Patents for “Real Inventions with Computers”?: The High Court Hears Arguments in CLS Bank Case

bethShaw-0580editConvertedProfile-e1360002102239Featured Expert Column — Patent Law

Beth Z. Shaw, Brake Hughes Bellermann LLP

On Monday, March 31, the Supreme Court heard argument in the much anticipated patent case Alice Corporation v. CLS Bank International. The arguments focused on the scope of application of Section 101 to claims for a patent related to computer data processing. In a previous divided opinion, the U.S. Court of Appeals for the Federal Circuit failed to agree on any standard as to why the computer-related patent claims were not patent eligible.

Justice Breyer, who questioned the parties more than any other justice, asked the Petitioner how the process claims at issue were different from King Tut applying calculations using an abacus. He queried how to come to a result that might have broader policy implications. Justice Breyer appeared to struggle with the idea of allowing a broad rule that might result in “competition on who has the best patent lawyer,” yet also expressed concern about ruling out “real inventions with computers.”

Justice Sotomayor asked if the Petitioners are “trying to revive the patenting of a function.” She also questioned whether the medium, system, and method claims stand or fall together, an issue that has plagued the divided Federal Circuit for some time. Justice Sotomayor wondered, however, if the Court actually needs to “announce a general rule with respect to software” to resolve this case.

The Petitioners argued that Congress intended the courts apply Section 102 to invalidate patents based on novelty, yet continue a liberal interpretation of Section 101. Justice Ginsburg seemed reluctant to accept that line of reasoning, stating that there are “four Justices” who don’t “buy that argument.” Justice Scalia noted, however, that “four is not five.” Justice Scalia’s questions suggest that he believes that a Section 101 patent-eligibility question should not be confused with the question of whether an invention is novel based on prior art.

Focusing on the practical application of the law by judges, Justice Kagan asked, “[w]hat do we want a judge to do at this threshold level in terms of trying to figure out whether the description is sufficient to get you past [101]?”

It appears that at least some of the justices may prefer to invalidate the patent here without reaching a broader question of when computer-related inventions should be patent-eligible. There also appear to be a group of justices, including Justice Scalia, who want to more clearly differentiate between the question of novelty and the question of an “abstract idea” as defined by previous case law applying Section 101. The questions from the oral argument at the Supreme Court reflect a philosophical debate and potentially divided Court, which could result in a decision with multiple opinions, not unlike that of the Federal Circuit in this case.

The Federal Circuit Muddies Its Venue Transfer Jurisprudence

federal circuit Patent plaintiffs, especially those resembling “patent trolls,” routinely sue in plaintiff-friendly forums, such as the Eastern District of Texas, or in other forums thousands of miles away from a defendant’s home base. Plaintiffs use the attendant inconveniences as leverage when pursuing quick settlements. Such venue manipulation is an item of significant concern to repeat player defendants of patent lawsuits.

Congress considered and rejected venue reforms as part of the America Invents Act of 2011, which may be one reason such provisions are not included in current reform efforts on Capitol Hill. Another reason may be that over the last five years, the U.S. Court of Appeals for the Federal Circuit has built up a robust jurisprudence which gives defendants a fair chance at having lawsuits transferred to a more convenient forum. Our 2010 Legal Pulse post The Federal Circuit Messes with (the Eastern District of) Texas Yet Again examined a series of Federal Circuit rulings which together have provided predictable standards for judging venue transfer requests under 28 U.S.C. § 1404(a).

However, two Federal Circuit decisions issued on the same day—February 27—by the same panel of judges now threaten the prevailing clarity on patent litigation transfer of venue. In both cases, Judges Prost and Reyna affirmed the lower courts’ denial of defendants’ motions to transfer with Judge Newman twice dissenting. In re Apple Inc. originated in the Eastern District of Texas, while In re Barnes & Noble, Inc. was filed in the Western District of Tennessee. The plaintiff in In re Apple is a Luxembourg company with one employee which has a Plano, Texas subsidiary whose six employees manage the company’s patent portfolio. The plaintiff in In re Barnes & Noble registered to do business in Tennessee just before filing this suit (as well as 19 other identical suits in the same court) and is a one-employee company with a home office. Continue reading

Department of Energy Task Force Issues Report on FracFocus

sboxermanFeatured Expert Column – Environmental Law and Policy

by Samuel B. Boxerman, Sidley Austin LLP with Ben Tannen, Sidley Austin LLP

The scope and extent of disclosure of hydraulic fracturing fluids continues to be an issue with which regulators are wrestling on both the state and federal levels.  In the most recent addition to the discussion, on February 24, 2014, the U.S. Department of Energy’s (DOE) Secretary of Energy Advisory Board (SEAB) N1 released its Task Force Report on FracFocus 2.0 (“Report”).  This Report makes recommendations related to FracFocus, the web-based, publicly available national hydraulic fracturing chemical constituent registry, on topics ranging from trade secret claims to future funding.  The Report was developed in response to a November 2013 request by Secretary of Energy Ernest J. Moniz asking SEAB to create a task force to focus on seven discrete issues related to FracFocus.  N2  In 2011, a SEAB subcommittee had previously studied the potential environmental impacts of unconventional gas production.  N3

FracFocus, operated by the Ground Water Protection Council and Interstate Oil and Gas Compact Commission, started in April 2011.  N4  In its first year of operation, it publicized information on over 14,000 wells from 231 companies.  N5  Since then, the number of wells registered on the website has more than quadrupled, to over 62,000.  N6  By the end of 2013, 14 states required some sort of disclosure on FracFocus, while companies located in other states voluntarily disclosed information on the site.  N7  According to the Report, “FracFocus has greatly improved public disclosure quickly and with a significant degree of uniformity.”  N8

The issue the Report examines most closely is the extent to which companies rely on the trade secret exemption in making disclosures on FracFocus.  The current FracFocus disclosure exemption is based on an OSHA regulation.  N9  The task force asserted its belief that, as a general principle, “full disclosure of all known constituents added to fracturing fluids is desirable.”  N10 Continue reading

Federal Circuit Retains De Novo Standard of Review of Patent Claims to Maintain “Certainty”

bethShaw-0580editConvertedProfile-e1360002102239Featured Expert Column — Patent Law

Beth Z. Shaw, Brake Hughes Bellermann LLP

In a patent infringement case, claim construction is often a preliminary proceeding in a district court, before trial of infringement, validity, or damages. The district court establishes the metes and bounds of the claims that define a patent right. Since 1998, the U.S. Court of Appeals for the Federal Circuit has conducted de novo review of claim construction. Cybor Corp. v. FAS Techs., Inc., 138 F.3d 1448, 1454–55 (Fed. Cir. 1998) (en banc) (“Cybor”).

In a much-anticipated decision, a divided Federal Circuit confirmed that the standard of review of patent claims remains de novo. The court held in Lighting Ballast Control v. Phillips Electronics N.A. that the scope of the patent is still reviewed as a matter of law on appeal, with no deference given to a district court judge’s claim construction.

The majority opinion, authored by Judge Newman, concluded that the appellate de novo review of claim construction provides national uniformity, consistency, and finality to the meaning and scope of patent claims. The majority opinion emphasized the role of stare decisis and the court’s fifteen years of experience using this de novo standard under Cybor. The opinion stated that a departure from the standard would add new uncertainty for patent litigation.

In a somewhat unusual twist, the majority opinion includes a long set of “Remarks on the Dissent,” with graphs and data from the Administrative Office of the United States Courts. This data, according to the majority, shows a decline in the percentage of district court patent cases that have been appealed over the past 19 years. The majority included the data to rebut the dissent’s argument that the de novo standard increases the percentage of appeals. Continue reading

WLF Briefing Focuses on U.S. Supreme Court at its Mid-Term Point

One of our speakers, Troutman Sanders’ Peter Glaser, and his authoring of WLF’s amicus brief in Utility Air Group v. EPA, were referenced in a New York Times story on the case.

Attendees of the briefing received printouts of the following WLF Supreme Court-related resources:

Supreme Court Set to Examine “Definiteness” of Patent Claims in Nautilus Case

bethShaw-0580editConvertedProfile-e1360002102239Featured Expert Column

Beth Z. Shaw, Brake Hughes Bellermann LLP

Patent claims define the scope of a patentee’s rights. Therefore, patent claims are required to be “definite” and to point out the actual invention described in the patent. Once a patent issues from the United States Patent and Trademark Office, however, that patent is presumed valid.

The United States Court of Appeals for the Federal Circuit has interpreted this definiteness requirement of the patent statute in many cases over the years. This year, the Supreme Court will evaluate whether the Federal Circuit used the right framework in Nautilus, Inc. v. Biosig Instruments, Inc.

Like many patent cases, Nautilus has a somewhat complicated procedural history. The patents and accused products relate to heart rate monitors mounted on exercise equipment. Biosig sued Nautilus for patent infringement, but the district court found Biosig’s patent claim indefinite as a matter of law, based at least in part on Biosig’s submissions to the Patent Office during a prior reexamination of the patent. On appeal, the Federal Circuit reversed. The majority panel (Judges Newman and Wallach) held that the disputed claim language could be construed and was therefore not “insolubly ambiguous.” Judge Schall concurred. The Federal Circuit noted that if the meaning of the claim is discernible, even if the conclusion is “one over which reasonable persons will disagree, we have held the claim sufficiently clear to avoid invalidity on indefiniteness grounds.” By embracing this standard, the court accords “respect to the statutory presumption of patent validity,” and protects “the inventive contribution of patentees, even when the drafting of their patents has been less than ideal.”

The Supreme Court will examine how the Federal Circuit’s acceptance of patent claims with multiple reasonable interpretations–so long as the ambiguity is not “insoluble” by a court–correlates with the statutory requirement of particular and distinct patent claiming. Additionally, the Supreme Court will examine how the presumption of validity affects the requirement of particular and distinct patent claiming.

Various companies that operate in the software arena filed an amicus brief in support of Nautilus’s petition for writ of certiorari, arguing that the Patent Office alone cannot solve the problem of indefinite patents, and that the Federal Circuit’s refusal to “police” indefinite patents distorts patentee behavior at the Patent Office. The amicus noted that the Patent Office has recently increased efforts to apply a revitalized indefiniteness standard during the patent application process. Yet, the amicus argued, a failure by the courts to demand precision in claim drafting reinforces incentives for patent applicants to write vague claims.

This is a truly significant case which has far-reaching implications in all areas of patent law. The meaning and “clarity” of patent claims are at the heart of virtually every patent case. As such, the decision in Nautilus may prove to be the case with some of the most far-reaching implications in 2014 and beyond.

In Case You Missed It: WLF Litigation Briefs and Publications, December 2013

turning calendarWashington Legal Foundation and its Legal Pulse blog welcome you to 2014.

December is a busy time for many people, so you may have missed some of the important Litigation and Legal Studies Division activities that kept WLF busy last month. A few links to late-December Legal Pulse posts are included as well.

Litigation Division filings

In re: FTC Investigation of Patent Assertion Entities (comments applauding the FTC’s decision to investigate the activities of Patent Assertion Entities (PAEs) in the wireless communications sector)

Utility Air Regulatory Group v. EPA (amicus brief urging the U.S. Supreme Court to reject the Environmental Protection Agency’s (EPA) purported authority to embark on an ever-expanding program to regulate greenhouse gases)

Mingo Logan Coal v. EPA (amicus brief asking the U.S. Supreme Court to review, and ultimately reject, the Environmental Protection Agency’s (EPA) purported authority for revoking a Clean Water Act discharge permit years after it was issued)

Legal Studies Division papers

No Going Back: Strategies For Opposing Remand Under CAFA’s Exceptions by Timothy J. Coughlin and Barbara A. Lum, Thompson Hine LLP

The Impact Of Individual Damages Issues On Class Certification After Comcast Corp. v. Behrend by Felix Shafir, Horvitz & Levy LLP

Legal Pulse Posts

The Meningitis B Outbreak: Heavy Doses of Government Can Be Costly

Two More Food Labeling Class Action Rulings: Harbingers of the New Year?

Proxy Advisory Services: Making Glass (Lewis) Transparent—and ISS Too

With CLS Bank Int’l, SCOTUS to Decide if Computers are “Machines”

bethShaw-0580editConvertedProfile-e1360002102239Featured Expert Column

Beth Z. Shaw, Brake Hughes Bellermann LLP

Earlier this year, the U.S. Court of Appeals for the Federal Circuit sat en banc to review software patents in CLS Bank Int’l v. Alice Corp. This was a decision that was supposed to clarify business method patents and software patents, the scope of 35 U.S.C. § 101, and what an “abstract idea” means in practice. Instead of clarity, however, the judges of the Federal Circuit issued seven different opinions (or reflections), with no consensus beyond the ultimate judgment, which was that the invention was patent ineligible. The split gave almost every judge an opportunity to provide his or her unique philosophical view on software patents. As the title of this commentator’s last post on CLS Bank reflected, Want Clarity on Software Patents?: Skip CLS Bank Int’l Opinion and Wait for Supreme Court Review. That wait is now over, as the Supreme Court agreed on December 6 to review the Federal Circuit’s “decision.”

Prior Supreme Court decisions in cases like Bilski v. Kappos and Mayo v. Prometheus provide clues as to how the Supreme Court might rule in this case. First, the Supreme Court is probably not going to create “a categorical rule denying patent protection for inventions in areas not contemplated by Congress,” such as software, business methods, or even diagnostic testing. Indeed, the Supreme Court in Bilski explicitly stated that a “business method is simply one kind of ‘method’ that is, at least in some circumstances, eligible for patenting under § 101.” And the Court stated in Mayo that “too broad an interpretation” of exclusionary principals “could eviscerate patent law.” As a result, the Supreme Court will not even attempt to eliminate all types of method patents in one fell swoop.   Continue reading

A New Peril for Patent Owners: Inequitable Conduct for Legal Arguments on Appeal to the Patent Appeals Board

bethShaw-0580editConvertedProfile-e1360002102239Featured Expert Column

Beth Z. Shaw, Brake Hughes Bellermann LLP

Inequitable conduct is a defense to patent infringement. It is only used where the patentee has unfairly obtained an unwarranted patent through misconduct. To prove inequitable conduct, a challenger must show by clear and convincing evidence that the patent applicant (1) misrepresented or omitted information material to patentability, and (2) did so with specific intent to mislead or deceive the PTO. The U.S. Court of Appeals for the Federal Circuit tried to clarify the law of inequitable conduct in Therasense sitting en banc in 2011. Yet, once again, a panel of the Federal Circuit is retreating from the standards set forth in Therasense.

The Federal Circuit in The Ohio Williow Wood Co. v. Alps South, LLC reversed and remanded for a district court to review the issue of inequitable conduct. In the background leading to the judgment in this case, Alps had challenged a patent of The Ohio Willow Wood Company (OWW) in two reexamination proceedings at the USPTO. The patent is directed to cushioning devices that go over the residuals stumps of amputated limbs to make use of prosthetics more comfortable. Alps requested a first ex parte reexamination of the patent, and OWW amended the claims of the patent.

Alps requested a second ex parte reexamination of the patent, challenging the amended claims, and the examiner at the USPTO rejected the claims as obvious. OWW appealed to the Board of Patent Appeals and Interferences (BPAI). OWW argued that the examiner’s rejection was improper because it relied on the uncorroborated testimony of an expert whom OWW characterized as a highly interested party. The BPAI concluded that the testimony was insufficient to sustain the examiner’s rejection.

The case had been stayed at the district court pending the result of the reexamination. When the district court lifted the stay, the court granted summary judgment of no inequitable conduct by OWW. Yet, the Federal Circuit found genuine issues of material fact regarding whether OWW committed inequitable conduct during the two reexamination proceedings. Continue reading

A Dissent to Chief Judge Wood’s Call to Remove Exclusive Patent Appeal Jurisdiction from Federal Circuit

bethShaw-0580editConvertedProfile-e1360002102239Featured Expert Column

Beth Z. Shaw, Brake Hughes Bellermann LLP

*Editor’s note: The Legal Pulse welcomes Guest Commentary submissions offering a contrary perspective on the Federal Circuit’s exclusive patent appeal jurisdiction. Anyone with an interest in doing so please comment on this post with an offer to write.

In a recent speech, Chief Judge Diane Wood of the U.S. Court of Appeals for the Seventh Circuit proposed abolishing the U.S. Court of Appeals for Federal Circuit’s exclusive jurisdiction in patent cases. Judge Wood is not the first to suggest reevaluating the Federal Circuit jurisdiction, and she won’t be the last. But while her idea is interesting and worth examining, it does not present a better approach to resolve what she called “the problems” that the Federal Circuit’s exclusive jurisdiction was designed to address.

Over thirty years ago, Congress created commissions to study the number of cases appealed to federal courts and the Supreme Court. The commissions found that filings in federal courts had increased substantially—but judgeships had not increased at all. The commissions also identified four major consequences of the courts’ inability to deal with increased caseloads: circuit splits on issues of national law; delay; burden on the Supreme Court to resolve circuit splits; and uncertainty even without circuit splits. The commissions therefore recommended a national court of appeals, and Congress created the Court of Appeals for the Federal Circuit on October 1, 1982.

Critics worried that specialization would produce a court with tunnel vision, judges becoming overly sympathetic to the policies promoted by the law that they administer, or judges who are biased in favor of the attorneys that regularly appear before them. Partly out of appreciation for the dangers of specialization, the law did not limit the Federal Circuit’s jurisdiction to patent cases. Intellectual property appeals make up less than half of the court’s docket. The rest of the court’s docket includes personnel appeals, veterans’ appeals, international trade cases, takings cases, tax, contracts, and other issues.

Judge Wood acknowledged these facts, but questions the effectiveness of the Federal Circuit to exclusively handle patent appeals. She is not proposing the elimination of the Federal Circuit itself, but rather the removal of its exclusive jurisdiction over patent appeals. She argues that this will provide the Supreme Court with the benefit of various appellate court viewpoints on patent issues. Continue reading