Articles Posted in U.S. Supreme Court

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Washington, D.C. – The United States Supreme Court issued a unanimous opinion in Alice Corporation Pty. LTD v. CLS Bank International et al., Case No. 13-298. At issue was software that allows a neutral third party to ensure that all parties to a financial transaction have fully performed their obligations. The Court held that Alice Corporation’s patents should not have been issued because they (1) consisted of software created to implement an abstract idea but (2) lacked an “inventive concept” sufficient to transform the abstract idea into a patent-eligible application.

Alice Corporation owned several patents that covered a manner for mitigating “settlement risk,” i.e., the risk that one or more parties to an agreed-upon financial exchange will not satisfy their obligations. Alice Corporation’s patent claims consisted of computer software that facilitated the exchange of financial obligations between the parties. The patents-in-suit claimed (1) a method for exchanging financial obligations, (2) a computer system configured to carry out the method for exchanging obligations, and (3) a computer-readable medium containing program code for performing the method of exchanging obligations.

Respondents (collectively, “CLS Bank“), which operate a global network that facilitates currency transactions, sued Alice Corporation, arguing that the patent claims at issue were invalid, unenforceable, or not infringed. Alice Corporation counterclaimed, alleging infringement.

All of the claims were held to be ineligible for patent protection by the district court because they purported to protect to an abstract idea. The Federal Circuit, sitting en banc, affirmed, although, of the ten judges, only five agreed on the reasoning behind the holding.

The Supreme Court held for CLS Bank, affirming the Federal Circuit, and held that the patent claims were drawn to a patent-ineligible abstract idea under 35 U.S.C. § 101 and, thus, could not be patented.

In this opinion, the Court defined the Section 101 framework as having two parts. First, the court must determine if the patent claim at issue is directed toward an abstract idea. Second, it must examine the elements of the claim to determine whether it contains an “inventive concept” sufficient to transform the abstract idea into a patent-eligible application.

The Court concluded that, in the case of the software patents-in-suit, “the method claims, which merely require generic computer implementation, fail to transform [an] abstract idea into a patent-eligible invention.”

Practice Tip: Patent lawyers hoped that this much-anticipated case would clarify the extent to which software is patentable. The Supreme Court had a difficult task in drawing these lines. A ruling that allowed ideas that were overly broad and/or vague to be patented would have encouraged lawsuits by “patent trolls” and inhibited innovation by inventors who might fear that implementing their ideas would subject them to liability for patent infringement. On the other hand, a ruling that restricted the patentability of software too much could nullify thousands of existing patents and could also discourage innovation because an inventor’s resulting creation would be more difficult to patent.

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Washington, D.C. – In two related rulings, the United States Supreme Court addressed the standards for granting and reviewing awards of legal fees in patent infringement lawsuits.

In the first matter, Octane Fitness, LLC was sued by Icon Health & Fitness, Inc. At issue was Icon’s contention that the use of a particular component in elliptical fitness machines constituted patent infringement. After Octane prevailed, it sought $1.8 million in attorneys’ fees. The district court denied these fees and an appeal was taken on the issue.

In its review, the Federal Circuit applied the rule from Brooks Furniture Mfg., Inc. v. Dutailier Int’l, Inc. In Brooks Furniture, the Federal Circuit had defined an “exceptional case,” which would warrant an award of legal fees, as one that either involves “material inappropriate conduct” or is both “objectively baseless” and “brought in subjective bad faith.” It then rejected Octane’s assertion – that attorneys’ fees were appropriate because Icon had asserted an unreasonable claim construction – as not falling within the Brooks Furniture definition and declined to overrule the district court’s denial of attorney’s fees.

In Octane Fitness v. Icon Health & Fitness, Case No. 12-1184, the Supreme Court reversed and remanded. Justice Sotomayor, writing for a unanimous court, said that the Federal Circuit’s interpretation of 35 U.S.C. §285 was overly rigid and “superimposes an inflexible framework onto statutory text that is inherently flexible.” Instead, the Court held that “an ‘exceptional’ case is simply one that stands out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated.

The Court also revised the standard of proof that had been required by the Federal Circuit. In Brooks Furniture, the Federal Circuit had held that §285 requires that parties establish the “exceptional” nature of a case by “clear and convincing evidence.” The Supreme Court opined that such a high standard was not supported by the statute. Instead, as patent infringement litigation is generally governed by a preponderance-of-the-evidence standard, that standard was also appropriate for the award of attorneys’ fees.

The second patent infringement litigation decided by the Supreme Court pertained to a patent infringement lawsuit filed by Allcare Health management Systems. After Allcare lost in the district court, the district judge awarded $5 million in attorneys’ fees to Highmark. The Federal Circuit reviewed the district court’s judgment de novo and reversed the award.

In Highmark v. Allcare Health Management Systems, Case No. 12-1163, the Supreme Court reversed the Federal Circuit’s reversal, holding that, in light of the traditional framework of review, the Federal Circuit should be more deferential to the trial court on the issue of the award of fees. The Supreme Court stated, “Traditionally, decisions on ‘questions of law’ are ‘reviewable de novo,’ decisions on ‘questions of fact’ are ‘reviewable for clear error,’ and decisions on ‘matters of discretion’ are ‘reviewable for abuse of discretion.'” The determination of whether a case should be considered to be “exceptional” for the purposes of awarding attorneys’ fees is a matter of discretion. As such, it is properly reviewed not de novo but instead for abuse of discretion.

Practice Tip: Under U.S. patent law, a trial court may award attorneys’ fees in case of patent infringement litigation that it deems “exceptional.” These Supreme Court rulings revisiting how “exceptional” is defined may benefit Google, Apple and other large technology companies, which are often targets of questionable patent infringement lawsuits, as trial judges will now have greater latitude to award attorneys’ fees in those cases in which they determine that the conduct of the losing party “stands out from others.”

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Washington, D.C. – The United States Supreme Court unanimously affirmed a Sixth Circuit antonin_scalia-photograph.jpgruling that intellectual property lawyers for defendant Static Control Components, Inc. of Sanford, North Carolina had properly pled a counterclaim for false advertising under the Lanham Act against Lexmark International, Inc. of Lexington, Kentucky. The Court held that a Lanham Act claim under §1125(a) may be asserted by plaintiffs who are within the zone of interests protected by the Lanham Act and whose injury was proximately caused by a violation of that statute.

Lexmark sells both printers and toner cartridges for those printers. In addition to selling new Lexmark-branded toner cartridges, it refurbishes used Lexmark cartridges. Those refurbished products are sold in competition with the new cartridges. To hinder others from reusing its cartridges, Lexmark includes a microchip that disables an empty cartridge until Lexmark replaces the chip. Respondent Static Control, a maker and seller of components for the remanufacture of Lexmark cartridges, developed a microchip that enabled empty Lexmark cartridges to be refilled and used again.

Lexmark sued for both copyright infringement and patent infringement. It also informed Static Control’s customers that Static Control had infringed its patents. Static Control counterclaimed, alleging that Lexmark had engaged in false or misleading advertising in violation of §43(a) of the Lanham Act, 15 U. S. C. §1125(a). Static Control alleged that Lexmark’s misrepresentations had damaged Static Control’s business reputation and impaired its sales.

The Supreme Court was asked to decide what had been styled by the District Court as a “prudential standing issue”: whether Static Control fell within the class of potential Lanham Act plaintiffs. Arguments that Lanham Act plaintiffs may assert standing under the Second Circuit‘s test – requiring a “reasonable interest” and a “reasonable basis” for the plaintiff’s claim of harm – were rejected by the Court.

Instead, in determining the appropriate reach of the Lanham Act, the Court relied on the traditional principles of statutory interpretation. It acknowledged the longstanding principle that the question for courts in determining who was a proper plaintiff was not a matter of judicial “prudence” but rather one of determining the intent of Congress when it authorized certain plaintiffs to sue under §1125(a): “We do not ask whether in our judgment Congress should have authorized Static Control’s suit, but whether Congress in fact did so.”

The Court thus held that, in a statutory cause of action, protection is extended only to those plaintiffs whose interests fall within the zone of interests protected by the law invoked. Because the Lanham Act lists among its purposes the protection of “persons engaged in [interstate commerce] against unfair competition,” and because “unfair competition” is interpreted to be concerned with injuries to business reputation and present and future sales, a lawsuit for false advertising must allege injury to a commercial interest in reputation or sales.

The Court then considered whether the harm alleged in this case was sufficiently similar to the conduct that the Lanham Act prohibits. It held that the harm is required to have been proximately caused by violations of the statute. In the case of a false advertising claim under the Lanham Act, a commercial injury caused by deceiving consumers was held to be a sufficient link between the wrongful act (the false advertising) and the injury (damage to a business’ reputation and/or sales).

The Court concluded that Static Control had adequately pleaded all elements of a Lanham Act cause of action for false advertising.

Practice Tip: The Court held that, in the case of a Lanham Act claim for false advertising, “a direct application of the zone-of-interests test and the proximate-cause requirement supplies the relevant limits on who may sue.” This test excludes as Lanham-Act plaintiffs some who have indisputably been damaged by false advertising. For example, the Lanham Act does not apply to non-business consumers who have been the victims of false advertising, as the Act restricts its class of plaintiffs to those who have suffered an injury to a “commercial interest” in reputation or sales.

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Washington, D.C. – An issue in the patent infringement dispute between medical-device giant Medtronic, Inc. and Mirowski Family Ventures, LLC (“Mirowski”) was heard by the United USSCPicture.jpgStates Supreme Court. In question was the placement of the burden of proof in patent infringement litigation that seeks a declaratory judgment. The Supreme Court reversed the U.S. Court of Appeals for the Federal Circuit, holding that the burden of proof of infringement rests with the patent holder even if the lawsuit is filed under the Declaratory Judgment Act.

After hearing arguments by patent attorneys for each side, the district court had held that Mirowski, the party asserting infringement, had the burden of proving patent infringement; it found that Mirowski had not met that burden.

The Federal Circuit reversed. It concluded that, when a patentee (Mirowski) is a declaratory judgment defendant and is also prevented from asserting an infringement counterclaim by the existence of a license between the parties – as Mirowski was – the party seeking the declaratory judgment (Medtronic) bears the burden of proving that it had not infringed the patent.

The Supreme Court granted certiorari. The question before the Court was “whether the burden of proof shifts when the patentee is a defendant in a declaratory judgment action, and the plaintiff (the potential infringer) seeks a judgment that he does not infringe the patent.”

Mirowski argued that it would be unfair to place a burden of proof on the party that was not seeking relief. The Intellectual Property Owners Association supported Mirowski’s position, contending that a failure to shift the burden of proof in such cases would lead to abuse of declaratory judgment actions, as the risks and burdens of patent infringement litigation would be placed entirely on the patent owner.

In contrast, Medtronic argued that placing the burden on a licensee would create an unacceptable choice between finality and fairness, as it would require the judicial system to permit a party to relitigate issues that had been previously decided under a different burden of proof.

The Supreme Court reversed the shifted burden of proof imposed by the Federal Circuit. The Court declared that it saw “no convincing reason why burden of proof law should favor the patentee” simply because it was filed under the Declaratory Judgment Act.

Practice Tip #1: It is settled law that, in patent infringement litigation, a patentee normally bears the burden of proof. Because 1) the operation of the Declaratory Judgment Act is only procedural and leaves substantive rights unchanged and 2) the burden of proof is a substantive aspect of a claim, this holding by the Supreme Court is not unanticipated.

Practice Tip #2: When drafting the terms of a license, patent owners should consider adding provisions to deter potential challenges by licensees.

Practice Tip #3: We have also blogged recently about another declaratory judgment case involving Mirowski, which is being heard in the Southern District of Indiana.

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Washington, D.C. – The Supreme Court of the United States agreed to review the judgmentsUSSCPicture.jpg of several Courts of Appeals in four intellectual property disputes. The cases included two patent cases (regarding joint-infringement liability and indefiniteness invalidity), a copyright case (concerning public performances), and a case which may have implications under trademark law (whether a Lanham Act claim is barred by the Food Drug and Cosmetic Act).

Limelight Networks, Inc. v. Akamai Technologies, Inc., Docket No. 12-786, is a patent case involving technology for managing web images and video. Appellate attorneys for Limelight Networks brought the case to the Court after the U.S. Court of Appeals for the Federal Circuit held that, in the case of method patents, multiple parties could be found to jointly infringe on a patent. The Federal Circuit, sitting en banc, held by a 6-5 vote that “all the steps of a claimed method must be performed in order to find induced infringement, but that it is not necessary to prove that all the steps were committed by a single entity.”

The question raised for review by the Supreme Court is whether a defendant may be liable for inducing patent infringement under 35 U.S.C. § 271(b) even if none has committed direct infringement under § 271(a). Patent attorneys for technology companies including Google Inc., Cisco Systems, Inc., Oracle Corporation, Red Hat, Inc., and SAP America, Inc. filed a brief in support of Limelight.

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Indianapolis, Indiana – Citing the recent U.S. Supreme Court decision in Gunn v. Minton, the court-bench-picture.jpgSouthern District of Indiana has remanded to the Marion Superior Court the legal malpractice lawsuit filed by the Indiana patent lawyer for Miller Veneers, Inc. The Defendants in the case are Indiana patent attorney Clifford W. Browning as well as two Indiana law firms, Krieg DeVault, LLP and Woodard, Emhardt, Moriarty, McNett & Henry, LLP.

In September 2012, Miller Veneers sued Clifford W. Browning; Krieg DeVault; and Woodard, Emhardt, Moriarty, McNett & Henry in Marion Superior Court alleging attorney malpractice regarding the acquisition of patents. Defendants removed the case to the Southern District of Indiana in October 2012, asserting federal question jurisdiction and 28 U.S.C. § 1338(a) (2008).

Although the court originally found that it had subject matter jurisdiction under 28 U.S.C. § 1338(a), the Supreme Court’s recent decision in Gunn v. Minton led the court to reconsider the question of federal jurisdiction and to conclude that it did not, in fact, have subject matter jurisdiction over the suit, despite that the legal malpractice claims were based on underlying patent matters.

According to the new standard set forth in Gunn, federal jurisdiction exists over state law claims “if a federal issue is (1) necessarily raised, (2) actually disputed, (3) substantial, and (4) capable of resolution in federal court without disrupting the federal-state balance approved by Congress.”

While the issues of federal law in this malpractice lawsuit were found to meet the first two prongs, the court held that they failed the second two prongs. Specifically, the third Gunn prong requires that the issue be “substantial,” which requires the court “to look to the importance of the issue to the federal system as a whole.” The court held that, as was the case in Gunn, this issue was not important to the federal system as a whole but merely to the parties. The court also held that the fourth prong had not met. It stated that, where issues such as malpractice are to be litigated, the balance is in favor of the states as they have “a special responsibility for maintaining standards among members of the licensed professions.”

The court, upon determining that it lacked jurisdiction under the standard set forth in Gunn, remanded the matter to the Marion Superior Court.

Practice Tip: In Gunn, the Supreme Court held that a legal malpractice claim pertaining to the handling of a patent infringement case did not afford jurisdiction under 28 U.S.C. § 1338(a), stating, “We are comfortable concluding that state legal malpractice claims based on underlying patent matters will rarely, if ever, arise under federal patent law for purposes of § 1338(a).”

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Washington D.C. — The U.S. Supreme Court has ruled that “patent exhaustion” does not bar an infringement claim against Indiana farmer Vernon Bowman for reproducing patented seeds by planting and harvesting second generation seeds without the patent holder’s permission. MonsantoLogo.JPG Bowman v. Monsanto Co., U.S., No 11-796, 5/13/2013.  Monsanto produces and sells patented soybean seed that is genetically altered to resist its “RoundUp” herbicide. Bowman is a farmer who purchased soybean for planting from a grain elevator, expecting that most of the grain elevator soybean would be Monsanto’s herbicide-resistant soybean. In the subsequent patent infringement brought by Monsanto, Bowman argued that Monsanto’s sale of its seed that he ultimately purchased from the grain elevator exhausted any patent rights in the seed. The argument was rejected by both the District Court and the Federal Circuit, and the Supreme Court agreed to review the case.

Patent Exhaustion Only for Sold Article

Under the patent exhaustion doctrine, an authorized sale of a patented product cuts off the patent owner’s right to control of that product, because the sale of that product fulfills the patent law by providing a reward to the patentee.  However, this limitation on patent rights applies only to the particular article sold.  If the purchaser could make and sell endless copies, the patent would effectively protect just a single sale.

In this case, the patent exhaustion doctrine provides Bowman with the right to use the purchased product in several different ways without Monsanto’s permission, including resale, human consumption or animal consumption of the product. However, it does not permit Bowman to make additional patented soybeans without Monsanto’s permission.

Bowman contended that his use of the purchased seed was covered by the patent exhaustion doctrine because that is the normal way farmers use seed, and that Monsanto seeks an impermissible exception to the exhaustion doctrine for patented seeds and other self-replicating technologies.

The Court rejected the argument, pointing out that it is Bowman who seeks an unprecedented exception to the well-settled rule that the exhaustion doctrine does not extend to the right to make a new product.

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Washington, D.C.: The Supreme Court has recently decided to hear a case that could reconcile two competing sections within The Copyright Act–section 602(a)(1) which prohibits the importation of a work without the authority of the owner and section 109(a) which allows copyrighted works to be sold without the copyright owner’s permission–which will determine the applicability of foreign copyright owners’ control of the sale and distribution of their work.

On April 16, 2012 the Supreme Court Granted cert in the case of Kirtsaeng v. John Wiley & Sons in an attempt to resolve the issue of the copyright protections of gray market goods. Reuters.com reports that Kirtsaeng, a graduate student at The University of Southern California, is from Thailand and had his family purchase textbooks cheaply overseas and then shipped to him. He then resold them on eBay for a profit, in order to make money for school. According to Kirtsaeng’s petition for cert, he claims to have researched the Copyright Law including the Doctrine of First Sale, section 109(a), and felt that it was applicable to him. However, John Wiley & Sons, whose Asian subsidiary produced some of the books sold, SCT.jpgdisagreed with the interpretation and filed an infringement suit in 2008. Although Kirtsaeng profited $37,000 from the Sale of books produced by John Wiley & Sons, a jury found him liable of infringement and imposed damages of $600,000.

According to SCOTUSblog.com, the 2nd Circuit upheld the ruling, stating that the Doctrine of First Sale only applies to U.S. made goods. In their ruling, the 2nd circuit applied the Costco Wholesale Corp. v. Costco case, in which the court split 4-4 in its decision to apply the Doctrine of First Sale to U.S. made goods sold by businesses, and extended its reach to individuals as well. When the Supreme Court hears Kirtsaeng’s case, it will seek to resolve the discrepancy in the Copyright Law and the issue of whether the Copyright Law applies to a copy that was made and legally acquired abroad and then imported into the United States, SCOUTUSblog.com reports. According to supremecourt.gov, the time for the parties to file their briefs on the merits has been extended until August 31, 2012. The case will be heard next term, reports abajournal.com.

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Washington, D.C. – The United State Supreme Court has invited the U.S. Solicitor General to file a brief expressing the view of the United States government on a patent infringement case that has been submitted to the Court on a petition of certiorari. Patent lawyers for Indiana farmer Vernon Hugh Bowman have filed a petition for certiorari requesting that the U.S. Supreme Court review the adverse decision of the U.S. Court of Appeals for the Federal Circuit, which held that Bowman had infringed the patents of the Monsanto Company of St. Louis, Missouri by using second generation seeds.

In 2007, patent attorneys for Monsanto had filed a patent infringement lawsuit in the Southern District of Indiana alleging that Mr. Bowman infringed patent no. 5,352,605, Chimeric genes for transforming plant cells using viral promoters and RE39,247E, GLYPHOSATE-TOLERANT 5-ENOLPYRUVYLSHIKIMATE-3-PHOSPHATE SYNTHASES, which has been issued by the US Patent Office. The patents at issue cover different aspects of genetically-modified “Roundup Ready®” soybeans that are resistant to certain herbicides, including Monsanto’s Roundup® product.

According to the Federal Circuit Court’s opinion, all growers of the Roundup Ready soybeans must sign a limited use license, called a Technology Agreement. The agreement restricts the use of the seed to a single season and does not allow the grower to save any seed from the crop produced to plant the next season. However, the agreement allows growers to sell the second-generation seeds to local grain elevators as “commodity seeds.” Farmer Bowman purchased some of these commodity seeds, planted and produced a crop from them. Mr. Bowman then retained some of the seeds from the commodity seed crop and replanted them the next year.

Chief Judge Richard L. Young of the Southern District of Indiana found that Farmer Bowman had infringed the Monsanto’s patents and entered a judgment in the amount of $84,456.20 in favor of Monsanto. The Federal Circuit Court affirmed. Mr. Bowman’s petition of certiorari asked the Court to review this decision. At this point, the Supreme Court has not decided whether it will hear the merits of the case.

Practice Tip: Fewer than 2% of certiorari petitions to the U.S. Supreme Court are accepted for review by the Court. The fact that the Court has requested the U.S. Solicitor General to brief this case suggests that the Court is taking interest in Bowman’s petition.

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Washington, D.C. – The United States Supreme Court has unanimously reversed a patent decision by the Court of Appeals for the Federal Circuit and has held that patent claims that are a “law of nature” are not patent eligible under 35 U.S.C. § 101. The decision built upon the Court’s 2010 decision in Bilski v. Kappos.

Patent lawyers for Prometheus Laboratories, Inc. of San Diego, California filed a patent infringement suit against Mayo Collaborative Services, doing business as Mayo Medical Laboratories of Rochester, Minnesota, alleging that Mayo infringed patent no. 6,355,623, Method of treating IBD/Crohn’s disease and related conditions wherein drug metabolite levels in host blood cells determine subsequent dosage and patent no. 6,680,302, Methods of optimizing drug therapeutic efficacy for treatment of immune-mediated gastrointestinal disorders which have been issued by the US Patent Office.

The patents at issue involve claims over an observed correlation between certain blood tests and patient health, specifically the correlation between the level of certain drug metabolites in the patient’s blood and the patient’s symptoms of gastrointestinal disease. The Court of Appeals for the Federal Circuit had twice ruled in Prometheus’s favor. Oral arguments were held December 7, 2011 at the United States Supreme Court. The Court decision essentially held that Prometheus’s “invention” was not patentable because it was effectively a law of nature. In other words, the relationship between the dosages and the effect on patient health was a natural phenomenon and therefore, unpatentable.

We blogged a preview of this case in October. This ruling is being criticized by the patent bar as making the law less clear. In particular, Robert S. Sachs of Fenwick & West LLP is examining the decision in a series of blogs on Patently-O in which he examines “just some of the logical and legal errors in the Court’s decision.” Sachs commentary also suggests that numerous patents should now be found invalid.

Practice Tip: The Court’s decision has immediately changed protocol at the patent examination office. The US Patent Office has issued new guidelines to patent examiners which are available here.
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