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Supreme Court ReviewAustin IPLA, August 19, 2014

Rob King,Silicon Labs

Anthony Peterman, Dell

Lisa Galloway, Lifesize

Jennifer Kuhn

+ IP Cases in the 2013-14 Supreme Court Term

Octane Fitness, LLC v. Icon Health and Fitness, Inc.

Highmark Inc. v. Allcare Management Systems

Alice Corp Pty., Ltd v. CLS Bank Int’l

Nautilus, Inc. v. Biosig Instruments Inc.

Limelight Networks, Inc. v American Broadcasting Co., Inc. v. Aereo, Inc.

Akamai Technologies, Inc.

POM Wonderful LLC v. The Coca-Cola Co.,

Petrella v. MGM, Inc.

Medtronic, Inc. v. Mirowski Family Ventures LLC

+Octane Fitness, LLC v. Icon Health & Fitness 134 S.Ct. 1749 (2014)

Key Facts – Icon and Octane are direct competitors of exercise equipment and Icon asserts a patent claiming an elliptical exercise machine. Octane’s Basis for Fees Under 35 U.S.C. 285:

Icon is a bigger company and never commercially sold the claimed machine

An email between two Icon executives in sales states that the suit is brought “as a matter of commercial strategy”

Basis of Denial of Fees After Summary Judgment Granted

Brooks Furniture v. Dutailier (CAFC 2005) – “Exceptional” is either “material inappropriate conduct” or both “objectively baseless” and “brought in subjective bad faith”

+Octane Fitness, LLC v. Icon Health & Fitness 134 S.Ct. 1749 (2014)

Best Practices and Continued Implications Pre-Filing Due Diligence is clearly even more important than

before

Control of and review of communications of key employees is continually relevant

Likely impact in the short-term is for frequent use of Sec. 285 motions to occur, so Courts will become wary of such motions becoming abusive

Similar behavioral traits for an “exceptional case” will likely be applied to Lanham Act cases and patent cases

+Octane Fitness, LLC v. Icon Health & Fitness 134 S.Ct. 1749 (2014)

Best Practices and Continued Implications Pre-Filing Due Diligence is clearly even more

important than before Control of and review of communications of key

employees is continually relevant Likely impact in the short-term is for frequent use of

Sec. 285 motions to occur, so Courts will become wary of such motions becoming abusive

Beyond the patent litigation context, the same interpretation of “exceptional case” will likely be applied to the Lanham Act

+Highmark Inc. v. Allcare Health Management System 134 S.Ct. 1744 (2014) Key Facts – Allcare owns a patent covering “utilization

review” in “managed health care systems” Highmark files a DJ and Allcare counterclaims Both sides file for SJ and Dist. Ct rules in favor of

Highmark Fed. Cir. affirms and then Highmark moves for fees

under Sec. 285. The Dist. Ct. awards the fees finding: (1) Allcare was

using an ‘informational survey’ for the real purpose of identifying companies to sue and then forcing the companies to buy a license under threat of suit; (2) Claims were maintained after own experts had admitted the claims had “no merit”; and (3) “asserted defenses it and its attorneys knew to be frivolous.” Fed. Cir. reviews de novo and reverses in part.

+Highmark Inc. v. Allcare Health Management System 134 S.Ct. 1744 (2014) Holding – Fed. Cir. is reversed.

Because Sec. 285 commits the “exceptional” determination to the discretion of the district court, that decision is to be reviewed on appeal for abuse of discretion and not de novo.

Impact – The District Court judge will have significant ability to punish a meritless filing that is “exceptional” and significantly fewer reversals will result.

More variation between districts in the award of attorney fees is likely to occur.

+Nautilus, Inc. v. Biosig Instruments Inc.

Key Facts – Biosig owned a patent related to a heart rate monitor associated with exercise equipment. Biosig sued Nautilus for infringement. One issue raised by Nautilus on summary judgment

was that the claims were invalid as indefinite. The District Court granted that motion. The Federal Circuit reversed applying its standard

that a patent claim could only be considered indefinite when it is “insolubly ambiguous.” If a claim is “amenable to construction” then it is not “insolubly ambiguous.”

+Nautilus, Inc. v. Biosig Instruments Inc.

Holding – Fed. Cir. is reversed. In a unanimous opinion, the Court held that the Fed

Circuit’s test failed to apply the statutory requirement. Because a patent claim serves a public notice function

then it must be definite enough to inform those in the field with “reasonable certainty.”

The Court viewed the imprecision allowed by the “insolubly ambiguous” standard diminished the public-notice function and discouraged innovation by allowing a “zone of uncertainty.”

Impact – There will be more defendants asserting the indefinite defense when any claim term could be subject to more than one meaning. Open question remains how the Fed Cir and District Courts will actually apply it. The Court’s reluctance to decide may indicate fact issues are involved.

+Alice Corp Pty., Ltd v. CLS Bank Int’l

Appeal from the Federal Circuit’s fractured en banc ruling: Ten member en banc panel issued seven different decisions Seven of ten judges agreed that the method and computer-

readable claims at issue were not valid under section 101. Five judge opinion written by Judge Lourie provided three

main points: Natural laws, natural phenomena, abstract ideas and

fundamental concepts should remain “free to all.” Formalism should not trump substance in analyzing

claims for their incorporation of material that should remain free to all.

Subject matter eligibility analysis should remain a flexible, claim by claim analysis.

+Representative claim at issue: 33. A method of exchanging obligations as between parties, each party

holding a credit record and a debit record with an exchange institution, the credit records and debit records for exchange of predetermined obligations, the method comprising the steps of:

(a) creating a shadow credit record and a shadow debit record for each stakeholder party to be held independently by a supervisory institution from the exchange institutions;

(b) obtaining from each exchange institution a start-of-day balance for each shadow credit record and shadow debit record;

(c) for every transaction resulting in an exchange obligation, the supervisory institution adjusting each respective party's shadow credit record or shadow debit record, allowing only these transactions that do not result in the value of the shadow debit record being less than the value of the shadow credit record at any time, each said adjustment taking place in chronological order; and

(d) at the end-of-day, the supervisory institution instructing ones of the exchange institutions to exchange credits or debits to the credit record and debit record of the respective parties in accordance with the adjustments of the said permitted transactions, the credits and debits being irrevocable, time invariant obligations placed on the exchange institutions.

U.S. Patent No. 5,970,479

+Supreme Court affirms:

“We hold that the claims at issue are drawn to the abstract idea of intermediated settlement, and that merely requiring generic computer implementation fails to transform that abstract idea into a patent-eligible invention.”

The Court distinguishes between claims that cover the building blocks of ingenuity (non eligible) and those that integrate the building blocks into something more

(following Mayo) thus transforming the building blocks into a patent eligible invention.

Merely implementing a non-eligible abstract idea on a generic computer will not transform an abstract idea into a patentable invention.

+USPTO Guidelines following Alice The same analysis should be used for abstract ideas

and laws of nature.

The same analysis should be used for product claims and process claims.

Subject matter eligibility step by step: Is the claim directed to a statutory category: process,

machine, manufacture or composition of matter. Is the claim directed to a judicial exception: law of nature,

natural phenomenon, or abstract idea. If the claim is directed to an abstract idea, does the claim

include: Improvements to another technology or technical field, Improvements to the functioning of the computer itself, Meaningful limitations beyond generally linking the use of

an abstract idea to a particular technological environment.

+American Broadcasting Co., Inc. v. Aereo, Inc.

+Limelight Networks, Inc. v Akamai Technologies, Inc. Key Facts – Limelight owned and asserted a patent

related to delivering data to internet users over a content delivery network (CDN) The claim required a number of steps including “tagging”

of portions of a website like video or music files. Limelight operated a CDN and performed some of the

steps but did not “tag” content. Although, it did provide instructions and assistance to its customers how to do that.

The Federal Circuit held that there was no direct infringement. But despite that, an en banc panel held Limelight could be liable for induced infringement.

The court reasoned that even if a single party cannot be liable for direct infringement under 271(a), courts may still find the predicate act of direct infringement occurred through the combined actions of multiple parties for the purpose of inducement under 271(b).

+Limelight Networks, Inc. v Akamai Technologies, Inc. Holding – Fed. Cir. is reversed.

In a unanimous opinion, the Supreme Court found that a party cannot be liable for induced infringement in the absence of direct infringement.

The Court refused to accept the attempt to create “two parallel bodies of infringement law” that would approach direct infringement differently under 271(a) and 271(b).

The Court also commented on the “direction and control” standard under the Muniauction case. In doing so, it raised some questions whether the Fed Cir could have found Limelight to have sufficient control for direct infringement.

Impact: The practical impact may be limited. The holding is aligned with how most perceived “black letter” law of inducement. The Fed Cir en banc decision opened potential new doors that were then closed by the Court.

+POM Wonderful LLC v. The Coca-Cola Co.,

+Statutory Interpretation in POM

Harmony Legislative Intent

+Petrella v. MGM, Inc

“We have not had occasion to review the Federal Circuit’s position.”

No more laches in copyright Patent law?

+Medtronic, Inc. v. Mirowski Family Ventures LLC 134 S.Ct. 843 (2014) Holding – Fed. Cir. is reversed.

Three legal propositions: (1) Burden of proving infringement generally rests on the patentee; (2) the DJ Act is “procedural”; and (3) Burden of proof is “substantive”

Practical considerations considered by the Supreme Court

(1) Uncertainty would result with shifting the burden to the licensee.

(2) Unnecessary complexity would result (proving a negative)

(3) Inconsistent with the purpose of the DJ Act

+Medtronic, Inc. v. Mirowski Family Ventures LLC 134 S.Ct. 843 (2014) Key Facts – A sublicense agmt. permitted licensee

Medtronic to challenge validity and infringement via a DJ action while paying disputed royalties into escrow. DJ action was filed. A litigation tolling agmt. was

signed. The licensee gave notice of new products with design information. Licensor then had to give notice of what products are infringing.

A dispute continued and another DJ action was filed. Dist. Ct.—Found for licensee because licensor had not

proved infringement, claiming the licensee must prove the negative.

Fed. Ct.—Reversed the Dist. Ct. and its prior precedent

Basis: Burden should be put on the party seeking relief

+Medtronic, Inc. v. Mirowski Family Ventures LLC 134 S.Ct. 843 (2014) Impact:

(1) Patentees have the burden of proof in all DJ suits.

(2) The Fed. Cir. holding could have unduly influenced the decision to file a DJ action.

(3) License agreement drafting continues to evolve:

As a Licensor, avoid any license where payment is dependent on whether future products use the patents (i.e. base the royalty payments on either a one-time fee or a determinable running royalty).

As a Licensor, use caution if trying to contract around the holding in this case.

+2014-15 Sneak Preview

Two Trademark cases at the Supreme Court (so far)

Teva (Lighting Ballast) de novo standard at the Supreme Court.

Suprema v. Cross Match en banc at the Federal Circuit.

+TTAB issue preclusion in district court litigation

B&B Hardware v. Hargis Industries, No. 13-352

Issue(s): (1) Whether the Trademark Trial and Appeal Board’s finding of a likelihood of confusion precludes respondent from relitigating that issue in infringement litigation, in which likelihood of confusion is an element; and (2) whether, if issue preclusion does not apply, the district court was obliged to defer to the Board’s finding of a likelihood of confusion absent strong evidence to rebut it. CVSG: 01/13/2014.

+Tacking trademarks—the Lighting Ballast of trademark law Hana Financial v. Hana Bank, No. 13-1211

Issue(s): Whether the jury or the court determines whether use of an older trademark may be tacked to a newer one.

“To own a trademark, one must be the first to use it; the first to use a mark has “priority.” The trade- mark “tacking” doctrine permits a party to “tack” the use of an older mark onto a new mark for purposes of determining priority, allowing one to make slight modifications to a mark over time without losing priority. Trademark tacking is available where the two marks are “legal equivalents.” “

+De Novo Review

Teva Pharmaceuticals USA v. Sandoz, No. 13-854 [Arg: 10.15.2014]

Issue(s): Whether a district court’s factual finding in support of its construction of a patent claim term may be reviewed de novo, as the Federal Circuit requires (and as the panel explicitly did in this case), or only for clear error, as Federal Rule of Civil Procedure 52(a) requires.

+Suprema Inc. v. Cross Match

Whether the United States International Trade Commission (“ITC”) has authority to find a Section 337 violation—and issue an exclusion or cease and desist order—where it finds that an importer actively induced infringement of a patented invention using its imported articles but the direct infringement occurred post-importation.