Recently I interviewed Ray Niro. Our wide ranging discussion touched on all things patent, we first discussed the announcement that Niro, Haller & Niro is now doing patent infringement defense on a flat fee basis. We wrap up our discussion of this new defense business model for the patent litigation industry below. We then transition into a discussion about fee shifting in patent litigation, first discussing the recently failed patent reform and then moving into a discussion of the Supreme Court fee shifting cases from the October 2013 term.
QUINN: How many lawyers do you have at your firm currently?
NIRO: 28. Between 28 and 31 most of the time. We are in the process of adding a few, so we’re I think 28 now; we’ll probably be 31 in the fall.
QUINN: Okay. And the reason that I ask that is because I suspect that as this word gets out that you’re doing this that you’re probably going to see a lot of interest. And how do you envision things developing? Are you going to be able to grow? Are you going to try and choose cases, which cases you can get involved with? What’s the mechanical process?
Last month, I co-authored an article on IPWatchdog.comabout the legal, technical and academic communities’ over-a-decade long debate about the boundaries, legality and wisdom of software patents. Now, on June 19, 2014, the U.S. Supreme Court has issued a decision in its review of the U.S. Court of Appeals for the Federal Circuit’s en banc May 10, 2013, decision in CLS Bank v. Alice. Unfortunately, the clarity that many had hope for has not come to fruition!
What we do know for sure — for at least a 150 years now — is that U.S. Patent Law recognizes four broad categories of inventions eligible for patent protection: processes; machines; article of manufacture; and compositions of matter. 35 U.S.C. Section 101. We also know for sure, despite the oft-quoted recognition that the patent laws were made to cover “anything under the sun that is made by man,” Diamond v. Chakrabarty, 447 U.S. 303, 309 (1980) (quoting S. Rep. No. 1979, 82d Cong. 2d. Sess., 5 (1952)), the U.S. Supreme Court has long recognized that there are three exceptions to these four broad patent-eligibility categories: laws of nature; physical phenomena; and abstract ideas. Id. This is where the certainty ends.
The Supreme Court’s Alice decision has again left the IP bar without a clear, repeatable test to determine when exactly a software (or computer-implemented) claim is patentable versus being simply an abstract idea “free to all men and reserved exclusively to none,” Funk Brothers Seed Co. v. Kalo Inoculant Co., 333 U.S. 127, 130 (1948). This is perhaps not surprising as Alice is a case more about so-called “business method” patents than software patents! (In fact, three justices in a succinct, 116-word concurring opinion indicated that they would impose a per se ban on patenting business methods!) With respect to software patents, however, we still find ourselves with a myriad of USPTO Section 101 guidelines, flowcharts and presentation slides – the latest of which is a March 4, 2014, 19-pager which may very well get fatter after Alice!
~ ‘The report of my death was an exaggeration’ –Mark Twain
Mark Twain, American humorist.
With apologies to the great humorist, the report of the death of software patents is an exaggeration. Some commentators quite quickly suggested that the Supreme Court’s decision in Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 573 U.S. ___, No. 13-298 (June 19, 2014), will “invalidate the majority of all software patents in force today” and is “bad news for software patents”. That interpretation may make good copy, but it is simplistic and overblown. While the Court invalidated Alice’s patents, the decision certainly does not invalidate the majority, or even a large percentage, of software patents, nor does it radically restrict the kinds of inventions that can be patented going forward. The decision is a modest and incremental clarification in the patent law, and a not wholesale revision.
The Court set forth a two-step test grounded in Bilski v. Kappos and Mayo v. Prometheus. While the Court may not have defined a clear boundary for so called “abstract ideas” specifically, it did squarely place this case within the “outer shell” of the law set forth in Bilski and Mayo. In doing so it articulated an approach that focuses not on finding the boundary line, but rather on the core properties of an ineligible patent claim. In Part I of this two-part post, I will focus on just the first step of the test, whether a claim recites a patent-ineligible “abstract idea.” In Part II, I’ll address issues regarding preemption, mental steps, and the application of Alice to software patents.
At least initially, the USPTO instructions to examiners seems extremely patentee friendly, which I must say comes as a surprise given the largely anti-patent rhetoric that has come from the White House over the last 16 months. Indeed, the USPTO has told examiners that the reason Alice’s claims were determined to be patent ineligible was because “the generically-recited computers in the claims add nothing of substance to the underlying abstract idea.”
The USPTO then went on to point out to patent examiners that there is no new category of innovation that is patent ineligible, nor is there any new or special requirements for the eligibility of either software or business methods. Hirshfeld explained: “Notably, Alice Corp. neither creates a per se excluded category of subject matter, such as software or business methods, nor imposes any special requirements for eligibility of software or business methods.”
Hirshfeld also explained that there is now a slight change in the way applications are to be examined when claims involve abstract ideas. Essentially, Alice stands for the proposition that the same analysis should be used for all types of judicial exceptions and the same analysis should be used for all categories of invention. Still, even recognizing this shift in analysis, Hirshfeld told examiners: “[T]he basic inquiries to determine subject matter eligibility remain the same as explained in MPEP 2106(I).” (emphasis added). Therefore, nothing has changed as far as the USPTO is concerned.
Earlier today the United States Supreme Court issued its decision in American Broadcasting Companies, Inc. v. Aereo, Inc., a case that required the Court to determine whether Aereo infringed copyrights of the plaintiffs by selling its subscribers a service that allowed them to watch television programs over the Internet at about the same time as the programs broadcasted the programs over the air. In a 6 to 3 decision authored by Justice Stephen Breyer the Court found that Aereo’s actions did constitute copyright infringement. A dissent was written by Justice Scalia and joined by Justices Thomas and Alito.
Using an all too familiar “logical” construct, the Supreme Court determined that what Aereo did was not a public performance within the meaning of the Copyright Act, but was still infringement because it was a public performance. This construct, which often appears in patent cases, is logically absurd, but without anyone to review the Court’s decisions they seem completely comfortable rendering internally inconsistent and logically flawed decisions, particularly when dealing with intellectual property.
The Supreme Court likely struggles with intellectual property because the Court is simply not comfortable with technology. In the past I have made much of the fact that the Supreme Court does not use e-mail, I’ve also pointed to the fact that during the KSR oral arguments Justice Scalia called the entire area of patent law “gobbledegook.” But we don’t even need to go beyond the text of the written decision to understand the Court’s true naiveté. Indeed, at one point in his opinion Justice Breyer asked why the facts actually matter.
Breyer asked: “why should any of these technological differences matter?” Aside from the fact that intellectual property issues are by their very nature extraordinarily dependent upon technology, technological reality matters because under our system of law cases are supposed to be decided based on fact, not myth or superstition.
On Thursday, June 19, 2014, the United States Supreme Court issued its much anticipated decision in Alice v. CLS Bank. In a unanimous decision authored by Justice Thomas the Supreme Court held that because the claims are drawn to a patent-ineligible abstract idea, they are not eligible for a patent under Section 101.
In what can only be described as an intellectually bankrupt opinion, the Supreme Court never once used the word “software” in its decision. This is breathtaking given that the Supreme Court decision in Alice will render many hundreds of thousands of software patents completely useless. While the Supreme Court obviously didn’t want to make this decision about software, the holding does make it about software because each of the ways software has been claimed were ruled to result in patent ineligible claims. On first read I don’t see how any software patent claims written as method or systems claims can survive challenge. For example, these claims to IBM’s Watson computer, which is really akin to the first generation omnipotent Star Trek computer, seem to be quite clearly patent ineligible. See Is IBM’s Watson Still Patent Eligible. It is impossible to see how the Watson claims remain patent eligible in light of this ruling and how the Alice claims were written. The only potential solace for IBM and others would be if the Federal Circuit narrowly interprets this decision noticing that the Supreme Court seemed almost preoccupied by the fact that the patent claims covered a financial process. Still, the structure of the claims are nearly identical, with Alice’s claims actually having more recited structure, if anything.
More difficult to understand is how the Court could issue a decision that doesn’t even use the word software. Software is clearly patent eligible if you read the patent statute. Software is mentioned throughout the statute. It was specifically mentioned in the America Invents Act in 2011. Tax strategies are not patent eligible in and of themselves, but the AIA says that software is not patent ineligible just because it incorporates a tax strategy. This is the type of analysis the Supreme Court engaged in the Bilski decision finding that business methods are patentable.
Earlier today the United States Supreme Court issued another of the many intellectual property related decisions the Court took during the October 2013 term. In this case, POM Wonderful LLC v. The Coca-Cola Company, the Supreme Court reversed a decision from the Ninth Circuit that held that within the realm of labeling for food and beverages, a Lanham Act claim asserting that the label is deceptive and misleading is precluded by the Federal Food, Drug, and Cosmetic Act (FDCA). The Supreme Court ruled that a claim brought pursuant to the Lanham Act, which makes deceptive and misleading advertising actionable under 15 U.S.C. § 1125(a), is not precluded by the FDCA, which forbids the misbranding of food, including by means of false or misleading labeling.
This case arose relating to the belief of POM that claims made by the Coca-Cola Company were misleading with respect to a juice blend sold by Coca-Cola’s Minute Maid division. The juice sold by Coca-Cola prominently displays the words “pomegranate blueberry,” but in truth the product contains only .3% pomegranate juice and only .2% blueberry juice.
In a unanimous ruling delivered by Justice Kennedy (minus Justice Breyer who took no part in the decision) explained that there is no text within the statutes that would support the contention that the FDCA precludes Lanham Act claims. Indeed, the Supreme Court specifically found the FDCA and the Lanham Act to complement each other.
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.)