At the end of June, the U.S. Supreme Court’s October 2015 term came to a close. The Court issued written decisions in three intellectual property cases during that term, the same number of cases as during the previous term, but fewer than in some recent years. Each case, however, will have a significant impact on future intellectual property proceedings. In addition, the Court already has granted certiorari in four cases for next term, and may add more IP cases to its docket in the Fall.

October 2015 Term

The Court decided four cases appealed from the U.S. Court of Appeals for the Federal Circuit during the 2015-2016 term (three with written opinions, one disposed by order). The Court affirmed the Federal Circuit in 25 percent of those cases (50 percent in patent cases), compared with a 33 percent affirmance rate in the October 2014 term and 17 percent in the October 2013 term. Since October 2012, the Supreme Court has decided 18 appeals from the Federal Circuit, and affirmed in five cases (28 percent).

Three IP cases during the term resulted in written decisions:

Cuozzo Speed Technologies, LLC v. Lee, No. 15-446 (June 26, 2016)

The Court affirmed the Federal Circuit, holding that the USPTO acted within its authority in promulgating rules requiring the Patent Trial and Appeal Board to construe patent claims in Inter Partes Review proceedings under the more conservative “broadest reasonable interpretation” (or “BRI”) standard. The Court also held that, with the exception of constitutional and other extraordinary challenges, the PTAB’s decision to institute review in an IPR proceeding is not appealable.

The eight justices participating in the case were unanimous that the USPTO’s rules applying the BRI claim construction standard were reasonable and within the rulemaking authority delegated to the USPTO in the America Invents Act. See 35 U.S.C. § 316(a)(4). The Court stressed that PTAB trials are administrative proceedings that review the prior examination of an issued patent, akin to a reexamination. As a result, the Court rejected arguments that the proceedings were “quasi-judicial” requiring the PTAB to apply the claim construction standard used in federal court litigation.

The Court noted that the use of BRI in PTAB trials may result in some inconsistency with parallel district court actions, but that possibility “has long been present in our patent system” based on the dual roles of the USPTO and the courts.

On the appealability of the PTAB’s decision to institute review, a majority of the Court ruled that the AIA expressly provided that the decision is not appealable. See 35 U.S.C. § 314(d). It noted that despite § 314(d), however, an institution decision could be appealed to lodge a constitutional challenge or in other extraordinary situations, such as the USPTO acting outside its statutory limits.

Halo Electronics, Inc. v. Pulse Electronics, Inc., No. 14-1513 (June 13, 2016) (decided with Stryker Corp. v. Zimmer, Inc., No. 14–1520).

The Court rejected the prevailing Seagate test for finding willful infringement in patent cases, a finding that may increase the prospect of enhanced damages, up to treble actual damages, under 35 U.S.C. §284. See In re Seagate Technology, LLC, 497 F. 3d 1360 (Fed. Cir. 2007) (en banc). Under Seagate, a patent owner was required to prove by clear and convincing evidence both (1) that the defendant “acted despite an objectively high likelihood that its actions constituted infringement of a valid patent,” without taking into consideration the defendant’s actual state of mind; and (2) that the defendant either knew of the high likelihood of infringement or it was so obvious that the defendant should have known the risk. The Court ruled that the Seagate test was “unduly rigid” and effectively “insulat[ed] some of the worst patent infringers from any liability for enhanced damages.” In its place, the Court left the questions of willfulness and enhancement of damages largely to the discretion of the district court, but limited them to “egregious” cases.

The Court based its ruling on Section 284, which states only that a court “may” award enhanced damages, using a word that the Court noted “clearly connotes discretion.” The statute does not support the complex Seagate test applied by the Federal Circuit.

The Court noted that although enhanced damage awards are discretionary, they must be consistent with a pattern laid out in over 180 years of case law under the Patent Act and earlier statutes. Based on that precedent, enhanced damages are “designed as a ‘punitive’ or ‘vindictive’ sanction for egregious infringement behavior.” The Court cautioned that such awards “are generally reserved for egregious cases of culpable behavior.”

Kirtsaeng v. Wiley & Sons, Inc., No. 15-275 (June 16, 2016)

In this appeal from the Second Circuit, the Court held that when considering whether to award attorneys’ fees to a prevailing party under the Copyright Act, a court should give substantial weight to the “objective reasonableness” of the losing party’s position, but also should consider all other circumstances relevant to granting a fee award.

 The Court granted certiorari to resolve the question whether a court should give substantial weight to the “objective reasonableness” of the losing party’s position in awarding attorney’s fees in copyright cases. The Court unanimously held that objective reasonableness must be considered, but held that a court also should give “due consideration to all other circumstances relevant to granting fees” and “retain[s] discretion even when losing party advanced a reasonable claim or defense.” The Court reasoned that the results of such an approach “enhance the probability that both creators and users. . . will enjoy the substantive rights the [Copyright] statute provides.” The Court reiterated that a court “must also give due consideration to all other circumstances relevant to granting fees; and it retains discretion, in light of those factors, to make an award even when the losing party advanced a reasonable claim or defense.”

October 2016 Term

The Court already has granted certiorari in four IP-related cases for the next term, beginning in October 2016.

Samsung Electronics Co. v. Apple, Inc., No. 15-777.

In this case, arising from the “Smartphone Wars” between Samsung and Apple relating to design patents covering Apple’s iPhone and other mobile devices, the Court will consider the role of apportionment in measuring damages for design patent infringement. The question presented is: “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?”

SCA Hygiene Products Aktiebolag v. First Quality Baby Products, LLC, No. 15-927

This appeal is related to the Court’s decision in Petrella v. Metro-Goldwyn-Mayer, 134 S. Ct. 1962 (2014), which held that laches is not available as a defense in copyright infringement actions. The Petrella court left undecided whether the same reasoning applies in patent cases. The question presented is: “Whether and to what extent the defense of laches may bar a claim for patent infringement brought within the Patent Act’s six-year statutory limitations period, 35 U.S.C. § 286.”

Star Athletica, LLC v. Varsity Brands, Inc., No. 15-866

In this case from the U.S. Court of Appeals for the Sixth Circuit, the Court will consider whether chevrons, color patterns, and other design elements applied to cheerleading uniforms are protected by copyright, or merely functional. The question presented is “What is the appropriate test to determine when a feature of a useful article is protectable under § 101 of the Copyright Act?”

Life Technologies Corp. v. Promega Corp., No. 14-1538

In this case, the Court will consider the extraterritorial effect of the export of a component that is part of a patented invention under 35 U.S.C. § 271(f)(1). The question presented is: “Whether the Federal Circuit erred in holding that supplying a single, commodity component of a multi-component invention from the United States is an infringing act under 35 U.S.C. § 271(f)(1), exposing the manufacturer to liability for all worldwide sales.”