Supreme Court Corner - Q2 2014

by DLA Piper

Octane Fitness, LLC v. Icon Health & Fitness, Inc.
Patent: Decided: April 29, 2014

Holding: A patent case is “exceptional” under 35 U.S.C. § 285 when it “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.”

This decision overturns the Brooks Furniture Mfg. v. Dutalier Int’l Inc. standard, finding instead that awarding fees is a matter of discretion and should be evaluated case by case. The court noted “exceptional” is not defined in § 285 and found exceptional means “uncommon,” “rare” or “not ordinary,” rejecting the prior two-prong standard as “overly rigid.” The Court held a party could satisfy § 285’s “exceptional” requirement by showing an infringement claim is “simply one that stands out from others with respect to the substantive strength of a party’s litigating position (both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated.”

This opinion is being widely read as lowering the standard for attorney fee awards. However, in the first opinion applying Octane – Bianco v. Globus Medical, Inc. – the Eastern District of Texas did not award fees because the defendant did not meet its burden of proof. Interestingly, Federal Circuit Judge William C. Bryson was sitting by designation and authored the opinion.

Alice Corp. Pty. Ltd. v. CLS Bank Int’l
Patent: Decided: June 19, 2014

Holding: The patent claims, which use a generic computer for intermediated settlement, are unpatentable under § 101 because they are drawn to an abstract idea and fail to claim an “inventive concept.”

While “abstract ideas” are generally unpatentable, a unanimous Supreme Court (9-0), following Mayo Collaborative Svcs. and Bilski, held certain applications of these ideas may be patent eligible.  To determine patentability under § 101, the court must analyze, first, whether the claims are directed to an abstract idea and, second, whether the claims include an “inventive concept”—“i.e., an element or combination of elements that is ‘sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the [ineligible concept] itself.’” (quoting Mayo)

Petitioner Alice Corp. is the assignee of several patents that claim methods, systems and computer-readable media for using a generic computer to mitigate settlement risk.  In finding the claims at issue unpatentable, the Court held that they are drawn to an abstract idea, mitigating settlement risk, though the Court did not “delimit the precise contours” of “abstract ideas.”  Second, the Court held that merely tying a claim to a generic computer does not “transform that abstract idea into a patent-eligible invention.”  The petitioner’s method claims are thus unpatentable because they simply implement the abstract idea through a generic computer.  Likewise,  the petitioner’s computer system and computer-readable medium claims are unpatentable none of the recited hardware claims a meaningful limitation beyond the generic use of a computer.

While at first blush this decision seems to be a victory for patent challengers, software patentees may also be encouraged by it.  On one hand, this decision may trigger an increase in § 101 motions, and lower courts may rule more computer-related patents invalid.  On the other, the Court’s narrow holding also affirms software inventions with an “inventive concept” are patentable.

Nautilus, Inc. v. Biosig Instruments, Inc.*
Patent: Decided: June 2, 2014

Holding: The Court, in a unanimous (9-0) opinion authored by Justice Ruth Bader Ginsburg, held that the Federal Circuit’s indefiniteness standard bred “lower court confusion” because it “lack[ed] the precision §112, ¶2” demands.

Limelight Networks, Inc. v. Akamai Techs., Inc.*
Patent: Decided: June 2, 2014

Holding: The Supreme Court, in a unanimous (9-0) decision authored by Justice Samuel Alito, held that induced infringement requires proof of an underlying direct infringement. Assuming without deciding that the Federal Circuit’s Muniauction case is correct, the Court found that a method claim is directly infringed when one either completes each step or directs or controls the performance of each step.

Highmark Inc. v. Allcare Health Management System, Inc.
Patent: Decided: April 29, 2014

Holding: A district court’s decision to award fees in a patent case under 35 U.S.C. § 285 is reviewed on appeal for abuse of discretion.

Highmark overturns the Brooks Furniture standard of de novo review because a district court is “better positioned” to decide whether a case is exceptional due to its experience with the case over a “prolonged period of time.”

The district court had awarded Highmark $5 million in attorneys’ fees, finding Allcare had engaged in a pattern of vexatious, frivolous litigation conduct. The Federal Circuit had reviewed the award without deference, pursuant to Brooks Furniture.

Petrella v. Metro-Goldwyn-Mayer, Inc.
Copyright: Decided: May 19, 2014

The equitable defense of laches cannot bar damages, a legal remedy, in copyright cases. Paula Petrella, owner of the copyright to the screenplay for the 1980 movie Raging Bull, waited until 2009 to bring her copyright infringement suit, seeking damages only for the three-year statutory period. The majority opinion (6-3), delivered by Justice Ginsburg, ruled that laches, an equitable remedy, cannot bar legal relief when, as here, Congress has enacted a statute of limitations; but laches can be invoked to bar an equitable remedy, e.g. injunction. Under the Copyright Act, authors have a long copyright term and a right to sue for infringement occurring no more than three years prior to suit, which, according to the Court, leaves “‘little place’ for a doctrine that would further limit the timeliness of a copyright owner’s suit.”

Petrella suggests copyright owners, in considering when to file an infringement suit, should consider the nature of the remedy (i.e. legal or equitable). To protect against a delay in suit, a party suspecting it may infringe another’s copyright should consider early declaratory judgment on non-infringement and document its non-infringement case to preserve key testimony and documents.

American Broadcasting Companies v. Aereo
Copyright: Argued: April 22, 2014

Issue: Does a company “publicly perform” a copyrighted television program when it retransmits a broadcast of that program to paid subscribers over the Internet?

Aereo provides its subscribers antennae permitting them to watch and record over-the-air broadcast TV programs. The petitioners argue Aereo’s transmissions are public performances under the Copyright Act and could harm the broadcast industry. The justices asked whether the “public performance” line could be drawn to include Aereo while excluding other unrepresented industries, such as cloud-based content providers.

*Look for more on these cases in Supreme Court Corner in the Q3 2014 issue of Intellectual Property and Technology News - available September 2014.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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