It is that time once again when we look back on the previous year in preparation to close the final chapter of 2016 in order move fresh into the year ahead. 2016 was a busy year in the patent world, although change was not as cataclysmic as it was in 2013 when the United States became a first to file country or in 2014 when the Supreme Court issued the Alice v. CLS Bank decision. It was, nevertheless, still an interesting year.
Before proceeding to these top new stories I will take a momentary detour. Although not really a patent or even an intellectual property story, the biggest news of the year for the legal world was undoubtedly the passing of Supreme Court Justice Antonin Scalia in February 2016. Justice Scalia did not author any substantive patent decisions of note, but did author several of the most important trademark opinions issued by the Supreme Court during his tenure. See What the passing of Justice Scalia means for SCOTUS patent jurisprudence. Whether you agreed with him or not, his passing and the vacancy that has lingered has been a matter of great importance.
Unfortunately, the passing of Justice Scalia was not the only loss suffered in 2016. One of my first mentors in the legal profession, Karl Jorda, passed in May 2016. It was my great good fortune to be assigned to work for him as a first year law student so many years ago. He was a giant in this field and he is missed. We also lost another giant in the patent community in August 2016 with the passing of Ray Niro. I had the opportunity to get to know Ray over the last few years and I considered him a friend. The trademark community was hit with the loss of long time Trademark Commissioner Lynne Beresford in June 2016. So 2016 was filled with sadness. I’m sure there are others.
In any event, to come up with the list below I’ve reviewed all of our patent articles, and have come up with these top 10 patent stories for 2016. They appear in chronological order as they happened throughout the year. Just missing the top 10 cut were the Supreme Court denying cert. in Sequenom and the USPTO being sued for Director Lee declaring a federal holiday. As interesting as those stories may have been, there was far more consequential patent news in 2016.
Also missing the cut, but particularly interesting were the rather egregious and insulting response filed in an Office Action in September, and the embarrassing concurring decision by Judge Mayer in Intellectual Ventures. While the latter two were truly train wreck moments, they were fleeting. Judge Mayer has completely marginalized himself on the Federal Circuit with no one embracing his extreme and inaccurate reading of Alice, and that type of albeit cringe-worthy and unprofessional response to an Office Action happens very rarely.
Happy New Year, and thanks for reading IPWatchdog.com!
1. Federal Circuit decides Enfish v. Microsoft
It is difficult to understate the importance of the Enfish decision. The opinion authored by Judge Hughes and issued on May 12, 2016 was the first such decision to find software patent claims patent eligible since DDR Holdings on December 4, 2014. The patents at issue were U.S. Patent No. 6,151,604 and U.S. Patent No. 6,163,775, both issued in late 2000 and both claiming priority to the same application filed in March 1995. The ’604 and ’775 patents are directed to an innovative logical model for a computer database. Contrary to conventional logical models, the patented logical model includes all data entities in a single table, with column definitions provided by rows in that same table. The patents describe this as the “self-referential” property of the database. The patents explain that the claimed invention is an improvement, which the Federal Circuit would make a great deal about in their patent eligibility analysis.
The claims in the ‘604 and ‘775 patents were found to not even cover abstract ideas, therefore being declared patent eligible after the first of the Alice/Mayo framework inquiries. The Federal Circuit also dispatched with the rather ridiculous notion that software shouldn’t be patent eligible if it could run on a general-purpose computer. Furthermore, the Federal Circuit also explained that physical elements are not a prerequisite for a claim to be patent eligible; to rule otherwise would be to resurrect the Supreme Court overruled Machine-or-Transformation test.
Enfish was but one important software case in 2016. Rather than taking up space with all of the various important software decisions I recommend interested readers see How to Patent Software in a Post-Alice Era and A Guide to Software Eligibility at the Federal Circuit. For more on Enfish specifically see Federal Circuit says software patent eligible and our Enfish archives.
2. SCOTUS Decides Halo Electronics v. Pulse Electronics
On June 13, 2016, in a unanimous decision delivered by Chief Justice John Roberts in Halo Electronics, Inc. v. Pulse Electronics, Inc., the United States Supreme Court did what much of the patent world expected it would do, which was to overrule the Federal Circuit’s “unduly rigid” test for the awarding of enhanced damages for willful damages put in place by In re Seagate Technology, LLC, 497 F. 3d 1360, 1371 (2007)(en banc). In the Supreme Court’s recent decisions in Highmark Inc. v. Allcare Health Management Systems, Inc., 134 S. Ct. 1744 (2014) and Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749 (2014) the Court, interpreting 35 U.S.C. § 285, found that there was no textual support in the statute to impose an onerous, rigid test for the awarding of attorneys’ fees to a prevailing party in a patent infringement lawsuit. Ultimately, the same logic employed by the Supreme Court in 2014 prevailed and the rigid rule adopted by the Federal Circuit that ignored the easy to understand, straight-forward language of the statute did not stand.
3. Supreme Court Decides Cuozzo Speed Technologies v. Lee
On June 20, 2016, in a unanimous decision delivered by Justice Breyer in Cuozzo Speed Technologies, LLC v. Lee, the United States Supreme Court upheld the United States Patent Office’s regulation requiring the Patent Trial and Appeal Board to apply the broadest reasonable interpretation (BRI) standard in Inter Partes Review (IPR) proceedings. The Supreme Court also held that the Patent Office’s decision to institute an IPR proceeding is not appealable to the Federal courts.
4. Common Sense No Substitute for Evidence
On August 10, 2016, the United States Court of Appeals for the Federal Circuit issued an important ruling in Arendi S.A.R.L. v. Apple, Inc. The opinion overruled an obviousness ruling by the Patent Trial and Appeal Board made in an inter partes review. The single question at issue in this case was whether the Board misused “common sense” to conclude that it would have been obvious to supply a missing limitation in a prior art reference to arrive at the conclusion that the claimed invention was in fact obvious. Judge O’Malley explained that common sense is ordinarily invoked to provide a known motivation to combine and not to supply a missing claim limitation. O’Malley recognized that in Perfect Web the Federal Circuit did authorize the use of common sense to supply a missing claim limitation, but she pointed out that this was the only case where that has been done. O’Malley further explained that in Perfect Web that which was missing was “unusually simple and the technology particularly straightforward.” In fact, in Perfect Web, which dealt with sending e-mail to an e-mail list, the missing claim limitation was nothing more than merely repeating the step of resending e-mails in accordance with the claim. Thus, O’Malley explained that Perfect Web is properly considered an exception to allowing common sense to supply a missing claim limitation, rather than the rule.
5. Federal Circuits says PTAB Arbitrary and Capricious
On August 30, 2016, the United States Court of Appeals fired a shot across the bow of the Patent Trial and Appeal Board (PTAB or Board) at the United States Patent and Trademark Office (USPTO), reversing the Board’s refusal to allow the patent owner to amend a claim in an inter partes review (IPR) proceeding.
The patent at issue was U.S. Patent No. 7,024,527, which describes systems and methods for performing restores from backups while applications are active and accessing the data being restored. After institution, the patent owner filed a conditional motion to amend, seeking to add new claims 26 and 27 if the Board ultimately concluded that the challenged existing claims are unpatentable. In the final decision by the Board in the IPR, the Board denied the patent owner’s motion solely because the patent owner did not discuss whether each newly added feature was separately known in the prior art. The Federal Circuit found that denying the motion to amend for this reason alone was unreasonable and, therefore, the decision of the Board had to be set aside as being arbitrary and capricious. In fact, after detailing all of the evidence submitted by the patent owner, an exasperated Judge Taranto wrote: “We do not see how the Board could reasonably demand more from Veritas in this case.”
6. Commerce Department Uncovers Patent Examiner Fraud
On August 31, 2016, the Inspector General of the United States Department of Commerce released a scathing report titled Analysis of Patent Examiners’ Time and Attendance, which painstakingly details what appears to be widespread patent examiner financial fraud on the Patent Office. The investigative report, prompted by interest caused by the infamous “Examiner A,” who falsely claimed he worked 730 hours in fiscal year 2014, concluded that for the 15-month period of August 10, 2014 through November 28, 2015, patent examiners submitted 288,479 hours that could not be supported or verified as being worked. These unsupported hours equated to $18.3 million in over payments.
To be fair there has been a difference of opinion between respected and thoughtful commentators on the findings of the Inspector General. While I have been quite critical of the 400 or so patent examiners noted as engaging in what I can myself only characterize as fraud, legitimate questions about the report have been raised. See Inspector General’s Hyperbolic Report Distracts From Improving Patent Quality and Time and Attendance Report has No Merit.
There have been patent examiners who have commented here on IPWatchdog.com and have admitted fraud, which was recently pointed out by the Inspector General during a December 2016 hearing on Capitol Hill. Thus, it does not seem like this issue will be going away.
7. FTC Released Patent Assertion Entity Report
On October 6th, 2016, the FTC released the long-awaited findings of this report, titled Patent Assertion Entity Activity: An FTC Study, which includes analysis of 22 PAE respondents and more than 2,500 affiliates and related entities conducted between January 2009 and mid-September 2014. The report’s findings and recommendations for legislative and judicial reform were intended to “balance the needs of patent holders with the goal of reducing nuisance litigation,” according to a quote attributed to FTC Chairwoman Edith Ramirez in the FTC’s official press release.
In what could be considered a positive, and perhaps surprising step in the right direction from the perspective of patent owners, the FTC’s acknowledged in this report that the term “patent troll,” which has widely been used to vilify all patent owners and not just those committing abuses of the patent litigation system, wasn’t helpful. Unfortunately, however, the FTC arbitrarily identified patent licenses costing less than $300,000 as indicative of nefarious behavior. Such a statement is as misguided as it is wrong, and fundamentally ignores that many innovations contribute modest amounts but are still valuable even if a fair license value is $50,000 or $100,000.
8. Federal Circuit Recognizes it is an Appellate Court
On October 7, 2016, the United States Court of Appeals for the Federal Circuit issued an incredibly important en banc decision in Apple Inc. v. Samsung Electronics Co. This decision reestablishes what should always have been the case; namely that the Federal Circuit is an appellate court that does not consider evidence outside the record or engage in fact finding on their own.
Initially in a panel decision the Federal Circuit reversed the detail of JMOL, which prompted Apple to request rehearing en banc. The decision was the en banc resolution, which was a stinging rebuke of the panel. In a majority decision authored by Judge Moore the Court explained that the Federal Circuit is an appellate court and as such it is not supposed to consider evidence outside the record or engage in fact finding. While that statement should sound funny for those familiar with the law and unfamiliar with the Federal Circuit, this is a huge moment in the modern history of the Federal Circuit. The Federal Circuit has been increasingly out of control for years, acting as a trial court and jury rather than an appellate court.
9. PTAB Reversed for Using Wrong Definition of CBM Patent
On November 21, 2016, the United States Court of Appeals for the Federal Circuit issued a decision in Unwired Planet v. Google. The case asked the court to determine whether the Patent Trial and Appeal Board (PTAB) has properly instituted a Covered Business Method (CBM) review. The PTAB had long been criticized for ignoring the limiting statutory language that narrowly allows a CBM to be filed only on financial service patents. Indeed, the PTAB routinely ignores the statute and institutes CBM reviews on patents that simply do not qualify for review.
In deciding to institute the Google requested CBM the Board stated that the proper inquiry “is whether the patent claims activities that are financial in nature, incidental to a financial activity, or complementary to a financial activity.” The Board determined that patent was a CBM patent because the location service could involve an eventual sale of services. As the Federal Circuit would point out: “All patents, at some level, relate to potential sale of a good or service.” To allow this PTAB created standard that has no textual support in the statute to be applied would be to allow virtually any patent to be the subject of a CBM.
10. SCOTUS Reverses Apple Design Patent Victory Over Samsung
On Tuesday, December 6, 2016, the U.S. Supreme Court issued a decision in Samsung Electronics Co. v. Apple, which found by a unanimous 8-0 vote that a damages award for design patent infringement may be limited to revenues attributable to a component of an article of manufacture and not the entire article itself. Tuesday’s SCOTUS decision overturns a judgment reached in May 2015 at the U.S. Court of Appeals for the Federal Circuit, which would have awarded nearly $400 million in damages to Apple Inc. for the infringement of three design patents by mobile devices marketed by Samsung Electronics
The question presented by Samsung in the petition for certiorari was: “Where a design patent is applied to only a component of a product, should an award of infringer’s profits be limited to those profits attributable to the component?” Much of the oral argument focused not he issue of apportionment of damages. The statute does not allow for apportionment of damages with respect to design patent infringement and ultimately the Supreme Court did not discuss the apportionment issue in its decision. Instead, the Supreme Court focused on the definition of an “article of manufacture.” The Supreme Court concluded that the term “article of manufacture is broad enough to encompass both a product sold to a consumer as well as a component of that product.”