Back in 2012, I discussed in a two-part article (here and here) the conundrum created by the Federal Circuit’s joint infringement doctrine, as particularly reflected in its extremely discordant and fragmented en banc decision of almost 100 total pages in the combined cases of Akamai Technologies, Inc. v. Limelight Networks, Inc. and McKesson Technologies, Inc. v. Epic Systems Corp. In an opinion over 30 pages long, a bare six judge per curiam majority found it unnecessary to resolve the joint infringement issue. Instead, the per curiam majority ruled that the Akamai Technologies and McKesson Technologies cases should be resolved by applying the doctrine of inducing (indirect) infringement under Section 271(b). The majority also ruled that such indirect infringement could occur as long as all steps of the claimed method are performed, but didn’t requiring that all steps be performed by a single actor.
In a decision barely reaching 11 pages, a unanimous Supreme Court in Limelight Networks, Inc. v. Akamai Technologies reversed and remanded the Federal Circuit’s per curiam majority ruling in Akamai Technologies and McKesson Technologies. That the Supreme Court overturned the Federal Circuit’s per curiam majority ruling is not a surprise. But what is truly shocking are the factually inaccurate statements, as well as the problematical reasoning that appears in Justice Alito’s opinion for this unanimous Supreme Court. With all due respect, Alito’s opinion is an abysmal “comedy of errors.” (In terms of one factually inaccurate statement, Alito’s opinion has been characterized as “embarrassing” and rightly.)
Justice Samuel Alito, authored the Limelight decision for a unanimous Court.
There are some who are questioning the wisdom and correctness of the Supreme Court’s recent decision, authored by Justice Alito for a unanimous Court, in Limelight Networks, Inc. v. Akamai Technologies, Inc. One particular point of criticism seems to be centered around the fact that the Supreme Court failed to take into consideration the existence of 35 U.S.C. § 271(f). Section 271(f) was enacted by Congress to overrule a 1972 Supreme Court decision that held that supplying parts to be assembled outside the United States could not result in infringement of a U.S. patented combination machine because the assembly occurred outside the territorial reach of the U.S., and therefore beyond the scope of the exclusive rights granted by a U.S. patent.
We recognize that certain Supreme Court patent decisions over the past several generations have legitimately raised questions about the Court’s familiarity with overall patent law concepts. Indeed, the Supreme Court has been criticized, including here on IPWatchdog.com, for muddying patent waters, failing to articulate clearly applicable standards and promulgating rulings that seem internally inconsistent, if not scientifically inaccurate. Any legitimate criticism of Supreme Court patent jurisprudence should, however, be on a case-by-case basis. Further, it is important to recognize that the Supreme Court does from time to time get a patent decision perfectly correct. See Diamond v. Chakrabarty, Diamond v. Diehr, Octane Fitness v. ICON Health & Fitness, Highmark v. Allcare, Gunn v. Minton, Bowman v. Monsanto, i4i v. Microsoft and Kappos v. Hyatt.
This current criticism swirling around Limelight seems misguided. Arguing that the Supreme Court erred by misinterpreting, or failing to apply, 271(f) misses the point entirely. The question presented in the appeal to the Supreme Court was whether there can be infringement under 271(b) if there is no direct infringement under 271(a). Infringement under 271(f)(1) was not at issue in the case, and 271(f)(1) was not relied upon by the Federal Circuit below.
Damages awards in district court patent cases continue rise, and at alarming rates for those who find themselves on the losing, infringer end of the lawsuit. According to data from Lex Machina, in 2013, average patent infringement awards increased 28% and median patent infringement awards increased 22% when compared with infringement damages awards during 2012.
According to data from Lex Machina’s recently released2013 Patent Litigation Year in Review, the 10 largest damages awards during 2013 ranged from a $1 billion award, to Monsanto from DuPont for infringement of a patent for genetically modified seeds, to just over $15 million, to Tomita from Nintendo for infringement of a video camera image system.
Table 26 from the aforementioned Lex Machina Year in Review shows the top 10:
Justice Alito began the decision with this summation:
“This case presents the question whether a defendant may be liable for inducing infringement of a patent under 35 U. S. C. §271(b) when no one has directly infringed thepatent under §271(a) or any other statutory provision. The statutory text and structure and our prior case law require that we answer this question in the negative. We accordingly reverse the Federal Circuit, which reached the opposite conclusion.”
At issue was the alleged infringement of U. S. Patent No. 6,108,703 (’703 patent), which claims a method of delivering electronic data using a “content delivery network,” or “CDN.” The ’703 patent also provides for the designation of certain components of a content provider’s website to be stored on Akamai servers. The process of determining which component to store on Akamai servers was known as “tagging.”
On March 26, 2014, RealD Inc. (NYSE: RLD) filed separate patent lawsuits in the United States District Court for the Central District of California against MasterImage 3D and Volfoni. The lawsuits RealD, Inc. v. Volfoni, Inc. et. al. (2:14-cv-02303) and RealD, Inc. v. MasterImage 3D, Inc. et. al. (2:14-cv-02304) allege that both the MasterImage 3D MI-Horizon3D products and the Volfoni SmartCrystal Diamond product infringes four patent owned by Real D. The lawsuits seek monetary damages as well as preliminary and permanent injunctive relief.
While intellectual property dates back to 2006, the RealD XL Cinema System was introduced in 2008 and today is the world’s most widely used 3D cinema projection technology with more than 15,000 units installed around the world. The XL Cinema System delivers twice the light efficiency of any other 3D cinema projection technology, and as a result, it provides a superior projected 3D image at a lower operating cost.
EDITORIAL NOTE: What follows is the Summary of the Argument from the AIPLA amicus briefin Limelight Networks, Inc. v. Akamai Technologies, Inc. The brief is filed by Wayne P. Sobon, who is the current President of the AIPLA, with Jeffrey I.D. Lewis listed as Counsel of Record. Lewis is himself a former AIPLA President. Also on the brief with Lewis is Scott B. Howard.
The cornerstone of Petitioner’s argument is that it follows from the language and simple structure of Sections 271(a) and 271(b) of Title 35 “that § 271(b) proscribes conduct that induces actionable direct infringement of a patent as described in § 271(a).” Pet. Br. at 1 (emphasis added). In doing so, Petitioner focuses on the elements of a claim for induced infringement under 35 U.S.C. § 271(b), but hides the true issues of this case – what is the meaning of “infringement” and is there patent liability when someone causes all of the steps of a method patent to be performed but no single entity performs all of the steps of the method claim by him or herself?
Recent Federal Circuit law has, without any statutory basis, limited infringement under Section 271(a) to the actions of a single entity, and some amici have even mistakenly characterized the single entity rule as settled law, e.g., Brief of Amici Curiae Cargill, Inc. et al. at 4 (but it is not, as shown below and in district court cases in the accompanying footnote  ). It is that erroneous limitation that leads to confusion over whether or not direct infringement is necessary for a finding of indirect, induced infringement.
Regardless of the number of patent reform bills, IP industry conferences, and risk management business models, the number of patent infringement lawsuits remains exceptionally high. Resolving disputes through the inefficiencies of litigation represents an enormous waste of resources and lost opportunities. And this issue runs beyond the usual suspects—a GAO August 2013 report found that 80 percent of patent litigation is brought by manufacturing companies. Thus, IP games are being played on all sides, resulting in demon dialogues, negative patterns and quick escalations to legal actions. In order to foster productive discussions, both sides need to stop playing games and start being transparent and candid about their intent at each stage of an IP licensing discussion. This is a foundation for building trust, developing cooperative behaviors, and allowing business creativity that is critically needed in our knowledge based economy.
The dialogue begins with a demand letter from a patent rights holder, which can take the form of a soft invitation to enter into mutually beneficial licensing discussions or detailed allegations of patent infringement. Often times, the intent behind this letter is to seek a payment to compensate the patent rights holder for the commercial exploitation of its patented technologies by the receiving side of the letter, not to stop the exploitation. There is nothing condemnable in this intent– trading IP rights offers a way to support the broad dissemination of technological advancements, which in turn create rewards for investments in innovation and job creation. These IP trades are so common that seasoned IP executive speak regularly about “IP monetization” or “IP value creation” in trade associations (e.g., the Licensing Executives Society) and conferences (e.g., the IP Business Congress).
Mylan Inc. (NASDAQ: MYL) recently prevailed in the United States District Court for the Northern District of West Virginia in a patent dispute involving Perforomist® (formoterol fumarate) Inhalation Solution, which has as the active ingredient a bronchodialating compound. The district court confirmed the validity of all patents asserted by Mylan. At issue were U.S. Patent Nos. 6,667,344; 6,814,953; 7,348,362; and 7,462,645, which cover Perforomist through June 2021.
Mylan previously sued Teva alleging that Teva’s Abbreviated New Drug Application (ANDA) for this product infringed four Mylan patents covering Perforomist. After a full trial, the Court entered a judgment finding infringement of the patents-in-suit, rejecting Teva’s defenses, and enjoining Teva from making, using, offering to sell, selling or importing the inhalation product described in Teva’s ANDA. The Court’s decision also prevents Teva’s ANDA, which has yet to receive a tentative approval from the U.S. Food and Drug Administration (FDA), from receiving final approval prior to expiration of the patents in suit.
According to data from Lex Machina, there has been a sharp decline in the number of patent litigation case filings so far in 2014. The obvious question this leads to is whether the patent litigation centric patent reforms presenting pending in the Congress are required if the number of patent infringement cases being brought is declining.
In January 2013, there were 490 new patent complaints filed. The number of new patent cases filed in January 2014 was 322. This represents a 34.3% drop in the number of new patent filings year to year, and represents the lowest number of new patent litigations since October 2011. See Patent Case Filings Drop Sharply in January to 322.
A source familiar with Lex Machina’s data tells me that the number of new patent lawsuits filed in February 2014 was also quite lower than during February 2013. During February 2013, according to Lex Machina data there were 548 new patent cases filed. The number of new patent cases filed during February 2014 was 456, which represents a decline of 16.8% year to year.
During the first two months of 2013 a total of 1,038 patent cases were filed, according to Lex Machina data, while the number of patent cases filed during the first to months of 2014 was just 778. This represents a decline of 25%.
There is a new entry into the patent reform debate. The Main Street Patent Coalition is a national coalition of organizations that says they are dedicated to stopping patent abuse by so-called patent trolls. The Main Street Patent Coalition is encouraging Congress to pass what they call “common sense patent reform legislation.”
The Main Street Patent Coalition members include: the National Restaurant Association, the National Retail Federation, the American Hotel and Lodging Association, the National Grocers Association, the International Franchiser Association, the Application Developers Alliance, the National Association of Realtors, the Retail Industry Leaders Association, the National Council of Chain Restaurants, the American Association of Advertising Agencies and the American Gaming Association. These trade associations say they want Congress to give small businesses a fighting chance against the growing threat of patent trolls.
The Main Street Patent Coalition claims they represent the small business community at large, which has to make you wonder. On their homepage they talk about an innovative, family owned and privately held company named White Castle. According to the LA Time, White Castle has 9,600 employees. How exactly is that a small business? Answer: White Castle is not a small business, at least if you concern yourself with the way the Small Business Administration defines small business. To be a “small business” you have to have no more than 500 employees. Clearly the Main Street Patent Coalition recent press release Small Main Street Businesses Launch Patent Reform Coalitioncarries a misleading, if not false, title.
The Supreme Court on November 5, 2013, heard oral argument on whether the burden of proof in an action for a declaratory judgment of non-infringement falls on the plaintiff licensee or on the defendant patentee. Medtronic Inc. v. Boston Scientific Corp., U.S., No. 12-1128, oral argument 11/5/2013.
The debate centered around whether a patentee/defendant sued for a declaratory judgment of non-infringement is required to prove a case of infringement that was neither alleged nor arguably possible where the DJ plaintiff is a licensee. The Petitioner argued that the burden that would be on the patentee as infringement plaintiff does not change when it is a DJ defendant. The Respondent argued that, because the patentee cannot assert an infringement counterclaim against its licensee in good standing, the normal default rule places the burden on the party that initiates the action.
Patent law places the burden of proving infringement on the patentee, and the procedural device provided by the Declaratory Judgment Act does not shift that burden, according to Seth Waxman of WilmerHale, arguing for Petitioner Medtronic. The Federal Circuit erred in changing the rule where the DJ plaintiff is a licensee.
This paper proposes amending 35 U.S.C. 271 Infringement of Patent with elements drawn from § 2-403 of UCC Article 2, Sale of Goods, and with elements of the Patent Exhaustion Doctrine. This amendment, if enacted, would prevent patent trolls from proceeding against Bona Fide Purchasers for Value with respect to certain specific infringements, in order to strengthen consumer confidence in the marketplace, by ensuring that vendors can deliver the products that they sell, free of threats of patent infringement litigation against such innocent buyers.