Off on Is Discovery Allowed in Inter Partes Re-examination? — Abbott Labs. v. Cordis Corp.

Posted in Patents

Tagged , , , ,