Should a District Court decide the question of patent-eligible subject matter under Section 101 as a “threshold issue” at the outset of the case – i.e., without the benefit of expert testimony and/or claims construction?
Former CAFC Chief Judge Rader at AIPLA on 10/25/14.
On November 14, the Federal Circuit issued its third opinion on the question of whether the claims in Ultramercial v. Hulu & Wild Tangent describe patent–eligible subject matter under 35 USC 101. In the first two decisions, the panel consisting of Chief Judge Rader and Judges Lourie and O’Malley, reversed the District Court’s granting of defendants’ Rule 12(b)(6) motion to dismiss based solely on the pleadings, i.e., prior to any discovery, expert testimony or formal claim construction.
In the latest decision (“Ultramercial-3”), the panel reached the opposite conclusion and affirmed the dismissal. This apparent turnaround was based on two intervening events: (1) the Supreme Court’s Alice decision in June; and (2) the fact that Chief Judge Rader was no longer on the court, and his place on the panel was taken by Judge Mayer. Much has, and will be, written about the first of these factors, so I would like to focus on the second, and in particular, the diametrically opposed views of Judges Rader and Mayer on a very important procedural issue; namely, whether the lack of patent-eligible subject matter should be a basis for dismissing a case at the outset based only on the “intrinsic” evidence, i.e., the patent itself and its prosecution history in the USPTO, without any discovery, expert testimony and/or claim construction. Notwithstanding the importance of the substantive Alice holding re how to distinguish a claim to an abstract idea from one that has a practical application, the procedural question is at the heart of the reversal of the CAFC’s holding in Ultramercial-3. The two judges’ opposing perspectives can most clearly be seen by comparing Judge Rader’s opinion of the court in Ultramercial-2 with Judge Mayer’s concurrence in Ultramercial-3.
On Thursday, November 14, 2014, the United States Court of Appeals for the Federal Circuit issued its latest decision in Ultramercial v. Hulu, which deals with the patent eligibility of software related patent claims. The district court originally held that U.S. Patent 7,346,545 (the “’545 patent”), the basis for the complaint filed by Ultramercial, does not claim patent-eligible subject matter under 35 U.S.C. § 101. This decision was appealed to the Federal Circuit, which reversed, concluding that the district court erred in granting WildTangent’s motion to dismiss for failing to claim statutory subject matter. WildTangent filed a petition for certiorari with the Supreme Court, which was granted. The Supreme Court vacated the Federal Circuit decision, and remanded the case for further consideration in light of its decision in Mayo Collaborative Services v. Prometheus Laboratories, Inc.
On remand the Federal Circuit once again found that the claims asserted by Ultramercial defined patent eligible subject matter. WildTangent again filed a petition for certiorari with the Supreme Court. While WildTangent’s petition was pending, the Supreme Court issued its decision in Alice Corp. v. CLS Bank International. Ultimately, the Supreme Court once again granted WildTangent’s petition for a writ of certiorari, vacated the Federal Circuit decision, and remanded the case for further consideration, this time in light of Alice.
Ultramercial’s Federal Circuit luck has now run out. Gone from the original panel was Chief Judge Rader who retired and was replaced by Judge Mayer, which does not bode well for any patent owner. This time in an opinion written by Judge Lourie the Ultramercial claims were found to be patent ineligible because they constitute nothing more than an abstract idea. If Judge Lourie were trying to predict what the Supreme Court would do when faces with patent claims that are clearly NOT abstract, his decision makes sense. Still, it is extraordinarily troubling that patent claims are being invalidated left and right based upon the so-called “abstract idea doctrine,” where the critical term “abstract idea” has never been defined by the Supreme Court or the Federal Circuit.
The Federal Circuit recently issued a decision in CardSoft v. Verifone, which the Court overturned the district court’s claim construction. Overturning a district court’s claim construction is hardly unusual, and perhaps more typical than it really should be, but that is another story for another day. What was unique about this particular case was that the Federal Circuit also went on to rule that CardSoft had waived any argument that the defendants had infringed under what they determined to ultimately be the correct claim construction.
CardSoft filed this patent infringement suit in March 2008 against VeriFone, Inc., VeriFone Systems Inc., and Hypercom Corp. (collectively, “Defendants”), asserting infringement of U.S. Patent Nos. 6,934,945 (“the ’945 patent”) and 7,302,683 (“the ’683 patent”). The district court held a Markman hearing in July 2011 and conducted a jury trial in June 2012. The jury determined that certain of the Defendants’ devices infringed claim 11 of the ’945 patent and claim 1 of the ’683 patent and that these claims were not invalid. The Defendants moved for a new trial and for judgment as a matter of law, but the district court denied both motions.
Judge Raymond Chen of the United States Court of Appeals for the Federal Circuit.
The AIPLA 2014 annual meeting is now several weeks ago, but there is a story that I have neglected to write thus far. I have been pondering what to say and how to say. On Friday, October 24, 2014, Judge Ray Chen of the United States Court of Appeals for the Federal Circuit delivered the luncheon address to a packed audience at the Marriott Wardman Park Hotel in Washington, DC. Those who know Judge Chen know he is an excellent speaker, funny, occasionally self deprecating, and always informed and thoughtful. His address to the AIPLA audience was no exception.
Ever since Judge Chen delivered one particular line I have been thinking about what he said, largely missing any other point he raised I’m afraid. Judge Chen said that he did not think it was particularly helpful for some in the patent community to refer to Judges on the Court as being anti-patent. I don’t know that Judge Chen was speaking about me directly, but there is no doubt that over the past several years I have become more vocal about those who hold anti-patent views. I have increasingly pointing out that the United States Supreme Court is openly hostile to patent owner rights. I have also increasingly pointed to what I refer to as anti-patent decisions from the Federal Circuit and noticing that there appears to be a clear philosophical and ideological split between the Judges, with some Judges routinely issuing or joining rulings that are adverse to the patent owner, while other Judges routinely issuing or joining rulings that favor the patent owner.
The label “anti-patent” is not meant as a criticism or insult. Instead I mean it is a purely descriptive way that recognizes a distinct and very real viewpoint; one that we have seen periodically throughout history but which is inconsistent with what the Framers believed. Therefore, I disagree with Judge Chen that it is not helpful to recognize that there are Judges on the Federal Circuit who, based on their written decisions, show a tendency to eschew a pro-patent viewpoint.
Earlier today President Obama nominated Kara Farnandez Stoll to serve on the United States Courts of Appeals for the Federal Circuit. Obama simultaneously appointed Judge Luis Felipe Restrepo of the United States District Judge in the Eastern District of Pennsylvania to serve on the United States Court of Appeals for the Third Circuit.
“These individuals have displayed exceptional dedication to the legal profession through their work, and I am honored to nominate them to serve the American people as judges on the United States Courts of Appeals,” President Obama said. “They will be diligent, judicious and esteemed additions to the bench.”
Kara Farnandez Stoll is presently a partner at Finnegan, Henderson, Farabow, Garrett and Dunner, LLP in Washington, D.C. She has extensive experience in patent litigation, and has represented clients at both the district court and appellate levels. Stoll has served as lead counsel on a number of cases before the United States Court of Appeals for the Federal Circuit.
On October 20, 2014, the Federal Circuit issued a decision in AntiCancer, Inc. v. Pfizer, Inc. The litigation related to patents owned by AntiCancer, Inc. on a technology related to the imaging of gene expression using a green fluorescent protein linked to a gene promoter. The fluorescent protein is derived from a species of green-glowing jellyfish named Aequorea victoria. The patented inventions are described as useful for drug discovery and evaluation in cancer control and treatment.
The appeal came to the Federal Circuit from the United States Federal District Court for the Southern District of California. The district court granted summary judgment of noninfringement. The decision of the district court was not entered on the substantive merits of any issue raised in the complaint, but instead on what the Federal Circuit characterized as a procedural aspect that occurred at the beginning of the litigation and arising from application of the Patent Local Rules of the Southern District of California.
The district court imposed a fee-shifting sanction as a condition of permitting AntiCancer to supplement the Preliminary Infringement Contentions that the district court found defective under Patent Local Rule 3.1. The district court issued an Order that would have allowed AntiCancer to supplement its infringement contentions, but only if it concurrently pay the attorney fees and costs incurred by the defendants in connection with their motion for summary judgment related to the defective infringement contentions. AntiCancer objected to this condition, and the district court entered summary judgment.
Last week the United States Court of Appeals for the Federal Circuit issued a decision in Halo Electronics, Inc. v. Pulse Electronics, Inc. While the decision is no doubt important to the parties involved, this decision may have more far reaching implications for patent reform in 2015 and beyond. The issue of particular interest in this case was willful infringement. In a concurring opinion, Judge O’Malley, who was joined by Judge Hughes, wrote that she felt constrained by the Federal Circuit’s precedent in In re Seagate and Bard Peripheral Vascular v. W.L. Gore, but that recent Supreme Court decisions call into question the continued viability of that precedent.
As such, Judges O’Malley and Hughes have urged the Federal Circuit to reconsider en banc the standard for awarding enhanced damages under 35 U.S.C. 284.
If enhanced damages for willful infringement is back on the table any prospects for broad-based patent reform is dead. The America Invents Act (AIA) was famously and permanently stalled until the issue of willful infringement and damages was removed from the legislation. With the damages logjam broken the forces pushing for patent reform were able to coax the legislation across the finish line.
On September 4, 2014, I had the opportunity to do a webinar conversation with Bob Stoll, former Commissioner for Patents at the United States Patent and Trademark Office and current partner at Drinker Biddle in Washington, D.C. Our wide ranging discussion lasted for just over one hour. This conversation, the first of many, was made possible with support from Innography, which is one of our sponsors on IPWatchdog.com. You can access the entire recording, which is free, by visiting Patent Eligibility in a Time of Patent Turmoil.
What follows is a bit of our conversation to wet your appetite. We discuss the Supreme Court generally, the lack of technical expertise at the Supreme Court, the realities of creating software, amicus briefs, the ramifications for watering down patent rights, the need for bright line rules and whether Congress needs to get involved.
STOLL: As someone very interested in the patent arena and getting the standards correct, I’ve been really worrying about things. I think we are in a very confusing state at the moment. I think that the courts are actually undermining patent eligibility in many different areas. And the irony seems to be, Gene, that the Supreme Court and now this Court of Appeals for the Federal Circuit seem to be not considering the fact that the United States is leading in many of these emerging technologies and specifically thinking about software and diagnostic methods and personalized medicine and gene sequences. I mean we are actually leading the world in this subject matter. We’ve developed these emerging technologies. We’re quite good at building upon a base of patents in these areas and I don’t think anybody’s taking into consideration the job creation and economic growth that these industries bring to the United States before mucking around in the standards.
Gene Quinn at the AIPF Annual Meeting in Washington, DC, September 29, 2014.
Today I am going to talk about what I call the patent pendulum. When Todd Van Thomme and I originally started talking about what I would talk about today I said that there would undoubtedly be something that comes up at the last minute. I even joked that I might wind up talking about how the Supreme Court actually got the Alice decision right, surprising us all and saying once and for all that software is clearly patentable. We all know it didn’t turn out that way. So the title of my presentation today is this: Dark Days Ahead: The Patent Pendulum.
As you are probably all familiar, patent law never stays the same in the same spot. It is always swinging one or another, either swinging more towards stronger patent rights and the patent owner, or away from strong patent rights and away from the owner. It has been that way throughout history.
Normally what’s happened is that we’ve seen the pendulum swing over longer periods of time, like over decades, and then it’ll move away. For example the 1952 Patent Act was premised on the fact that Congress didn’t like the way the law was developing over the preceding years and wanted more things be patentable, hence the 1952 Patent Act did away with the flash of creative genius test. So things swung back toward a more patent friendly law, at least for a while. And then in the 1970s no courts ever saw a patent that actually had valid patent claims. This famously prompted Congress to create the Federal Circuit. Under the guidance of Chief Judge Markey and Judges like Giles Sutherland Rich and Pauline Newman, who is still on the court, the pendulum swings back toward the patent owner once again.
There was a lot riding on Alice v. CLS Bank, and the Supreme Court got it wrong. There is no point in sugar-coating it, or pretending that everything will be alright. The Supreme Court is openly hostile to patents, and increasingly so is the Federal Circuit. Simply stated, strong patent rights are an absolute prerequisite for a high tech economy.
It is a sad realization, but we are indeed at a point were commercially viable claims worth litigating are virtually assured to be invalid claims. Until this changes the economy suffer in due course. After all, it isn’t the copycats who create new things. Copycats copy and innovators innovate. You cannot infringe patents owned by an innovator and claim that because the product is new to you it is an innovation. NO! It is merely new to you and a rip-off from the true innovator.