Litigation Webinar Series: INSIGHTS · 9/9/2015 · Litigation Webinar Series: INSIGHTS Our take...

Supreme Court Decisions

September 16, 2015

Litigation Webinar Series: INSIGHTSOur take on litigation and trial developments across the U.S.

Cherylyn Esoy MizzoPrincipal, DC

Robert CourtneyPrincipal, Twin Cities

Overview

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• INSIGHTS Series

• Key Developments & Trends

• Housekeeping

• CLE Contact: Georgie Stocks

• [email protected]

• Questions

• Materials: fishlitigationblog.com/webinars

• #fishwebinar

Wednesday, September 23rd

1:00 p.m. EST | Webinar

Patent Damages

mailto:[email protected]

Agenda

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• Patent Validity

• Alice and the Bar on Abstract Ideas

• Nautilus and Indefiniteness

• Patent Interpretation

• Teva and Claim Construction

• Patent Liability & Infringement Defenses

• Limelight and Changing Views of Divided Infringement

• Commil and Inducement

• Patent Damages

• Kimble and Patent Royalties

Paste Patent/ Complaint

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Patent Validity—Alice and the Bar on Abstract Ideas

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Alice Corp. v. CLS Bank International, 134 S. Ct. 2347 (2014)

Opinion: Thomas

Concurrence: Sotomayor (joined by Ginsburg and

Breyer)

• The latest in several recent cases concerning the legal framework for patent eligibility

• Under § 101 of the Patent Act, some innovations—no matter how new or clever—are not eligible for patents

• Laws of nature

• Natural phenomena

• Abstract ideas

• Alice outlines how courts are to identify, and invalidate, patents purporting to cover abstract ideas


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The 2012 case Mayo v. Prometheus had addressed patent eligibility as relating to natural phenomena

Alice embraced Mayo’s basic approach, and applied it to the inquiry of whether a patent claimed an abstract idea

A two-step approach:

• Is the claim directed to an abstract idea?

• If so, is there some “inventive concept” that transforms this abstract idea into some application of the idea that is patent-eligible?

Alice, 134 S. Ct. at 2355


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Under the Mayo test, Alice’s claims

were invalid as addressing patent-

ineligible subject matter.

Per Mayo step 1, the claims

addressed the abstract idea of

“intermediated settlement”

And per Mayo step 2, they lacked

any “inventive concept” that could

transform this idea “into a patent-

eligible application”


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Mayo Step 1 (an abstract idea):

• Alice’s claims addressed the use of an intermediary to mitigate settlement risk in financial transactions

• Intermediated settlement is “a fundamental concept long prevalent in our system of commerce”

• Under the reasoning of Bilski v. Kappos, 561 U.S. 593 (2010), such a concept is unpatentablyabstract


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Mayo Step 2 (no inventive concept):

• Some of Alice’s claims required

computers to implement the

invention, but this did not make

the claims less abstract

• Mere application of already well-

known methods—including use of

computers—does not make the

abstract idea patentable

• “[I]f a patent’s recitation of a computer

amounts to a mere instruction to ‘implement’

an abstract idea ‘on a computer,’ Mayo, 132

S.Ct. at 1301, that addition cannot impart

patent eligibility.” Alice, 134 S. Ct. at 2358.


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Alice’s Impact

• Alice sets a standard for finding computer-implemented claims unpatentably abstract

• It does not establish any bright-line rule. The specific circumstances of each patent will impact patent eligibility heavily

• In the wake of Alice, there has been a stream of patent ineligibility decisions from district courts, the PTO, and the Federal Circuit. E.g.:

• Versata Development Grp., Inc. v. SAP Am., Inc., 793 F.3d 1306 (Fed. Cir. July 9, 2015)—CBM claim invalid as patent ineligible

• Intellectual Ventures I LLC v. Capital One Bank (USA), N.A., 792 F.3d 1363 (Fed. Cir. July 6, 2015)—Claim invalid as patent ineligible

• Internet Patents Corp. v. Active Network, Inc., 790 F.3d 1343 (Fed. Cir. June 23, 2015)—Claim invalid as patent ineligible

• DDR Holdings, LLC v. Hotels.com, L.P., 773 F.3d 1245 (Fed. Cir. 2014)—Claim confirmed patent eligible

• Ultramercial, Inc. v. Hulu, LLC, 772 F.3d 709 (Fed. Cir. 2014)—Claim invalid as patent ineligible

“I adhere to the view that any ‘claim that merely

described a method of doing business does not

qualify as a process under § 101.’”

134 S. Ct. at 2360 (quoting Bilski, 561 U.S. at 614 (Stevens, J., concurring in judgment)).

Concurrence (Sotomayor, joined by Ginsburg and Breyer)


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Patent Validity—Nautilus and Indefiniteness

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Nautilus, Inc. v. Biosig Instruments, Inc.,

134 S. Ct. 2120 (2014)

Opinion: Ginsburg

• The Court defines test for

indefiniteness under 35 U.S.C. § 112,

¶ 2

• In reversing Federal Circuit’s holding

that claims were not invalid as

indefinite, the Court creates a new

indefiniteness standard—the claims

must “inform those skilled in the art

about the scope of the invention with

reasonable certainty”

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• Patent concerned heart rate monitor mounted to exercise equipment

• District court granted summary judgment that the claims are invalid as indefinite

based on the claim term “spaced relationship”

• In its original decision, the Federal Circuit reversed upon concluding that the

intrinsic evidence provided enough clarity for the term “spaced relationship”

• In reaching its decision, the Federal Circuit relied on its precedent that terms are

indefinite “only when it is not amenable to construction or insolubly ambiguous”

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Holding: A patent is invalid

for indefiniteness if its claims,

read in light of the patent’s

specification and prosecution

history, fail to inform, with

reasonable certainty, those

skilled in the art about the

scope of the invention.

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• The Court concluded that the

lower court’s test for indefiniteness

“could breed lower court

confusion”

• The new standard articulated by

the Court is intended to “mandate[]

clarity, while recognizing that

absolute precision is unattainable”

• The Court declined to address

validity and instead remanded to

Federal Circuit to decide the issue

under the new standard for

indefiniteness

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On Remand at the Federal Circuit

• The Federal Circuit reached the same conclusion under the new standard

that the claims at issue were not invalid as indefinite

• The intrinsic evidence made clear that a person of skill in the art would

understand with reasonable certainty the scope of the invention

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Impact of Nautilus v. Biosig

• Nautilus impacts the requirements inventors and claim drafters must satisfy to patent

new technologies

• Nautilus makes it easier for accused infringers to challenge and invalidate imprecise

claims

• Subsequent decisions that have issued since Nautilus show that the standard for

definiteness is more strict

• Interval Licensing v. AOL, Interval Licensing LLC v. AOL, Inc.,

766 F.3d 1364 (Fed. Cir. 2014)

• Loyalty Conversion Sys. Corp. v. Am. Airlines, Inc.,

No. 2:13-cv-655, 2014 U.S. Dist. LEXIS 122184 (E.D. Tex. Sept. 2, 2014)

• Regeneron Pharm., Inc. v. Merus B.V.,

No. 14 1650 (KBF), 2014 U.S. Dist. LEXIS 163350 (S.D.N.Y. Nov. 21, 2014)

• Light Transformation Techs. LLC v. Lighting Sci. Grp. Corp.,

No. 2:12-cv-826-MHS-RSP, 2014 U.S. Dist. LEXIS 94090 (E.D. Tex., July 11, 2014)

• Abdou v. Alphatec Spine, Inc.,

No. 12-cv-1804 BEN (RBB), 2014 U.S. Dist. LEXIS 163044 (S.D. Cal. Nov. 19, 2014)


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Teva Pharmaceuticals USA, Inc. v. Sandoz, Inc., 135 S. Ct. 831

Opinion: BreyerDissent: Thomas (joined by Alito)

• Addresses the deference to district judges in patent appeals

• Claim interpretation remains a legal, not factual question

• But when district judges make subsidiary fact determinations, those determinations are entitled to deference on appeal

Patent Interpretation—Teva and Claim Construction

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• The interpretation of patent

claims remains a legal issue for

the judge—not for juries—per

Markman v. Westview

Instruments, 517 U.S. 370 (1996)

• But on appeal, some deference

is required if the claim

interpretation process can

involve subsidiary fact questions

• In Teva, the district judge

weighed evidence and made fact

findings concerning the meaning

that a skilled artisan would apply

to the claim term “molecular

weight”

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• Appellate courts are not in a position to weigh evidence. Rule 52(a)(6) requires those courts to accept trial court’s findings unless they are “clearly erroneous”

• Per Teva, this rule applies to claim construction as well

• The Federal Circuit will defer to trial courts’ findings of fact—though not necessarily to the legal analysis

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• In dissent, Justice Thomas argued claim construction does not involve

findings of fact and therefore a de novo standard of review applies. Slip op.,

dissent at 1, 5–7.


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Impact of Teva v. Sandoz

• Teva constrains the Federal Circuit’s review of claim

construction issues, at least for some cases

• Claim construction does not always involve evidence weighing

or fact finding

• Litigants will take Teva into account in their claim construction

strategies, for example in:

• Use of expert testimony

• Submission of extrinsic evidence


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Patent Infringement—Limelight and Divided Infringement

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Limelight Networks, Inc. v. Akamai Technologies, Inc., 134 S. Ct. 2111 (2014)

Opinion: Alito

• Plaintiff Akamai sought judgment against Limelight on an inducementtheory concerning a method claim

• Akamai had not shown that either Limelight or any of its customers ever directly infringed the entire method

• Limelight itself practiced most, but not all steps

• At least one step was completed only by customers

• The Court held that there could be no inducement liability without direct infringement


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• Limelight itself was not a direct infringer, as it never practiced the whole method

• Even if Limelight instructed its customers to practice the remaining step, such is not “inducement” under § 271(b) because the act being induced is not, itself, infringement

• The fact that the various steps, had they all been performed by one person, would have been infringing was insufficient to support inducement liability

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• There is a coda to Limelight, arising from the Federal Circuit’s treatment on remand, 2015 WL 4760450 (Aug. 13, 2015)

• Sitting en banc, the Federal Circuit found Limelight liable for direct infringement

• The Federal Circuit determined that Limelight was liable for the acts of its customers due to the terms of Limelight’s service to customers

• Limelight has until mid-November to file a cert petition


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Limelight’s Impact

• Divided infringement considerations can be serious issues for

some method claims

• For those asserting such claims, Limelight reaffirms that

inducement cannot be shown without a direct infringement

• Careful claim drafting remains the best way to guard against

divided infringement issues

• Per the Federal Circuit’s remand decision, in some cases it may

be possible for a plaintiff to overcome divided infringement

issues by showing some close relationship between two part-

infringers, so as to attribute the acts of one to the other


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Patent Infringement—Commil and Inducement

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Commil USA, LLC v. Cisco Systems, Inc., 135 S. Ct. 1920 (2015)

Opinion: KennedyDissent: Scalia (joined by Roberts)Justice Breyer did not participate. Justice Thomas partially joined the Court’s opinion.

• Commil concerns the mental state required for inducement liability

“In contrast to direct infringement, liability forinducing infringement attaches only if thedefendant knew of the patent and that ‘theinduced acts constitute patent infringement.’”

135 S. Ct. at 1926 (quoting Global-Tech Appliances, Inc. v.SEB S.A., 131 S. Ct. 2060, 2068 (2011)).

• Good faith belief that the patent was invalid is not a defense.

• Good faith belief that the patent was not infringed is a defense.


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• Per Commil, patent infringement

and invalidity are separate

matters under patent law

“[I]nvalidity is not a defense to infringement, it

is a defense to liability. And because of that fact,

a belief as to invalidity cannot negate the scienter

required for induced infringement.”

135 S. Ct. at 1929.

• Dissent (Justice Scalia, joined by Chief

Justice Roberts):

“To talk of infringing an invalid patent is to talk

nonsense.”

135 S. Ct. at 1931


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Commil’s Impact

• Pre-suit opinions concerning invalidity will not preclude

inducement liability

• Confirmation that inducement does not require specific intent

to infringe.

• Requires an intentional inducing act, coupled with knowledge of

the patent and knowledge of infringement


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Patent Damages—Kimble v. Marvel and Post-expiration Royalties

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Kimble v. Marvel, 135 S. Ct. 2401

(2015)

Opinion: Kagan

Dissent: Alito (joined by Roberts

and Thomas)

• Court upholds over 50-year old rule

set forth in Brulotte v. Thys Co.,

379 U.S. 29 (1964) that makes it

per se unlawful to collect royalties

for the use of a claimed invention

beyond the patent expiration date

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• Case involves U.S. Patent No. 5,072,856

that covered toy that resembled the web-

shooting action of Spider-Man

• Patent owner, Kimble, sued Marvel when

they brought their own version of the

Spider-Man toy to market

• Kimble and Marvell settled, entering into

an agreement where, inter alia, Marvel

purchased the patent for a lump sum,

plus a 3% royalty, with no time limit on

the royalty obligation

• Upon learning about the Brulotte rule,

Marvel filed DJ action against Kimble

seeking confirmation that it can stop

paying Kimble royalties

• District court granted relief and Ninth

Circuit affirmedPhoto: www.forbes.com

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Slip Op. at 1.

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• The Supreme Court affirmed the lower court decision, finding no “special

justification,” which is required to depart from stare decisis overturn Brulotte

• The Court noted that “Brulotte lies at the intersection of two areas of law:

property (patents) and contracts (licensing agreements)” and in those contexts

“considerations favoring stare decisis are ‘at their acme’” because parties are

especially likely to rely on precedents when ordering their affairs.”

• The Court cited numerous instances in which Congress had the opportunity to

reverse Brulotte but chose not to, further suggesting that the rule should stand

• Kimble’s economic arguments for departing from Brulotte, i.e., that the effects

of Brulotte are anticompetitive and suppresses technological innovation—are

arguments more appropriately addressed to Congress, not to the Court

“[W]ith great power there must also come—great responsibility.”

Slip Op. at 18.

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• In dissent, Justice Alito argued

that stare decisis does not render

a decision “invincible.” It “is

important to the rule of law, but so

are correct judicial decisions.” Slip

op., dissent at 5.

• Justice Alito described the

Brulotte decision as one

grounded on an economic theory

that had been debunked, not on

“an interpretation of the terms of

the Patent Act.” Id. at 1.

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Patent Damages—Kimble and Post-expiration Royalties

Impact of Kimble v. Marvell

• The Kimble Court removes any doubt to the long-standing rule that

royalties tied to the post-expiration use of the underlying patents are

per se not allowed.

• Some flexibility in creative licensing, however, remains permissible

under the rule. To ensure that agreements are not impacted by

Brulotte, contracting parties should include express language in their

agreements that any post-expiration royalty payment is not for the post-

expiration use of the technology covered by the patent.

• Armed with the knowledge that revenue stream for the claimed

technology ends on the day the patent expires, patentees should avoid

delays in prosecution to maximize potential revenue during the patent

term.

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Questions?

Mark your calendar!

Wednesday, September 23rd

Patent Damages

fishlitigationblog.com/webinars

INSIGHTS Litigation Webinar Series

http://fishlitigationblog.com/webinars

Thank you!

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Please send your NY CLE forms or questions about the webinar to marketing at [email protected].

A replay of the webinar will be available for viewing at http://fishlitigationblog.com.

Cherylyn Esoy Mizzo

Principal

Washington, DC

202-626-7748

[email protected]

Robert Courtney

Principal

Twin Cities

612-766-2077

[email protected]

mailto:[email protected]

http://fishlitigationblog.com/

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Litigation Webinar Series: INSIGHTS · 9/9/2015 · Litigation Webinar Series: INSIGHTS Our take...

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