Every once in a while you stumble across a situation where what is fair seems obvious. At those moments we are all too frequently reminded that we do not have a fairness system, but rather we have a justice system. Which is one way to say that I think the Federal Circuit made a terribly poor decision; one that flies in the face of common sense, and frankly common decency. If the legal system cannot fix a mistake like this before the mistake has even been made public then the system is broken.
The case I am referring to is the recent decision from the United States Court of Appeals for the Federal Circuit in Japanese Foundation for Cancer Research v. Lee, which is the epitome of reaching the right legal decision instead of doing what is fair and just. A paralegal made a mistake, instructed the U.S. representatives to file a terminal disclaimer abandoning a patent, the paperwork was signed and filed by the attorney of record, and then immediately the error was identified. In fact, the mistake was identified and attempts made to mitigate the mistake even prior to the filing ever appearing in the PAIR system operated by the United States Patent and Trademark Office. Yet, at the end of the day, even though there was no question that the chain of events was caused by a paralegal misunderstanding what she was asked to do, the patent still winds up effectively nullified.
Judge Ray Chen of the Federal Circuit, speaking at AIPLA on 10/24/2014.
Earlier today the United States Court of Appeals for the Federal Circuit issued a ruling in DDR Holdings, LLC v. Hotels.com, L.P. The appeal was brought by defendants National Leisure Group, Inc. and World Travel Holdings, Inc. (collectively, NLG), who appealed from a final judgment of the United States District Court for the Eastern District of Texas entered in favor of DDR Holdings. Following trial, a jury found that NLG infringed the asserted claims of U.S. Patent Nos. 6,993,572 and 7,818,399. The jury also found the asserted claims of the ’572 and ’399 patents were not invalid and awarded $750,000 in damages.
On appeal to the Federal Circuit, in an opinion written by Judge Chen and joined by Judge Wallach, determined that the asserted claims of the ’572 patent were anticipated under 35 U.S.C. § 102(a) and, therefore, vacated the award of damages and prejudgment interest to DDR, which had been collectively premised on infringement of the ’572 and ’399 patents and without apportionment.
Of particular interest, the Federal Circuit found that the ‘399 patent constituted patent eligible subject matter, was not invalid and was infringed. This is big news because in the wake of the Supreme Court’s decision in Alice v. CLS Bank software patents have been falling at alarming rate. Assuming this decision stands any further review we finally have some positive law to draw from that will provide clues into how to tailor patent claims to make them capable of overcoming what has become a significant hurdle to patentability— namely the abstract idea doctrine.
On November 19, 2014, the United States Court of Appeals for the Federal Circuit issued a decision in e.Digital Corporation v. Futurewei Technologies, Inc. e.Digital appealed from a judgment of non-infringement made by the U.S. Federal District Court for the Southern District of California. The district court based its determination of non-infringement on the fact that e.Digital was collaterally estopped from seeking a construction of a claim limitation in e.Digital’s U.S. Patent Nos. 5,491,774 and 5,839,108 different from another court’s previous construction of the same limitation in the ’774 patent.
The Federal Circuit, with Judge Moore writing and joined by Judges O’Malley and Reyna, held that the district court correctly applied collateral estoppel to the ’774 patent, but improperly applied the doctrine to the unrelated ’108 patent.
To understand the ruling in this case one must first look at the prior case that construed the critical claim. Previously, in a litigation in the United States Federal District Court for the District of Colorado, e.Digital asserted claims 1 and 19 of the ’774 patent. The ’774 patent discloses a device with a microphone and a removable, interchangeable flash memory recording medium that allows for audio recording and playback. Asserted claims 1 and 19 recited “a flash memory module which operates as sole memory of the received processed sound electrical signals.” The district court construed the sole memory limitation to require “that the device use only flash memory, not RAM or any other memory system” to store the “received processed sound electrical signals.” The district court based its construction on the written description of the ’774 patent and its determination that the use of RAM had been disclaimed during prosecution. With this claim construction decided, the parties stipulated to a dismissal of the case with prejudice.
Many news outlets immediately started speculating that Rader’s decision to step down as Chief Judge had to do with a letter endorsing attorney Edward Reines, a patent lawyer at Weil Gotshal & Manges LLP and president of the Federal Circuit Advisory Council. This speculation was no doubt fostered by the fact that the announcement of Rader stepping down as Chief Judge came on the same day that he sent a letter to all of the other Judges on the Federal Circuit apologizing for his lapse in judgment and for the recent need to recuse himself. Given the timing his announcement he would step down as Chief Judge and his apology letter it is easy to understand why many speculated that the two are connected.
Fast forward to November 5, 2014, the date on which the Federal Circuit issued a Per Curiam decision publicly reprimanding Reines for his conduct relating to the dissemination of an e-mail sent to him by then-Chief Judge Rader. Unfortunately, for Reines this public reprimand will not likely end the inquiry into his relationship with Judge Rader. Allegations of the exchange of items of value was brought to the attention of the Federal Circuit. Although the Federal Circuit did not rely on these charges to support discipline, the Federal Circuit forwarded the matter of the exchange of items of value to the California bar authorities.
The Federal Circuit recently issued a non-precedential opinion in Vehicle IP, LLC v. AT&T Mobility, LLC. Perhaps the most interesting aspect of this decision was that it was a non-precedential opinion with a dissent, which to some extent seems a bit contradictory.
According to Federal Circuit Rule 32.1(b), “[a]n opinion or order which is designated as nonprecedential is one determined by the panel issuing it as not adding significantly to the body of law.” Still, a non-precedential decision with a dissent strikes me as odd. Perhaps this was a decision largely left to the staff attorneys. I suppose on some level it really doesn’t matter because Federal Circuit Rule 32.1(c) does not prohibit citation to nonprecedential dispositions issued after January 1, 2007.
I would have to think that this decision, which required the Federal Circuit to construe claim terms, would have to be precedential in at least some ways, unless the outcome in this case will not have any implication for the claims themselves or the patent. I guess I just don’t understand the concept of a nonprecedential claim construction. I cannot fathom a nonprecedential order in a real property boundary dispute. The whole point of suing over real property is to get a decision that is binding. Patents are property and it strikes me that the definition of the metes and bounds of what is covered in the claim really has to be precedential. If it isn’t precedential what is the point? This type of disposition is what leads to patent claims being construed to mean one thing in one case and another thing in another case. It is frustrating.
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.