The Federal Circuit has affirmed once again—this time in a sharply divided en banc decision—that it will subject a district court’s claim construction to de novo review on appeal. The case is Lighting Ballast Control v. Philips, and the appeal was the latest challenge to the standard of review set by the Federal Circuit over 15 years ago in Cybor Corp. v. FAS Technologies, Inc.
On the surface, this question of patent procedural law seems innocuous enough, but a glance at the title pages of the numerous amicus briefs (filed by an impressive roster of academic commentators and industry heavyweights) shows otherwise. The question of the appropriate standard of review for claim construction rulings is of immense importance to the patent bar.
At stake in Lighting Ballast was the Federal Circuit’s ruling 15 years ago in Cybor,that claim construction is subject to de novo review at the appellate level, despite the fact that the interpretation of patent terms often has factual underpinnings, a domain where trial judges are usually given a wide berth and significant deference. As the Supreme Court recognized in its landmark decision in Markman v. Westview Instruments, decided in 1996 shortly before Cybor, claim construction is a “mongrel practice” of both law and fact that often involves “construing a term of art following receipt of evidence.”
Cybor has been criticized both by Federal Circuit judges and by outside commentators, with most critics deriding Cybor’s blindness to the factual issues that are often implicit in the interpretation of what a patent means. While the question can sometimes be answered by reference to the terms of the patent alone—a traditional legal inquiry—it oftentimes also requires extrinsic evidence and the opinions of dueling experts on the state of the art and the technology in question—factual issues traditionally left alone absent “clear error.”
In Kilopass Tech., Inc. v. Sidense Corp. (Fed. Cir. December 26, 2013), in a 2-1 decision, the majority suggested that the fee shifting provisions of 35 U.S.C. §285 have broader application and are not applicable only when subjective bad faith and objective baseless claims are found. The push for broader application for the existing fee shifting statutory provisions is particularly relevant since there has been an increase in media coverage about certain abusive litigation tactics of patent trolls. This case might signal a nod to the district courts to apply the fee shifting provisions when trolling behaviors are practiced by the patent owner.
In this case, the District Court focused on the subject of bad faith prong and the objectively baseless prong to prove that the case is exceptional as required under 35 U.S.C. §285 for the fee shifting provisions to kick in. However, the Federal Circuit reiterated that 35 U.S.C. §285 allows for fee shifting in other situations than solely in those situations where the objective and subjective prongs are proven.
The Defendant (Sidense) was granted summary judgment holding that Sidense did not infringe the patent owner’s patent (Kilopass). Thereafter, the Defendant filed a motion in the District Court seeking an award of attorney’s fees under 35 U.S.C. §285, which the District Court denied. Sidense then appealed. This case provides a litany of points argued by the defendant as to why attorney fees should be awarded. The Federal Circuit agreed on some but rejected others.
There’s an old expression that Murphy (of Murphy’s Law fame) “was an optimist.” That expression certainly applies to the recent Federal Circuit panel decision in Novartis AG v. Lee, as well as the companion decision in Exelixis, Inc. v. Lee on the meaning of the Patent Term Adjustment (PTA) Statute (35 U.S.C. § 154(b)), and particularly what’s called the “B period” portion (i.e., 35 U.S.C. § 154(b)(1)(B)) of PTA. In Novartis, this Federal Circuit panel (opinion by Judge Taranto, joined by Judges Newman and Dyk) ruled that the second exclusion from PTA in the “B period” portion (i.e., 35 U.S.C. § 154(b)(1)(B)(ii)) excludes from PTA any time consumed by a Request for Continued Examination (RCE), even if that RCE is filed more than 3 years after the “actual filing date” of the patent application. Not only is this ruling a questionable interpretation of 35 U.S.C. § 154(b)(1)(B)(ii) for reasons I’ll discuss below, but it creates an unfortunate, and surely unintended impact on RCEs specifically, as well as continuation practice generally. And the more I dig into the PTA statute, the more problematical this ruling in Novartis becomes.
Novartis also addresses another thorny issue of when a patent applicant dissatisfied with the PTA determination by the USPTO may timely challenge such a determination (i.e., 35 U.S.C. § 154(b)(4)(A) (and which also went against the patentee, Novartis), but I’m going to focus solely on the B period exclusion issue. I’m also going to provide here a summary of the PTA statute as it relates to these 3 periods used for determining the cumulative PTA that the patent applicant gets. See the 2012 Eastern District of Virginia’s decision in Exelixis, Inc. v. Kappos which was vacated by the Federal Circuit’s companion decision to Novartis, and provides a nice, concise explanation of how these 3 periods work for determining the cumulative PTA owed the patent applicant.
Earlier today the United States Supreme Court declined to accept Soverain v. Newegg, which will allow one of the more pronounced travesties of justice to stand as if the Federal Circuit got it correct in the first place. Soverain President Katharine Wolanyk said, “We are obviously disappointed by the Supreme Court’s denial of our Cert. petition, and are troubled by the precedent it leaves in place.”
Everyone who has objectively looked at the case knows that the Federal Circuit made a terrible mistake, but now that won’t be corrected and a serial patent infringer that has made a business practice of ignoring patent rights gets to use the Soverain technology for free. And just when you think things couldn’t get more strange, Newegg makes a bizarre comment with misogynistic undertones.
“The witch is dead, hurray,” said Lee Cheng, Newegg’s Chief Legal Officer. It doesn’t take a rocket scientist to realize that Cheng is calling Wolanyk a witch. Of course he will deny such a charge and he and his supporters will proclaim their innocence. But this is no different than liberals working “weight” into every comment or tweet they make about New Jersey Governor Chris Christie. This type of not so subtle dig is what those familiar with Newegg have come to expect. It is this juvenile, over the top, holier-than-thou attitude that Newegg personifies.
This posting isn’t about eCommerce particularly. Win Treese and I wrote a book on that subject, called Designing Systems for Internet Commerce. In two editions, it sold over 20,000 copies, was used for a number of college and business school courses, and was even translated into Chinese. This post is about the ‘314 patent, which is sometimes referred to as the “Shopping Cart Patent”.
When it comes to the history of software patents it seems that everyone believes they are an expert. Unfortunately, few in the popular press actually take the time to get the story correct. In fact, there is a popular misconception in media that the Federal Circuit was the court that first authorized software patents. I have dealt with this nonsense in the past, and now have to deal with it once again. None other than the Wall Street Journal has published an article on the topic that is simply fiction.
The clearly erroneous Wall Street Journal article in question was published on December 15, 2013, under the title Jimmy Carter’s Costly Patent Mistake. The article, written by Gordon Crovitz, seems to take the position that patents stifle innovation, although Crovitz thesis is not explicitly stated. It would be erroneous enough to state that patents stifle innovation when all of the evidence is to the contrary, but that isn’t the major Crovitz sin in this article, although it is a whopper of a lie often told by patent critics.
Before proceeding, allow me to state what should otherwise be obvious: if patents stifle innovation you would expect run-away innovation in places where there is no patent system, but that isn’t what you see. You see extraordinary poverty, no economy and zero innovation where there are not patent rights. Likewise, you see economies established, domestic innovation and innovation from overseas flowing into countries that adopt strong patent rights. Furthermore, the entire point of a patent system is to grant exclusive rights that force creative, inventive and entrepreneurial individuals who are blocked to design around, which is exactly what happens. Designing around patents leads to enormous leaps in innovation. See Forfeiting Our Future Over Irrational Fear of Software Patents. And for those who don’t get it and erroneously state that we are seeing historic levels of patent litigation, read your history. There were close to 600 patent litigations associated with the invention of the telephone, and smart phone litigation has been but a small fraction of that number. Furthermore, the smartphone as we know it came out in 2007. In the past six years have the over abundance of patents stopped smartphone innovation? Hardly, and everyone who is at all honest knows that to be 100% true. So why the pretending about patents stopping innovation? Obviously there is real patent hatred and critics, like Crovitz, simply ignore facts and prefer their own brand of fantasy over truth.
As ridiculous as it is to suggest that patents stifle innovation, this ill-defined Crovitz thesis isn’t the major issue with the fiction published by the Wall Street Journal. There is objective and verifiable error in his article that even those with an agenda will have to admit.
The original January 2013 opinion was authored by Judge Neman with Judges Prost and Reyna in agreement. In that opinion the Court identified claim 34 as representative of the “shopping cart” claims, and held claim 34 invalid on the ground of obviousness. The parties stated, on petition for rehearing, that the Federal Circuit ruling should have been for claim 35, which would conform to the judgment entered on the jury verdict. Ultimately, the rehearing was not successful and claim 35, like claim 34, was ruled invalid because it was obvious. See Soverain Software LLC v. Newegg, Inc. (Fed. Cir., September 4, 2013).
The Newegg brief in opposition to Soverain’s Petition for Certiorari was due on November 18, 2o13, but Newegg’s attorney requested an extension until Thursday, December 12, 2013, so we await the filing of Newegg’s opposition brief. I have been told that Soverain plans to file a reply to whatever Newegg files, so it will be some time before we know whether the Supreme Court will take this important case.
The Pioneering Technology
Before diving into why this case matters and everyone should pay close attention, allow me to point out that the technology involved in this case is THE original shopping cart technology. In fact, the ’314 patent matured from a patent application that was filed on October 24, 1994. Despite what you may have heard, this is not an example of a bad patent, nor is it something that wasn’t new or was legitimately obvious at the time it was invented, which would have been some meaningful time before October 24, 1994. This is an example of a pioneering invention that came about at the dawn of Internet as we know it today. The fact that it is ancient in Internet terms does not mean that the claims are bad, it merely means that the innovation embodied in the patent is fundamentally important. Indeed, the Soverain’s enterprise software product has been in use for nearly 18 years, and has been used by over 1,000 customers in over 25 countries, including companies such as Time-Warner, AT&T, Sony, Disney, BusinessWeek and Reuters.
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