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Patent Cases Being Decided by the Supreme Court This Term

February 10, 2014

Overview

Every week or so we will continue to provide summaries of cases we think clients and others might find of interest. If you have any questions about the information provided in these case summaries or wish to discuss them further, please contact Peter Heuser at 503-796-2424 or pheuser@schwabe.com.

Last week was a quiet one in the Federal Circuit so I thought I'd briefly review the cases we're waiting for the Supreme Court to decide. It's hard to think of a time when more patent cases have been accepted for certiorari so this spring should be eventful in our patent world. The cases deal with the award of attorney fees in exceptional cases, infringement when no one party performs all the steps of a process, claim indefiniteness, and perhaps the most eagerly anticipated decision, another case involving patentable subject matter.

Alice Corp. v. CLS Bank (cert granted 12/6/13, argument 3/31/14)

This case will discuss, and hopefully decide, the degree to which computer-implemented inventions constitute patentable subject matter and how best to claim those inventions. The Federal Circuit's decision was not very helpful since the ten judges on the en banc panel issued seven different decisions, none of which was supported by a majority. The court divided 5-5 as to whether the computer system claims at issue were patent eligible.‎

Alice Corp's claims are drawn to methods of reducing ‎risk by effecting trades through a ‎supervisory institution ‎empowered to verify that both parties can fulfill ‎their obligations before allowing the exchange to be ‎completed. CLS describes that concept as "fundamental and ancient" and, citing Bilski, argues that the claims recite a basic building block of human ingenuity that should not be patent-eligible subject matter. Judge Lourie, writing for five members of the Federal Circuit, essentially agreed.

The Supreme Court has issued several decisions in recent years dealing with patentable subject matter, and we hope to get more guidance in CLS. However, in none of these recent cases did the Court provide clear guidelines, such as whether 35 U.S.C. §101 precludes or allows patents on genetic material, medical treatment regimens, or business methods. You'll recall that in Association for Molecular Pathology v. Myriad Genetics, 133 S.Ct. 2107 (2013), the Court considered whether certain claims relating to isolated DNA sequences recited patentable subject matter. The Supreme Court invalidated Myriad's claims, holding that merely isolating genes that are found in nature does not make them patentable. In Mayo v. Prometheus, 132 S.Ct. 1289 (2012), the Court ruled that claims directed to a method of giving a drug to a patient, and measuring metabolites of that drug, do not recite patentable subject matter. The decision has been controversial, with some parties claiming it frees pathologists to practice their disciplines, and other parties claiming it destabilizes patent law and stunts investment in personalized medicine. Bilski v. Kappos, 130 S.Ct. 3218 (2010), held that the machine-or-transformation test is not the sole test for determining patentable subject matter under section 101 but rather only a useful and important clue for determining whether some claimed inventions are patent-worthy processes under section 101. The Court determined that a method of hedging losses in one segment of the energy industry by making investments in other segments of that industry did not constitute patentable subject matter.

Octane Fitness, LLC v. Icon Health & Fitness, Inc. (cert granted 10/1/13, argument 2/26/14)

In Octane v. Icon the Federal Circuit ruled that a patent infringement defendant must prove the infringement allegations were both "objectively baseless" and "brought in subjective bad faith" in order for the case to be exceptional under 35 U.S.C. §285, entitling the defendant to attorney fees. The Supreme Court will decide whether this two-part test improperly appropriates a district court's ‎discretionary ‎authority to award attorney fees. A decision in the case could affect legislative efforts to rein in infringement actions by non-practicing-entities, either by lowering the bar to awarding such fees and thereby rendering such legislation less necessary, or by refusing to do so, which could add impetus to legislative efforts designed to discourage plaintiffs from bringing spurious patent cases.‎

Highmark, Inc. v. Allcare Management Systems, Inc. (cert granted 10/1/13, argument 2/26/14)

The issue before the Court here is whether deference needs to be given to a lower court judgment ‎regarding an exceptional case finding ‎under section 285. The district court had determined that the case was ‎objectively ‎baseless and brought in bad faith (meeting the high standard repeated in Octane), and thereby awarded fees. Over a strong dissent, a Federal ‎Circuit panel ‎reversed, holding that a district court's objective baselessness determination is to be reviewed ‎‎without ‎deference. The Federal Circuit denied rehearing en banc by a vote of six to five. One of the ‎two ‎dissents from that denial argued that the decision "deviates ‎from ‎precedent . . . and establishes a review standard for exceptional case findings in patent cases ‎that is ‎squarely at odds with the highly deferential review adopted by every regional circuit and the ‎Supreme ‎Court in other areas of law.‎"

Limelight Networks, Inc. v. Akamai Technologies, Inc. (cert granted 1/10/14)

Limelight v. Akamai asks when a party that performs only some steps of a patented method (the remaining steps of which are performed by another party) is liable under 35 U.S.C. §§271(a) or 271(b). Akamai sued Limelight for patent infringement pertaining to delivery of content delivery networks (CDNs), which provide internet infrastructure that allows websites to quickly balance loads in response to high demand. The problem Akamai had, however, was that Limelight did not perform all the steps in Akamai's patent. Akamai won a $40 million verdict but Limelight prevailed in post-trial motions and the award was taken away. In a 6-5 en banc ruling the Federal Circuit found that Akamai did not have to show that Limelight's customer actually infringed the patent directly; it merely had to show that Limelight "induced" its customer to infringe.

Nautilus Inc. v. Biosig Instruments, Inc. (cert granted 1/10/14)

The final patent case accepted by the Court this term, although certainly not the least important, is asking whether "insolubly ambiguous" is the proper standard for patent indefiniteness under 35 USC §112. The specific issue in the case is whether the phrase "spaced relationship," referring to the relative disposition of electrodes in a heart rate monitor circuit, is sufficiently clear under section 112. The phrase was not clearly defined in the patent specification but the Federal Circuit reversed the district court, finding that the patent claim was not "insolubly ambiguous." The Circuit therefore ruled that the judge should have provided a definition at the Markman hearing. The issue to be decided is whether this test is too lenient and whether courts should require greater certainty in patent claiming.

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