Patent Law

Regarding “Patent Trolling”, Plaintiff Ordered to Pay Attorney’s Fees after First Application of New Standard for Awarding Attorney’s Fees in Patent Cases

June 19, 2014

In the case of Lumen View Tech. LLC v. Findthebest.com, Inc. , the Southern District of New York has become the first court to hand down an opinion and order following the Supreme Court decision of Octane Fitness, LLC v. Icon Health & Fitness, Inc. In Octane Fitness, the Supreme Court made it easier for defendants in patent infringement proceedings to collect attorney’s fees if the case is deemed baseless and/or was brought in bad faith. In Lumen View Tech. LLC v. Findthebest.com, Inc., the defendant (Find the Best) operated a search engine. The plaintiff (Lumen) issued a letter to the defendant threatening legal repercussions if a “one time licensing fee” was not paid for violating patent 8,069,073 (“ hereafter the ′073 patent”).

Interestingly, the ‘073 patent deals with a computer implemented matchmaking method between two or more parties. Prior to the litigation, Find the Best informed Lumen that they were not in violation of the ‘073 patent as their search engine only requires preference data from a single user and not between multiple parties, as the patented process requires. After several communications between the parties (including an accusation by Lumen’s attorney that Find the Best had committed a hate crime by using the term “patent troll”), litigation proceeded with Lumen claiming infringement of their ‘073 patent.

The court eventually ruled that the ‘073 patent was invalid for claiming an abstract idea. It further found that the case was exceptional under the totality of the circumstances test articulated in Octane Fitness, stating “[n]o reasonable litigant could have expected success on the merits in Lumen’s patent infringement lawsuit against FTB because the ‘073 Patent claimed a bilateral matchmaking process requiring multiple parties to input preference information, while FTB’s ‘AssistMe’ feature utilizes the preference data of only one party.” The court went on to state that under the motivation prong of the test “Lumen’s motivation in this litigation was to extract a nuisance settlement from FTB on the theory that FTB would rather pay an unjustified license fee than bear the costs of the threatened expensive litigation.” Finally, the court found that under the deterrence prong of the test “Lumen’s motivation in this litigation was to extract a nuisance settlement from FTB on the theory that FTB would rather pay an unjustified license fee than bear the costs of the threatened expensive litigation.” Using this reasoning, the court awarded fees and nontaxable expenses.

In related news, the Innovation Act (a bill providing changes to 35 U.S.C. with the goal of dissuading “patent trolls”) has stalled in congress. Part of this act was designed to make recovering attorney’s fees by a prevailing party easier than it is today by awarding fees “unless the court finds that the position and conduct of the nonprevailing party or parties were reasonably justified in law and fact or that special circumstances make an award unjust.” It is expected that the Innovation Act will return to the floor in a year’s time. In the meantime, Octane Fitness provides the applicable standard for recovering attorney’s fees in patent infringement cases. In light of these changes, patent owners must be more certain of their position prior to initiating litigation against an alleged infringer. Conversely, those accused of patent infringement that is believed to be baseless have one more avenue to pursue for recovery of attorney’s fees.


Supreme Court Modifies Standard for Awarding Attorney’s Fees in Patent Cases

May 2, 2014

Two recently decided Supreme Court cases have made it easier for a party to be granted attorney’s fees after winning a case. According to 35 U.S.C. §285, a court may award attorney’s fees to a winning party in “exceptional” cases. Since 2005, the determination of the whether a case is exceptional has followed the guidelines outlined by the Federal Circuit in Brooks Furniture Mfg., Inc. v. Dutailier Int’l, Inc., 393 F. 3d 1378 (2005). These guidelines set a high standard for what is to be considered “exceptional.” Under Brooks, a case was exceptional only if there was “some material inappropriate conduct” or when the litigation is both “brought in subjective bad faith” and “objectively baseless.” Furthering the difficulty of proving an exceptional case, these requirements had to be established by clear and convincing evidence.

Two recent decisions by the Supreme Court have modified the requirements for showing an exceptional case. In Octane Fitness, LLC v. Icon Health & Fitness, Inc., the Supreme Court overturned the ruling in Brooks declaring it “unduly rigid” and stating that it “impermissibly encumbers the statutory grant of discretion to district courts.” Instead, the Supreme Court focused on the ordinary definition of the term “exceptional” meaning uncommon, rare, or not ordinary. Therefore, an exceptional case is “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.” The result is a more flexible standard relying on the district court’s discretion in consideration of the facts of the case and the totality of the circumstances.

In the companion case Highmark Inc. v. Allcare Health Management System, Inc., the Supreme Court ruled on the standard of review that appellate courts should use when reviewing an exceptional case determination made by the district court. In Highmark, the appellate court had reviewed an exceptional case determination de novo, granting no deference to the District Court’s decision. However, because the new test set forth in Octane Fitness relies on the discretion of the district court to determine whether a case is exceptional, the Supreme Court held that an appellate court should review this decision using an abuse-of-discretion standard.


Patent Eligibility at the Supreme Court

December 11, 2013

On December 6, the U.S. Supreme Court agreed to hear a case about whether computer-implemented inventions are patent-eligible subject matter under 35 U.S.C. § 101. The case, Alice Corporation Pty. Ltd. v. CLS Bank International, No. 13-298, involves computer technology related to reducing the risk that either of two parties to a transaction will default by employing a third party intermediary. The patents claim this technology in various ways, including as a method of exchanging obligations, a data processing system, and a computer program embodied in a storage media. This is an important case, in part, because it addresses many of the claim types commonly used with computer and software-based inventions. The question presented to the Supreme Court is:

    Whether claims to computer-implemented inventions-including claims to systems
    and machines, processes, and items of manufacture-are directed to patent-eligible
    subject matter within the meaning of 35 U.S.C. § 101 as interpreted by this Court?

The trial court concluded that all of the asserted claims were invalid under § 101. On appeal at the Federal Circuit, initially two out of three judges concluded that all of the claims were drawn to patent-eligible subject matter. Then the Federal Circuit reheard the case en banc, and produced a decision that ultimately affirmed the trial court (all of the claims invalid). However, the ten participating judges produced seven opinions with little agreement on the reasoning of how to consider the § 101 issue and why these claims are or are not invalid.

In addition to agreeing to hear the Alice case, the Supreme Court has also asked for a response brief for a similar petition, WildTangent, Inc. v. Ultramercial, LLC, No. 13-255, which is asking the Court to answer the question “When is a patent’s reference to a computer, or computer-implemented service like the Internet, sufficient to make an unpatentable abstract concept patent eligible under 35 U.S.C. § 101?”.

Patent-eligibility of some computer-implemented inventions has been uncertain since the Supreme Court’s 2010 decision in Bilski v. Kappos, 561 U.S. ___, 130 S. Ct. 3218, 177 L. Ed. 2d 792 (2010). Since then, Supreme Court cases involving § 101 have focused on other fields, including biotechnology and medical diagnostics.


Power of Attorney Practice Under the America Invents Act (AIA)

April 5, 2013

This presentation generally concerns Power of Attorney procedures and practices for US patent applications prosecuted under the America Invents Act, commonly known as the AIA. In particular, it describes the timing and procedures for filing Powers of Attorney under the new AIA rules. Additionally, it covers how to fill out the PTO/AIA/80 and 82 Power of Attorney Forms. A copy of the presentation can be found here.




Perfecting Foreign Priority Claims by Submitting Certified Copies of Foreign Priority Documents Under the America Invents Act (AIA)

April 2, 2013

The presentation and accompanying video below generally concerns procedures and practice for perfecting foreign priority claims for US patent applications under the America Invents Act, commonly known as the AIA. Specifically, the presentation discusses the new rules concerning the timing and procedures for submitting certified copies of foreign priority patent applications as well as procedures for submitting verified English language translations. To provide some context, it will first discuss the old procedures. A copy of the presentation can be found here.




America Invents Act (AIA) Transition Patent Application Statements

March 29, 2013

The presentation and accompanying video below generally concerns the procedures and rules for identifying whether or not patent applications are subject to the America Invents Act, commonly known as the AIA. It more specifically concerns the procedures and practices for US patent applications that were filed on or after the AIA’s implementation date of March 16, 2013, but claim priority  to patent applications filed before then, such as patent applications filed continuation, divisional, and/or continuation-in-part (CIP) patent applications. It describes the new rules concerning the timing and procedures for AIA transition applications. In addition, it discusses when and how to make Statements under Rules 55 or 78 to designate that the AIA’s First Inventor to File standard should apply to an AIA transition application. A copy of the presentation can be found here.




Saving High-tech Innovators from Egregious Legal Disputes, or SHIELD Act

March 18, 2013

Representatives Peter DeFazio (D-Ore.) and Jason Chaffetz (R-Utah) recently reintroduced H.R. 845, the Saving High-tech Innovators from Egregious Legal Disputes, or SHIELD Act. The bill seeks to “protect American tech companies from frivolous patent lawsuits that cost jobs and resources” by implementing a “loser pays” system for patent infringement cases brought by some types of non-practicing entities (sometimes referred to as “patent trolls). The SHIELD Act would not apply to plaintiffs in lawsuits where the plaintiff invented the patent or produced evidence of having made a substantial investment in bringing the patent to market.

Both members of Congress first submitted the bill last August, but it failed to get enough support to pass. This time around, the co-sponsors believe its chances of passing are much better. It now covers all industries, not just the high tech industries covered in the previous bill. Support for the new bill has come from groups like the Consumer Electronics Association, the Electronic Frontier Foundation, Engine Advocacy, the National Retail Federation, the Coalition for Patent Fairness, and the Consumer and Communications Industry Association.

Also, President Obama has made recent statements suggesting he is in favor of making further changes to the patent system in this area as well. During a recent Google Hangout appearance online, President Obama specifically mentioned the problem patent trolls present to businesses, old and new. He stated that the America Invents Act passed last year and fully in effect this month “hasn’t captured all the problems.” He addressed the issue of non-practicing entities that “don’t actually produce anything themselves” but that are “just trying to essentially leverage and hijack somebody else’s idea” to “see if they can extort some money out of them.” President Obama mentioned that “our efforts at patent reform only went about halfway to where we need to go” and an additional consensus needed to be reached on “smarter patent laws.”

As H.R. 845 has resurfaced in a new form, new questions regarding its final wording, the scope of its coverage, and its effectiveness in dealing with patent trolls have reappeared as well. We will continue to provide you with updates regarding this important legislation as it proceeds through Congress.


New Year Brings New Amendments to AIA

January 3, 2013

With confetti still lingering in the air Congress passed H.R. 6621 which includes many technical amendments to the America Invents Act.  The passing of H.R. 6621 was not without a small amount of controversy as a section dealing with still pending and unpublished pre-GATT applications was ultimately removed from the Bill.  As originally drafted, the Bill would have altered the term for such applications still pending one year from the Bill’s implementation date, effectively killing a majority of pre-GATT applications.  The section was first amended to require only that a report on still-pending pre-GATT applications be sent to congress including the inventor identities, before the Senate removed the section completely in the version ultimately passed by both houses. Some highlights of the Bill that did pass are discussed below.

 Dead-Zones: H.R. 6621 allows inter partes reviews to be filed at any time for issued patents with effective filing dates before March 16, 2013.

 Oath or Declaration: H.R. 6621 allows for an oath or declaration, substitute statement, or assignment, to be filed “no later than the date on which the issue fee for the patent is paid.”

 Patent Term Adjustment: H.R. 6621 clarifies that patent term adjustment accumulates only on “commencement of the national stage under section 371 in an international application.”  The Bill also requires that patent term adjustment be calculated with the issuance rather than at the notice of allowance.  Finally, the Bill clarifies that patent term adjustment decisions may only be challenged by filing in the Eastern District of Virginia.

 Improper Applicant: H.R. 6621 eliminates 35 U.S.C. 373 which restricts who may file international PCT applications at the USPTO.

 Patent and Trademark Fee Allocation: H.R. 6621 eliminates the requirement that patent fees be used to cover “administrative costs of the Office relating to patents” and a similar restriction relating to trademark fees.

 Derivation Proceeding: H.R. 6621 alters the timing for filing a petition to institute a derivation proceeding and includes a definition of the term “earlier application.”  The Bill also clarifies that interferences declared after September 15, 2012 are subject to the pre-AIA provisions of the Patent Act governing the Board of Patent Appeals and Interferences and appeals to the Court of Appeals for the Federal Circuit.


Federal Circuit Affirms Dismissal of Declaratory Judgment Action obtained by Woodard Emhardt

October 1, 2012

Matthews International Corp. manufactures and sells a Bio Cremation™ product that uses a hydrolysis process to accelerate the natural decomposition of the body to cremate human remains.  In 2011, Matthews filed suit against our client, Biosafe Engineering, LLC, seeking a declaratory judgment of non-infringement, invalidity and unenforceability of five method patents related to using alkaline hydrolysis to dispose of hazardous organic materials.  Matthews also asserted state law claims of trade libel, defamation, and tortuous interference with contractual relations alleging that Biosafe had wrongly accused Matthews of patent infringement to Matthew’s customers, potential customers and employees. 

Biosafe moved to dismiss all counts for lack of declaratory judgment jurisdiction and failure to adequately plead state law claims. The United States District Court of Western Pennsylvania granted Biosafe’s motion to dismiss all counts for lack of declaratory judgment jurisdiction and failure to adequately plead state law claims.  Matthews appealed.

 On appeal, the Federal Circuit upheld the district court’s holding that Matthews’ dispute with Biosafe lacked the requisite immediacy and reality to support the existence of declaratory judgment jurisdiction.  The Federal Circuit noted that there was no evidence as to when the Bio Cremation™ equipment might be used in a manner that could infringe Biosafe’s method patents and that the Bio Cremation™ equipment could be operated outside of the parameters specified in Biosafe’s method patents.  In addition, while Matthews sold the cremation equipment, it did not practice any of the claimed methods and could not be liable for direct infringement. 

 Immediacy

“A party may not obtain a declaratory judgment merely because it would like an advisory opinion on whether it would be liable for patent infringement if it were to initiate some merely contemplated activity.”  The Federal Circuit held that it would be premature to determine infringement of Biosafe’s patents at least until there was specific and concrete evidence regarding how Matthews’ customers planned to use the Bio Cremation™ equipment.

The Federal Circuit noted that a showing of actual infringement is not required to support declaratory judgment jurisdiction but the absence of any arguable infringing activity showed the dispute lacked the immediacy necessary to support declaratory judgment jurisdiction.

Reality

“In the context of patent litigation, the reality requirement is often related to the extent to which the technology in question is ‘substantially fixed’ as opposed to ‘fluid and indeterminate’ at the time declaratory relief is sought.” Because the Bio Cremation™ equipment could be operated using process parameters that would not infringe the method patents and because Matthews did not specify any operating parameters, the Court considered it impossible to determine whether the operation of the Bio Cremation™ equipment infringed the method patents. The Federal Circuit affirmed the district court’s characterization of Matthews’ Bio Cremation™ equipment as “fluid and indeterminate.” A party has no right to obtain declaratory relief when it provides insufficient information for a court to assess whether its future activities would be infringing.

Finally, the Federal Circuit affirmed the district court holding that Matthews failed to plead the bad faith element of the state law trade libel, defamation, and tortuous interference claims. The court stated that the state law claims would not be ripe for review even if Matthews had pled the required bad faith element. Until some specific evidence regarding the operating parameters for the Bio Cremation™ equipment is produced, any determination of whether Biosafe acted unreasonably in asserting that Matthews infringed the patents would be premature.

The full decision is hyperlinked Matthews International Corporation v. Biosafe Engineering, LLC, September 25, 2012, Mayer, H.

We congratulate Spiro Bereveskos for his successful argument at the Federal Circuit. We also congratulate Steve Zlatos and William McKenna for writing the successful appeal brief.


U.S. Supreme Court Issues Decision in Microsoft v. i4i Case

June 20, 2011

The U.S. Supreme Court has handed down a decision in the much-anticipated Microsoft v. i4i case.  In its decision, the Supreme Court affirmed that invalidity of a patent must be proved by clear and convincing evidence.  To read the full opinion, click here

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