Covered Business Method Patent Held Invalid under 35 USC 101 and Alice.

The Patent Trial and Appeal Board (PTAB) has issued a Final Written Decision of the invalidity of an Internet-related patent under the subject matter restrictions of 35 U.S.C. 101.

In Bank of America, N.A., PNC Financial Services Group, Inc. and PNC Bank, N.A, vs. Intellectual Ventures I LLC, the PTAB found claims 1-23 of U.S. Patent No. 7,603,382 B2 (“the ‘382 patent”) to be unpatentable as directed to patent-ineligible subject matter under 35 U.S.C. 101 and Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 134 S. Ct. 2347, 2355 (2014) as being directed to an “abstract idea.”

A sample claim of the challenged patent is as follows:

  1.  A system for providing web pages accessed from a web site in a manner which presents the web pages tailored to an individual user, comprising:an interactive interface configured to provide dynamic web site navigation data to the user, the interactive interface comprising:a display depicting portions of the web site visited by the user as a function of the web site navigation data; anda display depicting portions of the web site visited by the user as a function of the user’s personal characteristics.

In arriving at its decision, the Board considered the following arguments on the part of the Patent Owner:

  1. that the claims of the ‘382 patent are not “directed to ‘an idea itself, a mathematical formula or algorithm, a fundamental economic practice long prevalent in our system of commerce, or a method of organizing human activity.'”
  2. that the claims of the ‘382 patent “do not preempt the alleged abstract idea and are transformed by an inventive concept.” That claims 1-6 and 16-23 user the claimed interactive interface to provide tailored content based upon the user’s personal characteristics and the user’s website navigation data.
  3. That the ‘382 patent is not a covered business method patent because the claims are directed to a technological invention.
  4. That Section 101 is not a proper ground upon which a covered business method patent review may be maintained.

The Board based its decision regarding argument 1 on the recent U.S. Supreme Court holding in Alice, setting out a two-step test for patentability of an abstract idea. Key to this step 1 was a statement by the Patent Owner’s expert, who testified that “the patent is described at what may appear to be a fairly high abstract level.” In responding to argument 2, the Board held that the limitations of the claims do not contain an “inventive concept” to “transform” the claimed abstract idea into patentable subject matter. Key to this step was, again, testimony of the Patent Owner’s expert that “the ‘382 patent lacks implementation details because it is written at a ‘fairly high abstract level.’” The Board distinguished the ‘382 patent from the Federal Circuit’s decision in DDR Holdings, LLC v. Hotels.com, L.P., 773 F.3d 1245 (Fed. Cir. 2014). In responding to argument 3, the Board held that in at least claim 11 “there is no technological feature in that claim that is novel and unobvious.” Finally, in regard to argument 4, the Board held that Section 101 is a proper ground for instituting a Covered Business Method patent proceeding.

THE 3D REVOLUTION: IP ISSUES ARISING FROM THE PROLIFERATION OF 3D PRINTING

A.What is 3D printing and why is it a big deal?

Traditional methods of manufacturing require expensive machinery and molds or casts. The high cost associated with such equipment acts as a barrier to entrance into the market. It also restricts variation and customization. 3D printing (known as “additive manufacturing”) creates or “prints” a desired object “layer by layer” using a variety of raw materials including plastics, metals, clays and even chocolate (Hershey and 3D Systems recently unveiled their new Chocolate 3D printer capable of creating elaborate shapes in dark, milk, or white chocolate.)

3D printers utilize a blueprint in the form of a Computer Aided Design (“CAD”) file. The CAD file can be created manually or via sophisticated 3D scanners capable of “scanning” three dimensional objects.

3D printing has already been widely utilized in major industries such as automotive (auto design and parts); aerospace (NASA sends 3D printers into space for emergency replacement parts and tools); healthcare (custom implants and orthotics); and military (3D printers provide on demand replacement parts in the field). Small business and consumer use is expected to increase dramatically as 3D printers become more affordable. (A steep increase in 2015 has been predicted due to the recent expiration of several key patents.) For those who think 3D printers are too big, clumsy and cost prohibitive for widespread consumer use – recall the early stages of the computer revolution. (“I think there is a world market for maybe five computers.” Thomas Watson, President of IBM, 1943).

Because 3D printers copy and create replicas of existing 3D objects, they raise a host of intellectual property concerns. Many fear the erosion of non-legal deterrents to infringement (i.e. high capital costs) will result in widespread infringement rendering traditional legal enforcement useless and devaluing intellectual property.

The music industry is frequently cited for comparison. Leading commentators argue 3D printing will effect change in the manufacturing industry in much the same way digitization altered the music industry:

3D printing will unleash the power of digitized things on manufacturers. The PC and the Internet put digitization into consumers’ hands, slashed copying and distribution costs, and weakened entry barriers to economic sectors that provided certain nonrivalrous goods. Nonrivalrous goods are like an idea; once created, their capacity is infinite as “there is no additional marginal cost in allowing others to use [them].”. . . Once digitization hit the copyright industry, it felt the full force of nonrivalry. . . [A]nyone could make and distribute copyrighted goods. To date, companies relying on patent to protect nonrivalrous goods have not had to face potential broad-based copying. 3D printing will challenge those companies. Lower costs, the ability to make specialized and just-in-time parts, and a return to local manufacturing are all positive developments that should be embraced. Yet these advances will threaten, if not destroy, many firms and jobs that live off rents from intellectual property.

Devan Desai and Garard Magliocca, Patents Meet Napster: 3D Printing and Digitization of Things, 102 Geo. L.J. 1691 (2014). As with digital music, the coming years will see a host of intellectual property cases, issues and legislative activity involving 3D Printing.

 B. Forms of Intellectual Property Protection

1. Copyright
a. “Pictorial, Graphic and Sculptural Works”

U.S. copyright law protects original “pictorial, graphic, and sculptural works.” 17 U.S.C. §102(a)(5). This includes three-dimensional works of art. Examples of such works include artificial flowers and plants, dolls, toys, jewelry designs, models, sculptures and figurines. Traditional copyright laws will afford protection to copyright protected work duplicated by a 3D printer. Several variations merit discussion.

b. “Useful Articles”

Copyright protection is generally not available to articles which have a utilitarian function. Copyright protection for such “useful articles” extends only to “features that can be identified separately from, and are capable of existing independently of, the utilitarian aspects of the article.” “Useful articles” are defined as those goods “having an intrinsic utilitarian function that is not merely to portray the appearance of the article or to convey information.” 17 U.S.C. §101.

Determining the scope of copyright protection for useful articles is fact intensive and indefinite at best. However, the exclusion of “useful articles” leaves open the ability of 3D printers to supply objects used in our everyday lives without necessarily implicating copyright law.

c. Computer Software

Computer programs are protected as “literary works” under the Copyright Act. 17 U.S.C. §102(a)(1). Both source code and object code are considered “literary works” because they are original works of authorship “expressed in words, numbers, or other verbal or numerical symbols or indicia.” 17 U.S.C. §101.

The underlying CAD files which facilitate 3D printing constitute computer software eligible for copyright protection. Accordingly, U.S. copyright law will prohibit the unauthorized distribution of copyright protected CAD files for use with 3D printers.

(1) Originality Requirement for CAD Files

In order to be eligible for copyright protection, the subject CAD file must meet the requisite “originality” requirement. The U.S. Supreme Court set a low bar for meeting the originality requirement in Feist Publications, Inc. v. Rural Telephone Service, 499 U.S. 340 (1991). In order to qualify, a work must: 1) be independently created by the author (as opposed to copied from other works); and 2) possess at least some minimal degree of creativity.

Leading commentators argue scans of 3D objects in the public domain will not pass the originality test:

There is a solid argument that no originality is involved in [scanned] design[s] at all. A 3D scan that is not modified cannot be compared to a photograph, which is an original (and copyrightable) work that combines reality with the expression of the photographer. A person who uses a scanner to get an exact copy of an object, by contrast, contributes nothing to the result.

Devan Desai and Garard Magliocca, Patents Meet Napster: 3D Printing and Digitization of Things, 102 Geo. L.J. 1691 (2014).

In support of their contention, Desai and Magliocca cite to Meshwerks, Inc. v. Toyota Motor Sales U.S.A., Inc., 528 F.3d 1258 (10th Cir. 2008). In Meshwerks, the 10th Circuit held that a 3D scan using older technology was not sufficiently original to be entitled to copyright protection. Id. The Court explained Meshwerks process as follows:

Meshwerks took copious measurements of Toyota’s vehicles by covering each car, truck, and van with a grid of tape and running an articulated arm tethered to a computer over the vehicle to measure all points of intersection in the grid. Based on these measurements, modeling software then generated a digital image resembling a wire-frame model. In other words, the vehicles’ data points (measurements) were mapped onto a computerized grid and the modeling software connected the dots to create a “wire frame” of each vehicle.

Id. Despite Meshwerks’ painstaking efforts, the Court determined the resulting files were not original and therefore not amenable to copyright protection. According to the court the files were “not so much independent creations as (very good) copies of Toyota’s vehicles” and “depict[ed] nothing more than unadorned Toyota vehicles–the car as car.” Based on this reasoning, a scanned 3D CAD file would presumably likewise not merit copyright protection.

d. Merger Doctrine

The copyright merger doctrine provides that if an idea and the expression of such idea are so tied together such that there is a very limited number of ways to express or embody the idea in a work, the expression of the idea is uncopyrightable.   This is akin to the “scenes a faire” doctrine which provides that certain well established story lines, fables, folklore, scenes of nature, and other common visual and cultural references are not copyrightable. Such “scenes a faire” are part of the public domain.

Desai and Magliocca theorize that 3D printing will foster a new debate and potential expansion of the merger doctrine. They reason:

A CAD file may give the merger doctrine more relevance than it has had to date. Consider software that is written to make a statue that looks like one of the giant heads (or moais) from Easter Island. The idea and the expression there could be described as identical–a statue that looks like a giant Easter Island head. The software can only do one thing. Most other software, by contrast, can do multiple things or be described as an expression of some idea (for example, a spreadsheet). The moai program does not present a merger problem if the CAD file is classified at a higher level of generality (making art from indigenous cultures), but it is not clear why the software should be viewed in that way. The design file could also be seen as the specific iteration of a specific trail.

Devan Desai and Garard Magliocca, Patents Meet Napster: 3D Printing and Digitization of Things, 102 Geo. L.J. 1691 (2014).

e. Derivative Works

A derivative work is a work based on or derived from one or more already existing works. 17 U.S.C. § 101. The right to create derivative works is one of the exclusive rights of a copyright holder. 17 U.S.C. § 106(2). At least one commentator has suggested CAD files created using copyrighted protected 3D objects constitute derivative works. Daniel Harris Brean, Asserting Patents to Combat Infringement Via 3D Printing: It’s no “Use” 23 Fordham Intell. Prop. Media & Ent. L.J. 771 (“A CAD file distributor could thus be. . .infringing the copyright in the article itself by having made, copied, and distributed a derivative work of the article.”)

f. DMCA Take-Down Notices

The Digital Millennium Copyright Act (“DMCA”) notice and takedown provisions provide a vehicle for copyright owners to force online service providers to discontinue infringing activity by third parties. Upon proper notification by the copyright holder, online service providers can insulate themselves from liability by removing infringing files. The DMCA’s “safe harbor” provisions may provide an effective tool for copyright owners to combat the online sale or distribution of infringing CAD files and/or 3D printed articles.

2. Patents

a. Direct Infringement

Direct infringement is the unauthorized making, using, selling, offering for sale, or importing of the patented invention. 35 U.S.C. §271. Accordingly, the printing (“making”), sale, or use of patented products will constitute direct infringement.

While traditional direct infringement claims will be effective against large commercial 3D printers and sellers of patented products, this is not the anticipated business model.   Rather, the head of the distribution chain will generally sell or distribute CAD files for end use by small businesses and consumers. This poses obstacles to relying on direct infringement theories.

(1) Do CAD Files Constitute the “Patented Invention” Under § 271(a)?

Are sellers of CAD files offering for sale and selling the patented invention under §271(a)? If so, they would be directly liable for patent infringement. At least one commentator makes a compelling argument CAD files are not the equivalent of the underlying infringing product:

The requirement under § 271(a) that the sale be of “any patented invention” implicates the particular claims of the patent, since “[I]t is a bedrock principle of patent law that the claims of a patent define the invention to which the patentee is entitled the right to exclude.” If a patent claims a physical product, that physical product is what must be sold or offered for sale in order to satisfy § 271(a).

Daniel Harris Brean, Asserting Patents to Combat Infringement Via 3D Printing: It’s no “Use” 23 Fordham Intell. Prop. Media & Ent. L.J. 771

If the sale of CAD files does not constitute direct infringement, patent holders are left with a high volume of small value direct infringement claims against end user consumers. The music industry taught us that pursuing such claims is not practical or feasible. Accordingly, patent holders will likely be forced to rely heavily on theories of indirect infringement to attack the head of the distribution chain.

b. Indirect Infringement

(1) Active Inducement

Section 271(b) makes it unlawful to “actively induce infringement of a patent.”  Active inducement occurs when one encourages another to engage in infringing activity with “knowledge that the induced acts constitute patent infringement.” Global-Tech Appliances, Inc. v. SEB S.A., 131 S. Ct. 2060 (2011). The requisite knowledge standard is one of “willful blindness” requiring: 1) subjective belief that there is a high probability infringement exists; and 2) deliberate actions to avoid confirming such infringement. Id. Despite the heightened knowledge standard, active inducement claims are a viable tool for pursuing flagrant sellers of CAD files having as their sole purpose the production of infringing products.

(2) Contributory Infringement

Contributory infringement is defined as the sale, or offer to sell, within the United States or the importation into the United States of “a component of a patented machine, manufacture, combination, or composition, or a material or apparatus for use in practicing a patented process, constituting a material part of the invention, knowing the same to be especially made or especially adapted for use in an infringement of such patent, and not a staple article or commodity of commerce suitable for substantial noninfringing use.” 35 U.S.C. §271(c).

In order to establish contributory infringement, a patent owner must show: 1) that there is direct infringement; 2) that the accused infringer knew that the combination for which its components were being made was both patented and infringing; 3) that the component has no substantial noninfringing uses; and 4) that the component is a material part of the invention. Fujitsu Ltd. v. Netgear Inc., 620 F.3d 1321 (Fed. Cir. 2010)

Commentators question whether a CAD file will be found to constitute a “component” for purposes of contributory infringement.   Their concern derives from the narrow interpretation of “component” adopted in Microsoft Corp. v. AT&T Corp., 550 U.S. 437 (2007). In Microsoft, the Court construed the meaning of “component” in the context of § 271(f). Section 271(f) makes it an infringement to export unassembled components of a patented invention to induce assembly of the invention outside the United States in a manner that would infringe the patent if such combination occurred within the United States.

AT&T holds a patent on an apparatus for digitally encoding and compressing recorded speech. Microsoft’s Windows software, when installed, rendered the subject computer infringing. Microsoft sent a master version of its Windows software abroad, either on disk or via electronic transmission. Copies of the master were made abroad and installed on computers. Microsoft denied liability for such foreign activities on the grounds the master version of its software did not constitute a “component” within the meaning of § 271(f).

The Court adopted a narrow interpretation of “component” in the software context. According to the Court, software constitutes mere information and detailed instructions akin to “a blueprint. . .schematic, template, or prototype.” Accordingly, software cannot constitute a “component” until such time as it is expressed on a computer readable medium. Commentators opine that CAD files for use with 3D printers are likely to be viewed in the same restrictive fashion under Section 271(c). Daniel Harris Brean, Asserting Patents to Combat Infringement Via 3D Printing: It’s no “Use” 23 Fordham Intell. Prop. Media & Ent. L.J. 771

C. Licensing Models – “If You Can’t Beat ‘Em Join ‘Em”

The inherent difficulties of relying on traditional legal theories when combating infringement in the digital age has caused certain manufacturers to borrow from the iTunes playbook. Observers believe a licensing model can succeed in the 3D printing arena despite the availability of free alternatives:

Although the entertainment industry makes a credible complaint that “it is impossible to compete with free,” there have actually been several documented cases of artists who have successfully competed with those who offered their work for free in violation of copyright law. Of course, individual examples are insufficient to declare a trend. Yet there are studies showing that the availability of content for purchase can decrease file sharing, and the unavailability of legal content for purchase can result in increased peer-to-peer sharing, in violation of copyright law. If given the opportunity, rational consumers will purchase digital content that is appropriately priced, free of viruses, and of high quality. With physical products, consumers will consider printable designs that they know will work and are virus free, if those designs are priced appropriately.

Devan Desai and Garard Magliocca, Patents Meet Napster: 3D Printing and Digitization of Things, 102 Geo. L.J. 1691 (2014).

Consistent with this theory, Hasbro has partnered with 3D printing pioneer Shapeways to make its popular “My Little Pony” brand available to fans online via 3D printing. Nike utilizes 3D printing technology to produce high performance sport cleats. Such cleats will inevitably soon be available for home production — swoosh and all — via licensed CAD files.

Are predictions of the demise of IP due to 3D printing greatly exaggerated? (See VCR and Napster). Or, will 3D printing be the next “internet” and spawn a new industrial revolution with evolving forms of intellectual property? Time will tell.

Womens IP Forum: Top Topics in IP 2015

TopTopics2 11 15

 

Briggs and Morgan, P.A. is pleased to invite you to our Intellectual Property Women’s Forum. Come join like-minded professionals for a CLE presentation and engaging discussion in a collaborative environment. A brief networking reception will immediately follow the seminar.

Topics include:

  • Practical Tips if Your Company is Approached by a Patent Troll
  • The AIA: What it Means for Your Company
  • Judges’ Panel on Hot Topics

Agenda:
3:30 – 4:00 PM Registration
4:00 – 5:00 PM Seminar and Panel Discussion
5:00 – 6:00 PM Networking Reception

Please RSVP by February 4 to Dena Edmiston at RSVP@briggs.com or 612-977-8581

“The 3D Revolution” — 3D Printing and Intellectual Property

Gartner, Inc. touts itself as “the world’s leading information technology research and advisory company.” Accordingly, intellectual property lawyers may want to pay attention to Gartner’s claims that the “escalation of 3D printing capabilities will change retail models and threaten intellectual property.” Gartner’s January 2014 report contains the following predictions:

–           3D printing will result in the loss of more than $100 billion per year in global IP revenue by 2018.

–           At least seven of the world’s top 10 multichannel retailers will be using 3D printing technology to generate custom stock orders by 2018.

–           The rapid advancement of 3D printing for the production of living tissue and organs (“bioprinting”) will foster major ethical debates.

–           There will be an explosion in demand for 3D technology to meet medical needs in underserved emerging markets (i.e. 3D printed prosthetic limbs.)

Several companies have already adopted an “if you can’t beat ‘em join ‘em” mentality. For example, Hasbro partnered with 3D printing pioneer Shapeways to make its popular “My Little Pony” brand available to fans online via 3D printing. Chocolate giant Hershey is developing a licensed 3D printer concept for confections. Nike utilizes 3D printing technology to produce high performance sport cleats. It seems inevitable such cleats will soon be available for home production — swoosh and all — via licensed “blueprints.”

Are predictions of the demise of IP due to 3D printing greatly exaggerated? (See VCR and Napster). Or, will 3D printing be the next “internet” – spawning innovation and whole new industries? Stay tuned.

Alice Corp. v. CLS Bank Intl: the Supreme Court supports a “New Hermeneutic of Suspicion?”

Alice Corp. v. CLS Bank Intl (573 U.S. ___ (2014)) held that Petitioner’s method, computer readable media, and system claims are drawn to a patent-ineligible abstract idea. Here, I focus not on the definition of an “abstract idea” (the Court avoided such a definition) but rather on how the Court’s holding appears to affirm the “new hermeneutic of suspicion” that I discussed in my blog post analyzing the per curia Federal Circuit opinion (CLS Bank Intl v. Alice Corp., 717 F.3d 1269, 106 U.S.P.Q.2d 1696 (C.A. Fed. 2013)). In the case at hand, the Court did not distinguish among the ineligibility under 35 U.S.C. 101 of the method, media, and system claims, but rather rejected them all. The Court also did not take into account the dissenting in part opinions of Federal Circuit Judges Rader, Linn, Moore, and O’Malley that the system claims are eligible for patent protection under 35 U.S.C. 101 even though the method claims are not. Rather, in passing the Court stated that “This Court has long ‘warned…against’ interpreting §101 ‘in ways that make patent eligibility depend simply on the draftsman’s art.’” The Court appears to accept Judge Lourie’s opinion in the per curia case that “the asserted method and system claims require performance of the same basic process” and therefore simply adding a computer to the system claims does not save them from ineligibility. 106 U.S.P.Q.2d 1696. The Court’s opinion appears to support the Federal Circuit’s analysis whereby system claims, even though drawn to a computer with hardware,  are no more eligible than the method claims because the reviewing court suspects the patent draftsman of  “artfully” attempting to avoid the ineligibility of the method claims. As Federal Circuit Judges Moore, Linn, and O”Malley said in their dissenting opinion, such a hermeneutic “may open to ineligibility challenges “hundreds of thousands of patents, including all business method, financial system, and software patents as well as many computer implemented and telecommunications systems.” 106 U.S.P.Q.2d ___ (Moore, J; Linn, J; and O’Malley, J. dissenting-in-part). The Supreme Court has not attempted to “delimit the precise contours of the ‘abstract ideas’ category.” In other words, the Court is essentially saying “we will know it when we see it.”

Here is a link to my previous blog post.

 

 

Third Annual University of Minnesota Law School Patent Symposium

On Wednesday, May 21, Briggs and Morgan’s Intellectual Property group and the University of Minnesota Law School co-presented the Third Annual University of Minnesota Law School Patent Symposium, Non-Practicing Entities: Abusive “Patent Trolls” or Free Enterprise Drivers of Innovation? The symposium covered the following topics:

  • Do Patent Assertion Entities Help or Hinder Innovation?
  • Issues and Trends in State Actions Against NPEs
  • Litigation When Sued by a Patent Assertion Entity
  • Litigating Against NPEs – In‐House Strategies
  • Pending Legislation Aimed at NPEs

Briggs and Morgan’s top-rated intellectual property attorneys can help you maximize the value of your IP and avoid risk. Briggs’ IP lawyers have been recognized by their peers as “Top 40 Intellectual Property” lawyers, Intellectual Property “Super Lawyers,” and Minnesota Attorneys of the Year. As a result, they possess the knowledge and breadth of experience to understand your business and help you achieve your objectives.

Please click here if you were not able to make the symposium but would like to view a copy of the materials.

Supreme Court Eases The “Exceptional Case” Standards for Patent Cases

In October, we reported on the Supreme Court’s decision to take on two patent cases addressing the “exceptional case” standards of Section 285. This week, the Court issued its unanimous decisions in Octane Fitness v. Icon Health & Fitness and Highmark v. Allcare Health, abolishing the Federal Circuit’s rigid standards for these types of cases and creating new standards that will make it easier for district courts to award fees to prevailing parties in patent infringement actions.

Prior to this week’s decisions, in order to establish that a case was exceptional, a prevailing party was required to show by clear and convincing evidence that the litigation was both brought in bad faith and objectively baseless. In Octane Fitness, however, the Court found that Section 285 contains no such requirements. Rather, according to the Court, Section 285 “imposes one and only one constraint on district courts’ discretion to award attorney’s fees in patent litigation: The power is reserved for ‘exceptional’ cases.” Similarly, the Court found that “nothing in [Section 285] justifies such a high standard of proof” as clear and convincing evidence. Instead, “Section 285 demands a simple discretionary inquiry; it imposes no specific evidentiary burden, much less a high one.”

Construing the term “exceptional” in accordance with its ordinary meaning, the Court held that an “exceptional” case “is simply one that stands out from others with respect to the substantive strength of a party’s litigating position. . . or the unreasonable manner in which the case was litigated.” Accordingly, under the new framework set forth in Octane Fitness, district courts may determine whether a case is “exceptional” in a “case-by-case exercise of their discretion, considering the totality of the circumstances.”

Piggy backing on the holding of Octane Fitness, the Icon Health decision held that all aspects of an “exceptional case” determination should be reviewed under an abuse of discretion standard rather than the Federal Circuit’s previously exercised de novo review of the “objectively baseless” determination.

While both of these cases had implications relating to the rise of non-practicing entity (“NPE”) litigation, the Court did not specifically address NPE issues. However, with the more flexible standards set forth in these decisions, there is no doubt these holdings will impact not only NPE litigation, but patent litigation in general. “Exceptional case” motions are likely to become more common, and, as one amicus suggested, the new standards will “incentivize[] patent holders and accused infringers to litigate only legitimate, good-faith disputes over patent infringement and validity.”

Federal Circuit Partially Vacates Judge Koh’s Order Denying Apple’s Motion for a Permanent Injunction Against Samsung

[Cross-posted at Comparative Patent Remedies]

In an appeal arising from Judge Koh’s December 2012 order denying Apple’s request for a permanent injunction against Samsung, following the high-profile August 2012 jury verdict in Apple’s favor, Judge Prost writing for the panel (1) affirms Judge Koh’s ruling denying a permanent injunction with respect to Samsung’s infringement of three design patents and its dilution of Apple’s trade dress; and (2) vacates the portion of the ruling denying a permanent injunction with respect to the three utility patents.  The opinion can be downloaded from here.  My previous write-up on the case following oral argument in August 2013 is here.

The principal issues were (1) whether Judge Koh was correct to require proof of a causal nexus between Samsung’s infringement and Apple’s (established) loss of market share and downstream sales to Samsung, and (2) if so whether she correctly applied the “causal nexus” concept.  (The “causal nexus” requirement itself comes from two previous Federal Circuit decisions on preliminary injunctions, referred to in the opinion as Apple I and Apple II).  On the first issue, the Federal Circuit says yes:  “the district court was correct to require a showing of some causal nexus between Samsung’s infringement and the alleged harm to Apple as part of the showing of irreparable harm.”  The court rejected Apple’s argument that “causal nexus” is an “unprecedented fifth requirement,” and reaffirms that “causal nexus . . . is part of the irreparable harm factor.”  On the second issue, however, the court “agree[s] with Apple that certain of the standards arguably articulated by the district court go too far.”  Specifically:

First, the district court appears to have required Apple to show that one of the patented features is the sole reason consumers purchased Samsung’s products. . . .

It is true that Apple must “show that the infringing feature drives consumer demand for the accused product.” Apple II, 695 F.3d at 1375. It is also true that this inquiry should focus on the importance of the claimed invention in the context of the accused product, and not just the importance, in general, of features of the same type as the claimed invention. . . .  However, these principles do not mean Apple must show that a patented feature is the one and only reason for consumer demand. Consumer preferences are too complex—and the principles of equity are too flexible—for that to be the correct standard. Indeed, such a rigid standard could, in practice, amount to a categorical rule barring injunctive relief in most cases involving multi-function products, in contravention of eBay.

Thus, rather than show that a patented feature is the exclusive reason for consumer demand, Apple must show some connection between the patented feature and demand for Samsung’s products. There might be a variety of ways to make this required showing, for example, with evidence that a patented feature is one of several features that cause consumers to make their purchasing decisions.  It might also be shown with evidence that the inclusion of a patented feature makes a product significantly more desirable. Conversely, it might be shown with evidence that the absence of a patented feature would make a product significantly less desirable. . . .

The second principle on which we disagree with the district court is its wholesale rejection of Apple’s attempt to aggregate patents for purposes of analyzing irreparable harm.

While it is true that this court analyzed causal nexus on a patent-by-patent basis in Apple I, we did not mean to foreclose viewing patents in the aggregate. Rather, we believe there may be circumstances where it is logical and equitable to view patents in the aggregate. For example, it may make sense to view patents in the aggregate where they all relate to the same technology or where they combine to make a product significantly more valuable.  To hold otherwise could lead to perverse situations such as a patentee being unable to obtain an injunction against the infringement of multiple patents covering different—but when combined, all—aspects of the same technology, even though the technology as a whole drives demand for the infringing product.

Applying these rules, the court concluded that Judge Koh did not abuse her discretion in finding no causal nexus between the design patent infringement and Apple’s harm; but that she must reconsider the matter with respect to three utility patents.  (The court agreed with Judge Koh that there was no evidence Samsung would resume the trade dress dilution, and affirmed the denial of an injunction with respect to those rights on that ground.) With regard to the utility patents, the court wasn’t swayed by Apple’s survey evidence that “ease of use, in general, is important to the iPhone” or that Samsung copied.  This evidence, though relevant, wasn’t enough by itself to show causal nexus.  But the court did find evidence in the form of a conjoint survey potentially more probative: Read the rest of this entry

Intellectual Ventures’ Damages Claims, Professor Cotter’s Reaction

Reuters quotes our very own Professor Cotter regarding the novel damages argument being made by Symantec and Trend Micro against Intellectual Ventures (IV). According to the news service, IV seeks more than $300 million from the two companies for infringing a patent purchased for $750,000. Symantec and Trend Micro have told a Delaware Court that such a large licensing fees cannot be reasonable for a patent acquired for so little.

Thomas Cotter, a patent damages expert at the University of Minnesota Law School who is not involved in the case, said he is unaware of any court ruling along the lines being urged by Symantec and Trend Micro. For Intellectual Ventures, which says it has earned about $3 billion to date from licensing its thousands of patents, the stakes could hardly be higher.

“If the royalty is capped at the purchase price, there’s obviously no point in being a patent assertion entity,” Cotter said. Read the rest of this entry

“The Innovation Act of 2013” – Representative Goodlatte Introduces New Bill Seeking to Curb Perceived Patent Litigation Abuses

On October 23, 2013, House Judiciary Committee Chairman Robert Goodlatte introduced “The Innovation Act of 2013.” (H.R. 3309) The bill is in response to perceived abuse of the patent litigation system by Non-Practicing Entities (referred to derogatorily as “Patent Trolls.”) The bill is being distinguished from other recent reform proposals on the basis that it “target[s] abusive behavior rather than specific entities.”  The bill’s authors have been careful to note that it does not attempt to eliminate valid patent litigation.  Rather, the stated goal is “preventing individuals from taking advantage of gaps in the system to engage in ‘litigation extortion.’”

Some of the key highlights of the bill are:

1.         Heightened pleading requirements.  Without limitation, the bill would require Plaintiffs to provide: i) an identification of each patent and each claim allegedly infringed; ii) an explanation as to where each element of each claim is found in each “accused instrumentality”; iii) whether each element is infringed literally or under the doctrine of equivalents; iv)  how the terms of each claim correspond to the functionality of the accused instrument; v) for any indirect infringement, a description of the direct infringement and any acts allegedly inducing or contributing thereto; vi) allege indirect infringement; vii) a description of the “right” of the party to assert infringement, viii) a description of the principal business of the party alleging infringement; and ix) a list of all infringement complaints involving the same patent(s).

2.         Joinder.  The bill would allow joinder of an “interested party” where a defendant shows the plaintiff has no substantial interest in the patent other than asserting it in litigation.  “Interested Party” is defined to include: i) assignees of the patent; ii) persons with a right to enforce or sublicense the patent; iii) persons with a direct financial interest in the patent, including attorneys and law firms representing the plaintiff;

3.         Attorneys Fees to the Prevailing Party. The bill provides that the court “shall” award reasonable fees and other expenses to the prevailing party unless the position of the non-prevailing party was “substantially justified” or “special circumstances make an award unjust.”  Of note – the bill expressly allows prevailing defendants to collect fee awards from non-plaintiffs having a substantial interest in the patent-at-issue.

4.         Limitations on Discovery.  The bill would allow only limited discovery until after claim construction.

The bill also contains substantive changes to the AIA’s new IPR and PGR proceedings.  First, the bill seeks to limit PGR estoppel. Under the AIA, PGR creates estoppel for “any ground that the petitioner raised or reasonably could have raised. . .” 35 U.S.C. § 325(e) (italics added.)  The bill would narrow such estoppel solely to grounds actually raised.  The authors of the bill presumably want to promote use of PGR by limiting estoppel concerns.

Second, the bill seeks to change the PTO’s longstanding practice of applying the broadest possible claim construction in review proceedings.  The proposed bill would require the PTO to “constru[e] each claim of the patent in accordance with the ordinary and customary meaning of such claim as understood by one of ordinary skill in the art and the prosecution history pertaining to the patent.” To the extent the authors of the bill are seeking to curtail NPE litigation, one wonders why they would propose a narrower claim construction, thereby making it easier for the NPEs’ patents – many of which are perceived to be obvious and overbroad — to survive review.

To see why former USPTO Director Kappos supported and favored continuing application of the broadest possible claim interpretation see http://www.uspto.gov/blog/director/entry/ensuring_quality_inter_partes_and.

http://www.uspto.gov/blog/director/entry/ensuring_quality_inter_partes_and

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