As I was reading recent Federal Circuit decisions I initially skipped right past I/P Engine, Inc. v. AOL, Inc. (CAFC, August 15, 2014). After all, this decision was non-precedential, so how important could it really be? But the Federal Circuit seems to have a peculiar definition of “non-precedential” these days.
In this case the jury found that the asserted claims were infringed, the jury found that the asserted claims remained non-obvious because the defendants’ evidence did not establish obviousness with clear and convincing evidence, and the plaintiff won a verdict of over $30 million with an ongoing royalty rate of 3.5%. The district court judge reviewed the jury determinations, particularly with respect to obviousness, and found that the jury was correct. The Federal Circuit, in their infinite wisdom, disagreed and found the asserted claims obvious. To do so the majority provided no deference to the factual determinations of the jury.
Alexsam, Inc. v. IDT Corporation is a non-remarkable patent infringement decision with a remarkable dissent. Plaintiff Alexsam sued IDT for infringement of its U.S. Patent No. 6,000,608, which covers a system of activating a gift card using existing terminals at retail establishments. IDT controls different gift card activation systems which were grouped into three separate systems. The Federal Circuit affirmed the lower court’s ruling that the patent was valid under 35 U.S.C. § 103, reversed the finding of infringement with regard to two of the systems and affirmed the lower court’s finding of infringement with respect to one of the systems as a discovery sanction.
What is noteworthy about the case is not the majority opinion, but the dissent by Judge Haldane Robert Mayer. Mayer’s dissent discusses why the patent is invalid under 35 U.S.C. § 101, which is curious because the 101 issue was not raised by the defendants during the appeal nor even mentioned during oral arguments. While Mayer’s dissent is not a binding opinion, if another judge on the panel signed on to Mayer’s reasoning then the patent would have been held invalid based on an issue not raised during the appeal.
Five years ago today, on Monday, August 20, 2007, while many of us were otherwise preoccupied with the impending doom of the claims and continuations rules promulgated by the Patent Office, the United States Court of Appeals for the Federal Circuit unceremoniously changed the law as it applies to the awarding of willful damages. Sitting en banc in In re Seagate Technology, LLC, the majority of the Court determined that the negligence standard for determining whether to award enhanced damages for willful infringement is not the appropriate standard, but rather that a reckless standard should be and now is the law of the land.
Curiously, the Federal Circuit announced this significant change to the law relating to willfulness in a case that related to a discovery dispute. Seagate Technology, LLC petitioned the Federal Circuit for a writ of mandamus directing the United States District Court for the Southern District of New York to vacate Orders compelling disclosure of materials and testimony that Seagate claimed was covered by the attorney-client privilege and work product protection. The Court, per Judge Mayer, would say that this case requires confrontation “the willfulness scheme and its functional relationship to the attorney-client privilege and work product protection.”
Last week the Federal Circuit handed a major victory to a defendant who fought a baseless patent infringement litigation, giving hope that the district courts and the Federal Circuit have had enough of patent litigation used as a ploy to shake down defendants. In Eon-Net v. Flagstar Bancorp, the district court found that Eon-Net’s litigation misconduct and its filing of a baseless infringement action in bad faith for an improper purpose warranted an exceptional case finding. The Federal Circuit decision, with Judge Lourie writing and Judges Mayer and O’Malley joining, concluded that the district court did not clearly err in finding and addressing the litigation misconduct.
As a result of the misconduct found, Judge Martinez of the United States Federal District Court for the Western District of Washington slapped the patentee-plaintiff with Rule 11 sanctions totaling $141,984.70 for failure to perform a reasonable pre-filing investigation. The district court also awarded the defendant $489,150.48 in attorneys fees and costs pursuant to 35 U.S.C. 285. The Federal Circuit affirmed the district court’s rulings and cited with approval the district court’s characterization of the underlying lawsuit as bearing “indicia of extortion.”
On March 10, 2010, District Court Judge Kathleen O’Malley was nominated by President Barack Obama to succeed Alvin Schall, who retired from the United States Court of Appeals for the Federal Circuit. Earlier today, Judge O’Malley was confirmed by the United States Senate, see Senate Confirms Five Judicial Nominees. O’Malley’s confirmation, along with the confirmation of 18 others in recent days, is the result of a deal between Senate Democrats and Republicans that ensured passage of 19 nominations in exchange for an agreement not to move forward with other controversial nominations, including the hotly challenged nomination of Goodwin Lui, who is Associate Dean and Professor of Law at University of California Berkeley School of Law. O’Malley will join 15 other colleagues on the Federal Circuit, 6 of who are on senior status.
Judge O’Malley has served on the the United States District Court for the Northern District of Ohio since being appointed by President William J. Clinton on September 20, 1994 and confirmed by a voice vote of the Senate on October 12, 1994. See Thomas: Nomination PN1786-103.
The United States Court of Appeals for the Federal Circuit announced back in May that they would take up the matter of Tivo, Inc. v. EchoStar Corp. en banc, and then subsequently set the oral argument date for Tuesday, November 9, 2010. November 9, 2010 will be a busy day for the Federal Circuit indeed. On this first anniversary of the Bil ski oral arguments at the United States Supreme Court the Federal Circuit has scheduled two en banc hearings. Second up on November 9, 2010 will be Tivo v. EchoStar, first up will be Therasence v. Becton, both cases of great importance. We will be following both cases closely, and I will be in attendance in the gallery and offering eyewitness accounts that afternoon. In the meantime, however, let the punditry, analysis and gossip begin. First up — TiVo v. Echostar, which will decide the limitations (if any) on a district court’s ability to use contempt proceedings to enforce a permanent injunction in a patent case when there is an alleged work-around.
TiVo, Inc. (NASDAQ: TIVO), owner of U.S. Patent 6,233,389, titled “Multimedia Time Warping System,” was a big winner today at the United States Court of Appeals for the Federal Circuit when the CAFC handed down its decision in Tivo, Inc. v. EchoStar Corp. A majority of the 3 judge panel hearing the case agreed with the district court and ratified the contempt order against EchoStar (NASDAQ: SATS) and Dish Network (NASDAQ: DISH). EchoStar’s business focuses on digital Set-Top Boxes and and Satellite Services, and was spun-off from DISH Network on January 1, 2008. The patented technology involved allows television users to simultaneously record and play television broadcasts using what is commonly known as a digital video recorder. On news of the Federal Circuit ruling TiVo stock immediately surged ahead well over $5, up over 50%. Within less than 1 hour TiVo stock when from trading just over $10 a share, trading at $10.31 at 11:06 am EST, to trading at $16.07 at 11:42 am EST, hitting an intra-day high at 1:18pm EST at $16.36, and establishing a trading range plus or minus $15.65, where it is at as of 2:46pm EST.
Judge Randall Rader, soon to be Chief Judge of the CAFC
No one could rightly accuse me of being biased against patents. As a patent prosecutor for over 32 years, most would say I’m the exact opposite. But I do find certain patented inventions that don’t rise to the level of being unobvious under 35 U.S.C. § 103to one of ordinary skill in the art. Such is the patented memorabilia card in Media Technologies Licensing, LLC v. The Upper Deck Company that was deemed obvious on summary judgment, a judgment which was affirmed by a majority of a Federal Circuit panel.
Normally, I find Judge Rader, the heir apparent for Chief Judge of the Federal Circuit, to write cogently and persuasively, even in dissent. Witness his withering blast in In re Bilskiwhere he rightly takes the majority to task for the nonsensical “machine or transformation” test. But unfortunately, like the line from Hamlet, Judge Rader “doth protest too much, methinks” without case law support in his dissent in Media Technologies.
I am just getting back from a week in San Francisco, California teaching the PLI Patent Bar Review Course at PLI’s California Headquarters in downtown San Francisco. I am back in the office after having taken the red-eye, with a stop over in Long Beach, California before the cross country trek to DC. As has become so common, while I was away and attending to other business a major announcement was made last week. It seems that news breaks whenever I am away on business, so it is either a conspiracy or I just travel for business too much! In any event, by now most in the patent community are likely aware that Chief Judge Paul Michel of the United States Court of Appeals for the Federal Circuit announced on Friday, November 20, 2009, that he will not be taking senior status when it is available to him and instead will be stepping down from the Federal Circuit effective May 31, 2010. As Judge Michel exits, presumably to take on a more active and vocal role in patent reform efforts, Judge Randall Rader will assume the duties of the Chief Judge of the Federal Circuit.
Later today the United States Supreme Court will hear oral arguments in the Bilski matter. It is not an overstatement to say that the fate of much future innovation rests squarely on the Supreme Court getting this one right, so lets hope for the best and pray that they do get this one right. There is every reason to believe that the Supreme Court will accurately and appropriately reach a sensible decision relative to patentable subject matter, but there is also at least some fear that they may get it wrong, and wrong to the point where vast amounts of innovation will cease, stall and simply never develop. Because the Federal Circuit as a whole sitting en banc decided not to demonstrate judicial restraint and completely ignored long standing judicial principles associated with answering only the limited questions presented by the case, far more was said in Bilski than necessary, and it is safe to say that those in the majority in the CAFC Bilski decision could never have known the extent of the fall-out caused by opening a patentable subject matter Pandora’s Box. But that is precisely why judges are not supposed to be activist, why they are supposed to undertake a conservative approach and only decide the narrow question before them. Too bad the majority of the CAFC missed those days in law school classes where we all cursed the Supreme Court for not addressing the issue of social importance and instead decided some narrow, inconsequential issue or simply punted it back to the lower courts as a result of some technical matter. Had they not maybe they would have known to stick to the issue at hand.