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.
The United States Patent and Trademark Office exists to protect the rights of American innovators, granting them a license to reap just rewards from their inventions.
But today the U.S. patent system is under attack—in the form of a terribly wrong decision in the very court that was purposely established by Congress in 1982 to support and enforce the protections for patents enshrined in Article One of the U.S. Constitution. The court in question is the U.S. Court of Appeals for the Federal Circuit (CAFC). The bad decision is in Soverain Software LLC vs. Newegg Inc.
In September, the CAFC ruled in favor of Newegg, reversing earlier rulings that Newegg had infringed three patents of Soverain’s relating to Internet commerce technologies.
In doing so, the CAFC disagreed with the facts established by the USPTO when it decided to award Soverain the patents in the first place. It reversed two successive lower court decisions which upheld the USPTO’s position and awarded Soverain both damages and a royalty payment from Newegg. And its decision conflicted with the exact opposite conclusion from the USPTO in reexaminations of the three patents where the same prior art was considered.
In a non-precedential opinion issued October 18, 2013, the Federal Circuit issued a decision that calls into question the overall utility of forum selection clauses in contractual relationships. In fact, Eli Lilly lost its bid to have its dispute with Genentech and City of Hope heard in the Northern District of California despite having a forum selection clause in the governing contract that stated the parties would litigate any dispute in the Northern District of California. See In re Eli Lilly and Co.
The en banc Federal Circuit on September 13, 2013, heard oral argument on whether to overrule its en banc decision in Cybor Corp. v. FAS Technologies, Inc., 138 F.3d 1448 (Fed. Cir. 1998), and hold that claim construction can involve issues of fact reviewable for clear error, and that it is not entirely an issue of law subject only to de novo review. Lighting Ballast Control LLC v. Universal Lighting Technologies, Inc., Fed. Cir., No. 2012-1014, 3/15/2013.
Lighting Ballast Control LLC (LBC) owns a patent (5,436,529) on control and protection circuits for electronic lighting ballasts commonly used in fluorescent lighting. The patent includes the term “voltage source means” in the following context: “voltage source means providing a constant or variable magnitude DC voltage between the DC input terminals.” LBC sued Universal Lighting Technologies, Inc. (ULT).
District Court Decision
On appeal is the district court decision that a person of ordinary skill in the art would understand the claim term “voltage source means” to correspond to a rectifier or other voltage supply device. It thus rejected ULT’s argument that the term invokes Section 112 ¶6 and that the claim is invalid for indefiniteness for lack of specific structure in the specification. A Federal Circuit panel reversed in a nonprecedential decision, concluding from a de novo review that “voltage source means” does invoke Section 112 ¶6 and that the claim is invalid for indefiniteness. That panel decision was vacated when the appellate court decided to consider the claim construction issue en banc.
Not surprisingly, the decision of the latest Federal Circuit case on software patent eligibility – Accenture Global Services, GMBH v. Guidewire Software, Inc. – could be predicted from the makeup of the CAFC panel. Judge Lourie, joined by Judge Reyna, issued the majority opinion that the system claims were invalid. The Court followed the analysis for determining patent eligibility from CLS Bank,, 717 F.3d 1269 (Fed. Cir. 2013) and affirmed the district court’s finding that the system claims of U.S. Patent No. 7,013,284 (“the ‘284 patent”) were ineligible. Judge Rader dissented.
Accenture appealed the district court’s holding that system claims 1-7 and method claims 8-22 were invalid as not directed to patentable subject matter. Interestingly, Accenture only appealed the ruling on the system claims, thus waiving its appeal on the method claims.
The Federal Circuit’s original opinion issued January 22, 2013, and was authored by Judge Neman with Judges Prost and Reyna in agreement. In that January 2013 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. But that is where the agreement between the parties ended. Soverain requested further proceedings on the merits, while Newegg proposed that the Federal Circuit correct what they referred to as a “typographical error.” The Federal Circuit ordered additional briefing.
Supreme Court Bound?
Before jumping into the substance of this case, the first thing I noticed was that Seth Waxman of Wilmer Cutler Pickering Hale and Dorr was listed as the lead attorney for Soverain Software in both the petition for rehearing and the ensuing briefs. Robert Wilson of Quinn Emanuel Urquhart & Sullivan, who specializes in life sciences litigation and appellate matters, was previously the lead attorney for Soverain. Wilson remains on the brief, which is common when the next step toward the Supreme Court is contemplated. But it is hard to imagine that Soverain has brought in Seth Waxman at this late stage if they are not contemplating an appeal to the Supreme Court.
Last week the United States Court of Appeals for the Federal Circuit issued a decision in the latest appeal in the Apple/Samsung epic patent battle. See Apple, Inc. v. Samsung Electronics Co. (Fed. Cir., August 23, 2013). In this situation the parties really were not fighting against each other; instead finding themselves arguing on the same side against the decision of the district court to allow sensitive information to be publicly available.
On August 9, 2012, Judge Lucy Koh of the United States District Court for the Northern District of California issued a decision that denied in part the parties’ motion to seal certain filings. In general, Judge Koh sealed information about the parties’ production and supply capacities, confidential source code, third-party market research reports, and the pricing terms of licensing agreements. However, Judge Koh ordered unsealed documents disclosing the parties’ product-specific profits, profit margins, unit sales, revenues, and costs, as well as Apple’s own proprietary market research reports and customer surveys and the non-price terms of licensing agreements.
In her ruling Judge Koh ordered the parties to take an immediate appeal to the Federal Circuit, which occurred on August 13, 2012. The Federal Circuit consolidated the appeal by Apple and the appeal by Samsung, designating Apple as the appellant and Samsung as the cross-appellant. On August 15, 2012, the district court granted a stay pending the final resolution, thus the August 9, 2012 order that sensitive financial information would be made publicly available has been stayed pending disposition of the appeal.
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