Posts Tagged: "SCOTUS"

Today, the U.S. Supreme Court issued an opinion with large ramifications for patent holders and potential infringers alike. Deciding the consolidated cases of Halo Electronics, Inc. v. Pulse Electronics, Inc. and Stryker Corp. v. Zimmer, Inc., the Court ruled that enhanced patent damages are appropriate to punish an infringer’s egregious, deliberate, or flagrant patent infringement. The Court rejected the Federal Circuit’s Seagate test, which had provided an accused infringer with a complete defense to a charge of willfulness (and thus enhanced damages) if the infringer was able to construct, even years after the infringement began, a reasonable argument that the patent was invalid or not infringed, even where the infringer in fact had acted in bad faith. The Court also lowered the required burden of proof from clear and convincing evidence to a preponderance of the evidence. At the same time, it seems clear that mere negligence is not enough to establish entitlement to enhanced damages. While the Supreme Court referred to the 180 years of enhanced damages jurisprudence since the Patent Act of 1836 as setting forth the appropriate approach, it may take several years of additional litigation for predictability to emerge from today’s decision.

Earlier today, 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 is 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).

As the Supreme Court prepares to hear arguments for SCA Hygiene Products v. First Quality during the October 2016 term, another laches case, Medinol Ltd. v. Cordis Corp., awaits its chance to be heard before the Court. Medinol, similar to SCA Hygiene, presents the question of whether judges may use the equitable defense of laches to bar legal claims for damages that are timely within the express terms of the Patent Act.

Over the last ten years, one bad patent reform bill after another has been introduced and then pushed by a fantastic lobbying and public relations effort that has dumped hundreds of millions of dollars on Washington DC. eBay v. MercExchange is not the only legislation enacted by the courts in their effort to avoid Congressional meddling with their turf. Legislation was introduced related to damages, willful infringement, inequitable conduct and obviousness, all of which were enacted in whole or in part by the courts, presumably to avoid passage of the legislation in Congress.

Amici agree with Petitioner that this procedure was beyond Congress’s power to impose, and its underpinning rationale—that patents are a matter of administrative largesse, rather than the constitutionally protected property right—is constitutionally infirm. Amici write separately because this case presents an issue of enormous significance with far-reaching consequences for inventors, investors, and small-business owners. The institution of IPR review has made patents more expensive to obtain and defend, and has introduced uncertainty in patent rights that makes patents less valuable to their holders, less attractive to inventors, and less safe for investors. This devaluation of patent rights has measurably diminished the value of all patents.

This case presents an important constitutional question which the court below decided based on an incomplete analysis of the Supreme Court’s jurisprudence. In the case below, a three-judge panel of the U.S. Court of Appeals for the Federal Circuit decided that a patent is a “public right,” and that these Article I trial proceedings are not unconstitutional. Significantly, the Federal Circuit reached its conclusion without considering more than a century of precedent by this Court recognizing that an issued patent is a property right, at least for purposes of determining if a “taking” has happened. James v. Campbell, 104 U.S. 356, 358 (1882); see also Horne v. Dep’t of Agric., 135 S. Ct. 2419, 2427 (2015) (quoting with approval James).

In March 2016, Vehicle Intelligence filed a petition for writ of certiorari with the Supreme Court arguing that the two-part Alice test is “a universal pesticide to kill and invalidate virtually all patents.” Vehicle Intelligence has posed the following questions: (1) whether the Mayo/Alice test states that use or application of an abstract idea is automatic, conclusive proof of preemption of the abstract idea; (2) whether the Mayo/Alice test requires that any patent which improves on technology existing in the prior art to be retaught in a vacuum in order to present inventive concepts to satisfy the second step of the Mayo/Alice test; and (3) whether a patent would satisfy the second step of the Mayo/Alice test by having independent claims that include multiple explicitly-stated inventive concepts.

I represent MCM Portfolio LLC, which is seeking Supreme Court review of a recent decision of the United States Court of Appeals for the Federal Circuit upholding the constitutionality of the inter partes review (IPR) procedures created by the America Invents Act (AIA). The petition is available here. Amicus briefs in support of the petition are being filed May 31. We argue that IPR violates Article III of the Constitution, which vests the judicial power in the federal courts, and also the Seventh Amendment, which guarantees a right to a jury in civil litigation.

A good argument can be made that a given panel of PTAB judges will construe claims in the manner that makes most sense to them, regardless of the legal rubric they are assigned. Indeed, we can draw a direct analogy from the experience following the Supreme Court’s decision in Teva v. Sandoz on the degree of appellate deference to be accorded to a district court’s claim construction. Notwithstanding decades of anticipation surrounding that issue, there has been little practical effect on the outcomes of litigations or appeals as a result of Teva. District court judges and Federal Circuit panels still approach claim construction issues in essentially the same way they did before. It seems likely that the use of BRI versus plain and ordinary meaning in inter partes review proceedings will also turn out to be much ado about nothing.

It seems difficult to reconcile the Respondent’s principal argument that two standards should still apply: that is, that the PTAB should be permitted to continue applying its policy-derived broad BRI standard for construing patent claim scope in Congressionally mandated “adjudicative” IPR proceedings while still using the lower preponderance of the evidence standard provided under 35 U.S.C. § 316(e). The notion that the USPTO may “infer” such intent to also apply the BRI in the absence of any express guidance from Congress was weak, at best. Especially because having two such claim construction standards applied by Article III courts and the ITC on the one hand, and the USPTO’s unilateral application of an “examination” claim construction standard in an intended “adjudication” setting on the other hand, has already led to inequitable and presumably non-appealable results.

On Monday, April 25, 2016, the United States Supreme Court heard oral arguments in Cuozzo Speed Technologies v. Lee, the first case in which the Supreme Court will decide issues relating to inter partes review (IPR) proceedings conducted by the Patent Trial and Appeal Board (PTAB) of the United States Patent and Trademark Office (USPTO). With the oral arguments now behind us, I once again reached out to a panel of experts who are closely watching the case to ask for their reactions. Once again, I posed the question: What do you expect the Supreme Court to do in Cuozzo? This time, with the benefit of having listened to the oral arguments, the reactions and predictions of our panel of experts follows.

Perhaps the best question of the entire oral argument was asked by Chief Justice Roberts: “So why ­­should we be so wedded to the way they do business in the PTO with respect to the broadest possible construction when the ­­point is not to replicate PTO procedures? It’s supposed to take the place of district court procedures.” Gannon’s response pointed to the difference in the burden of proof between the district court (i.e., clear and convincing) and the PTAB (i.e., preponderance). Chief Justice Roberts responded, “it’s a very extraordinary animal in legal culture to have two different proceedings addressing the same question that lead to different results.” Gannon replied that there are “multiple reasons” why different results could be achieved, to which Roberts said: “there’s a problem here, and so we should accept another problem that’s presented where we don’t have to do it.”

While I would never go into business handicapping the outcome of SCOTUS deliberations, I do have an opinion about what they should do in this case, at least on the claim construction issue. Judge Newman had it exactly right in her panel dissent and her concise dissent from the denial of rehearing en banc. The “broadest reasonable interpretation” standard is useful during the examination phase, ensuring that no conceivably relevant art is overlooked and that the applicant’s opportunity to amend is well informed. But it’s silly, and ultimately damaging to the system, to apply the same standard in a post-issuance process that is directed at determining exactly what issued claims mean and where amendments are seriously restricted. Just as in district court, IPRs benefit from contested advocacy about the meaning of claim terms. In that adjudicative phase there is no place for the artificial construct of “broadest reasonable interpretation” in place of “most reasonable interpretation.”

If the Supreme Court’s recent track record in patent cases is a guide to the potential outcome in this case, it seems quite likely that the Court will not simply affirm the Federal Circuit’s decision. While the Government has set out some reasonably compelling points in support of its position, I believe the Court will agree in large part with Cuozzo and the overwhelming support of the many amici in the case that have set out significant problems and negative long term consequences to the patent system if the PTO’s current approach of using BRI in IPRs is not altered. I also believe the Court will reign in the PTO with regard to its position on reviewability of the PTAB’s institution decisions. A prohibition on judicial review in this context arguably would allow a U.S. government agency to exceed its explicit statutory authority granted by Congress.

Showing a bowl of spaghetti on one of his first few PowerPoint slides set the tone. The law as it applies to software patent eligibility is a tangled mess. “The Supreme Court has continually taken cases in this area and rather than clarify they have continued to hang on,” Schecter explained referencing the fact that the Supreme Court seems committed to the belief that their 101 jurisprudence is consistent and reconcilable. Of course, that is not the case. “There are too many cases that conflict with each other.” He is right. Schecter would go on to say that we are at a point where a legislative fix seems necessary.