No Name Calling in My Court: Judge Bans Use of Term “Patent Troll” in Jury Trial

thumbnailTrollThis recent item from Law360 (subscribers only) caught our eye: “Judge Koh Bars Apple From Calling Rival ‘Patent Troll’ At Trial.”

In addition to being referenced regularly at this blog for her food labeling class action rulings, Judge Lucy Koh of the U.S. District Court for the Northern District California has been presiding over a number of high-profile skirmishes in the “Smartphone Patent Wars.”

The case before her is GPNE Corp. v. Apple, Inc. GPNE alleged in its complaint last June that Apple iPads and iPhones infringe patents GPNE holds on data transmission. GPNE’s business model is arguably similar to that of other entities commonly labeled “patent trolls.” It does not practice its patents; rather, it seeks revenue through licensing and litigation. GPNE views the term as prejudicial and urged Judge Koh to prohibit its use before the jury.

In her June 24 Pretrial Order Re: Motions In Limine, Judge Koh dictated:

Apple may not refer to GPNE as a ‘patent troll,’ ‘pirate,’ ‘bounty hunter,’ ‘privateer,’ ‘bandit,’ ‘paper patent,’ ‘stick up,’ ‘shakedown,’ ‘playing the lawsuit lottery,’ ‘corporate shell game,’ or ‘a corporate shell.’

She did, however, permit Apple to use other terms when referring to GPNE:

Apple may refer to GPNE as a ‘non-practicing entity,’ ‘licensing entity,’ ‘patent assertion entity,’ ‘a company that doesn’t make anything,’ or ‘a company that doesn’t sell anything.’ The Court finds that this conclusion strikes the balance between allowing Apple to argue that GPNE’s status as a non-practicing entity is relevant to the calculation of reasonable royalties and to secondary considerations of non-obviousness without unduly prejudicing GPNE or confusing the jury. See Fed. R. Evid. 403.

Judge Koh’s order reflects how this once “inside baseball” term has become part of the broader patent law and technology policy lexicon. “Patent troll” was coined, ironically, in 1999 by an Intel attorney, Peter Detkin.  Detkin left Intel and eventually co-founded Intellectual Ventures, a non-practicing entity which some have called “a patent troll on steroids.”

For years, only those who were narrowly involved with patent licensing and litigation uttered the term. Lately, however it is being utilized in everyday discussions on patents and technology. While President Obama did not specifically use the term is his February 2013 “Fireside Hangout” on Google Plus,  he did accuse entities “that don’t produce anything themselves” of “extort[ing] money” out of technology producers. A document issued by the White House Task Force on High-Tech Patent Issues last June, however, did utilize the term “patent trolls” when discussing the need for reform.

One could argue that “patent troll” has become so widely used that it has lost its “punch” as a pejorative in characterizing those whose singular business is sticking up or shaking down technology-producing companies through opaque demand letters and playing the lawsuit lottery. Obviously, Judge Koh does not see it that way, and declared her courtroom a troll-free zone. Whether that helps GPNE prevail in its claim, however, is uncertain.

Also published at WLF’s Forbes.com contributor page

Supreme Court Observations: Alice Corp. v. CLS Bank

LangdonSmith,DanielF-48047-87-bwrGuest Commentary

by Evan H. Langdon and Daniel F. Smith, Adduci, Mastriani & Schaumberg, LLP*

The Supreme Court’s ruling in Alice Corp. v. CLS Bank is notable for what it does not say. Though the Court struck down a software invention directed to mitigating settlement risk through a computer intermediary as patent ineligible, the Court did not rule that software patents or patents that implement software on a computer are per se ineligible. The Court was careful to leave open the door for patent protection of software inventions. In a 9-0 ruling, the Supreme Court affirmed the en banc U.S. Court of Appeals for the Federal Circuit ruling that Alice Corp.’s patent was invalid as directed to ineligible subject matter under 35 U.S.C. § 101. In so doing, the Court reiterated its ruling in Bilski v. Kappos that it is the invention itself that must be patent eligible and whether a claim is directed to software or is tied to a computer does not alter the analysis.

CLS Bank initiated the case by filing for declaratory judgment that the asserted patent was invalid, unenforceable, and not infringed; Alice Corp. counterclaimed for infringement. The parties cross-moved for summary judgment on whether the asserted claims are eligible for patent protection. After the Supreme Court issued Bilski, the District Court granted CLS Bank’s motion finding the claims ineligible for patent protection because they were directed to an abstract idea. On appeal, the Federal Circuit panel reversed the District Court, finding it was not “manifestly evident” that the claims were directed to an abstract idea. A divided en banc Federal Circuit upheld the District Court’s conclusion with a five judge plurality concluding that the claims draw on an abstract idea and the use of a computer added nothing of substance to that idea.

Reliance on Mayo and Gottschalk

In analyzing the claims at issue, the Court relied heavily on its established precedent under 35 U.S.C. § 101 and concluded that Alice Corp.’s claims did not cover patentable subject matter. The Court emphasized the long-standing principle that laws of nature, natural phenomena, and abstract ideas are not patentable because upholding such a patent would effectively grant a monopoly and pre-empt the claimed approach in all fields. Continue reading

Court Upholds FTC Rule for Pharma Patent License Transfers

amurinoFeatured Expert Column – Antitrust/Federal Trade Commission

Andrea Agathoklis Murino,Wilson Sonsini Goodrich & Rosati

Last November, I wrote about a new Federal Trade Commission (FTC) rule which, in a change to long-standing policy, made the transfer of a license providing an exclusive licensee with “all commercially significant rights” over a patent within a therapeutic area reportable under the Hart-Scott-Rodino Act. In practice, this meant that licensing agreements which previously required only the signatures of the two parties, now required a waiting period and an FTC blessing.

Shortly before the rule was to become operative, the Pharmaceutical Research and Manufacturers of America (PhRMA), an industry group representing biopharmaceutical researchers and biotechnology companies sued to block it. The group argued that the FTC had not observed the appropriate procedures under the Administrative Procedures Act and that the FTC lacked authority to issue an industry-specific rule rather than a rule of general application, among other claims.

In a lengthy opinion on May 30, 2014, Judge Beryl A. Howell of the United States District Court for the District of Columbia, sided with the FTC and tossed PhRMA’s claims, finding that the FTC had followed the correct processes, had a reasoned basis for creating and instituting this rule, and should be shown deference. This bottom line is this puts us right back to where the FTC hoped it would be back in November: the transfer of “all commercially significant rights” over a patent is a HSR-reportable event.

That’s the headline but there are at least two questions that result from the opinion worth pausing to consider. First, this rule continues to only apply to the pharmaceutical industry. There are virtually no other industries with HSR-specific rules applicable only to them. Does this mean the FTC plans to extend HSR-specific rules to other industries? Or is the pharma industry so important in its own right that proper antitrust enforcement demands a different set of rules? Only time will tell. More importantly, perhaps, the FTC has not defined the phrase “all commercially significant rights.” What are the contours of this definition? What’s included or excluded? How, if at all, will the FTC provide guidance to the pharma community? PhRMA has up to 60 days to appeal so this may not be the last word. Stay tuned.

Update: Supreme Court Issues Two More Patent Law Rulings

supreme courtLast Thursday in the Legal Pulse post Trolls and Trial Lawyers Should Curb Their Enthusiasm Over Patent Reform Timeout, WLF’s Cory Andrews wrote:

The U.S. Supreme Court may soon provide litigation defendants with further, albeit less specific, legal weapons against patent trolls.  By the end of June, the Court will issue opinions on one case involving induced patent infringement (Limelight v. Akami) and another addressing the standard for “definiteness” in patent claims (Nautilis v. Biosig).

On its very next opinion-issuing day—today, June 2—the Court released opinions in Limelight and Nautilis. In both cases, the Court reversed the U.S. Court of Appeals for the Federal Circuit unanimously.  That court is 0-4 in patent cases (over which it has exclusive federal circuit court appellate jurisdiction) on which the Court has ruled this term.  Each reversal has been unanimous. Still pending from the Federal Circuit: Alice Corporation Pty. Ltd. v. CLS Bank Int’l addressing computer-implemented inventions.

A site from the Legal Pulse blogroll, Patently-O, has instructive and insightful assessments of today’s Court rulings here.

Trolls and Trial Lawyers Should Curb Their Enthusiasm Over Patent Reform Timeout

patentLast week was quite a successful one in Washington for the plaintiffs’ bar. First, as WLF’s Rich Samp detailed in a May 22 Legal Pulse post, the Solicitor General of the U.S. opposed federal preemption of state failure-to-warn suits against medical device companies. Then, the following day, the Senate Judiciary Committee shelved legislation meant to curb abusive litigation and related activities by “patent-assertion entities” (PAEs), a.k.a. patent trolls.

But attorneys who represent PAEs, and the private businesses that may benefit from PAE activity, should temper their enthusiasm. The concept of “patent reform” will persist during Congress’s timeout. Various Executive Branch entities are working to shine a light on patent troll misbehavior, and the federal judiciary is gradually becoming less tolerant of patent litigation abuse. Consider the following examples of such non-legislative activity.

Federal Agencies. While the White House made the biggest splash on patent litigation last June with a Task Force on High-Tech Patent Issues report, far more impactful work regarding PAEs is being done at the Federal Trade Commission (FTC). For the past year, FTC has been conducting a formal “6(b)” study of PAEs. In a May 19 Federal Register notice, the Commission noted that it would be sending information requests to 25 PAEs as well as 15 wireless communication industry manufacturers and patent holding companies. Continue reading

WLF Briefing Addresses Antitrust Law Ramifications of “Patent Privateering”

PodiumPic1Patent Assertion and “Privateering”: When Do Antitrust Law Concerns Arise when the Patent Is the Product?

The recording of this Media Briefing program (held on May 21) can be viewed in its entirety online.  Click HERE.

Program focus:As federal antitrust officials continue to study the impact patent licensing and assertion have on market competition, concerns have been raised over “operating” companies’ relationships with patent-assertion entities. Can such “privateering” run afoul of antitrust laws or should regulators view such activity as a legitimate business practice at a time when patents are increasing seen as commodities?

Speakers:

 

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

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: