Patent Eligibility of Software
In the Supreme Court October Term 2013, all eyes are on the Court’s grant of certiorari in Alice Corp. v. CLS Bank Intl, where the patent eligibility of software will be back before the Court once again.
The question to be decided by the Court is “[w]hether claims to computer-implemented inventions — including claims to systems and machines, processes, and items of manufacture — are directed to patent-eligible subject matter within the meaning of 35 U.S.C. § 101 as interpreted by this Court? The Court will seek to provide guidance on when recited computer structure is meaningful in a process that is otherwise patent ineligible. The briefing of the case is scheduled to begin next January. Read our blog for analysis.
For in-depth analysis, read CLS Bank Certiorari: Recited Computer Structure Before Supreme Court Again
Attorneys fees
The eyes of the patent community will be focused on two award of attorney fee cases in Octane Fitness v. ICON and Highmark v. Allcare. Rulings in these case could make it harder for patent holders to bring a suit because of the exposure of the patent holder to attorney fees for filing a frivolous lawsuit.
In Octane, the Court will decide whether the settled standard for exceptionality contravenes statutory intent by raising the standard for recouping attorneys fees and encouraging spurious patent cases. Under Section 285, a case is “exceptional” if the litigation (1) was brought in subjective bad faith; and (2) is objectively baseless.
Octane addresses the propriety of this two-prong test. The trial court granted summary judgment of noninfringement. In support of its motion for summary judgment to make the case exceptional, Octane relied on ICON’s allegedly unreasonable claim construction positions, its privilege assertions over its pre-suit investigation, and e-mails allegedly supporting bad faith litigation in an effort to go after Octane. The federal circuit affirmed the trial circuit denial of Octane’s summary judgment to find the case exceptional by explaining only that “We have no reason to revisit the settled standard for exceptionality.” Octane, Op. 15.
In Highmark, the Court will address the appropriate standard for reviewing a district court’s finding of a case to be exceptional under the two-prong test. The federal circuit reviewed a lower court finding of a case to be exceptional de novo and not with deference on the basis that objective baselessness — one of two criteria required for sanctions — is a “question of law based on underlying mixed questions of law and facts.” On de novo review, the federal circuit affirmed one of the claims to be exceptional but reversed exceptionality of the other claim after finding support in the specification for the claim even though that position was not argued by Allcare. The federal circuit remanded for recalculation of the attorney fees and a petition for en banc hearing was denied. The Court will address whether this review standard for exceptional case findings in patent cases is at odds with the highly deferential review adopted by every regional circuit and the Supreme Court in other areas of law.
The Court’s recent rulings have shown a willingness of the Court to curb abuses of the patent process. In eBay v. MercExchange, decided in 2006, for example, the Court unanimously determined that an injunction should not be automatically issued based on the finding of patent infringement. This ruling made it harder for companies that obtain patents only to license them to use the threat of an injunction to extract a high price from infringers. This is because it is harder to tip the balance of the four factors traditionally used to determine if an injunction should issue in favor of an injunction when the patent holder is not practicing the patents.
The decision to hear Octane and Highmark in the Supreme Court October Term 2013 may signal that the Court is ready to continue to curb abuses in the patent process. Octane and Highmark provide the Court with another opportunity to reign in the abuses in the current patent process involving the filing of questionable lawsuits in the hopes of forcing a settlement out of a company that prefers to avoid the cost of litigation.
Burden of Proving Infringement
Another case being closely followed is Medtronic v. Boston Scientific, involving a novel theory developed by the federal circuit that shifts the burden of proving infringement over to a licensee in the situation where a licensee has brought a declaratory judgment action for noninfringement.
In Medtronic, the federal circuit found that the burden of infringement, which traditionally is borne by the patent holder, shifted to the licensee in this case because the patent holder was foreclosed by the grant of the license from counterclaiming for infringement. The federal circuit based its novel theory on the Supreme Court’s Medimmune decision, where the Court found declaratory judgment jurisdiction “notwithstanding the fact that the declaratory judgment plaintiff licensee continued to make royalty payments pursuant to a license.” The federal circuit reasoned that in this case, the petitioner “is unquestionably the party now requesting relief from the court; it already has a license; it cannot be sued for infringement; it is paying money into escrow; and it wants to stop.” Since it is requesting the relief, it should carry the burden.
This case was heard by the Court on November 4, 2013. Judging from the reaction of the Court, this novel theory of the federal circuit might be short lived.
Direct Infringement Prerequisite for Induced Infringement
With the filing of the amicus curia of United States on December 10, 2013 in Limelight v. Akamai, the issues have joined on the petition by Limelight to grant certiorari on the issue of divided infringement. The Court is being asked to decide whether the performance by an accused party of some but not all steps of a claim together with conduct of other unrelated parties who are induced by the accused to perform the remaining steps of the claim amounts to a “direct infringement” sufficient to establish induced infringement?
The en banc federal circuit held that it did. The U.S. contends that the federal circuit got it wrong. The U.S. amicus is sympathetic with what the federal circuit was trying to do — which is to hold the accused accountable. But the U.S. explained that the federal circuit’s approach is inconsistent with the most straightforward reading of the statutory text which requires direct infringement as a precondition for induced infringement.
If the Court were to grant the petition and reverse the federal circuit, that would likely mean a reinstatement of the “single-entity rule” for establishing direct infringement for purposes of induced infringement under 35 U.S.C. § 271(b). No longer would it be possible to base liability for induced infringement upon two or more unrelated entities engaging in acts that collectively practice the steps of the patented method even though no one induced entity practices all of the steps of the method.
As the U.S. explains, the statutory gap is unfortunate because it will likely permit vendors like Limelight to avoid liability altogether since no one party, directly or vicariously, performed all of the method steps. But that loophole is for Congress and not the courts to close. That is the position of the U.S.
For more insight, read “Prevailing Winds On Induced Infringement Thinking: Direct Infringement by a Single Entity is No Longer a Predicate for Induced Infringement — For Now”