Archive for the ‘supreme court’ tag

Appellate Review of Markman Hearings

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In Markman, the Supreme Court declared that determining the meaning of patent claims, i.e. “claim construction,” is a question to be decided by the court; the Seventh Amendment right to a jury trial does not apply. Markman v. Westview Instruments, Inc., 517 U.S. 370, 372 (1996). Shortly thereafter, in Cybor, the Court of Appeals for the Federal Circuit held that de novo review applied when results from these newly-created ‘Markman hearings’ are appealed. Cybor Corp. v. FAS Technologies, Inc., 138 F.3d 1448, 1451 (Fed. Cir. 1998) (en banc).


Earlier this year, the Federal Circuit granted a rehearing en banc to determine if Cybor should be overruled, and what, if any, deference should be given to a District Court’s claim construction. Lighting Ballast Control LLC v. Philips Electronics N. Am. Corp., ___F.3d___, WL 667499 (Fed. Cir. Feb. 21, 2014) (en banc). The court considered three options: (1) reaffirm Cybor and maintain de novo review, (2) overrule Cybor and declare claim construction a question of fact, or (3) adopt a “hybrid” standard of review that affords deference to the District Court’s factual determinations but preserves de novo review of the “ultimate” conclusion. Amici from industrial and technological companies advocated reaffirming Cybor. Academics and practitioners generally favored either the hybrid approach or the overruling of Cybor. Relying on stare decisis, a 6-4 majority reaffirmed Cybor.


The majority pointed out that since Cybor was decided, Congress has not acted to overturn it while enacting other patent legislation during that time. They further explained that predictability and consistency favor maintaining the status quo. Consistency is a concern particularly relevant in patent law – a concern which led to the creation of the Federal Circuit over thirty years ago. The majority feared a return of “forum shopping” because the same patent could be subject to conflicting interpretations in different District Courts. Parties would be incentivized to choose a forum with judges likely to interpret patent claims in their favor knowing that reversal on appeal is unlikely.


The dissent, appearing to favor the hybrid approach, pointed out that the parties in the present case, almost all amici, and the Supreme Court recognize that claim construction involves some questions of fact. Thus, they vehemently argued that under Rule 52(a)(6), courts of appeal can set aside only those findings of fact that are “clearly erroneous.” Rejecting stare decisis, the dissent argued that “informal deference” is already given to District Courts because they spend “hundreds of hours” learning the relevant technology, so overruling Cybor would “not upset settled expectations.” The dissent also stated that de novo review incentivizes the losing party to appeal, decreases the likelihood of settlement, and increases litigation costs.


But Lighting Ballast may not stand for long. In April, the Supreme Court granted certiorari in Teva Pharmaceuticals USA, Inc. v. Sandoz, Inc., which presents a nearly identical question as that in Lighting Ballast. In Teva, the District Court held a Markman hearing and construed the claims in Teva’s favor, avoiding invalidity for indefiniteness. The trial judge relied heavily on Teva’s expert witness to determine the level of ordinary skill in the art at the time of invention. Teva Pharm. USA, Inc. v. Sandoz Inc., 810 F. Supp. 2d 578, 596 (S.D.N.Y. 2011). On appeal, the Federal Circuit explicitly applied de novo review, compared the testimony of the competing expert witnesses, reversed the District Court, and held the claims indefinite. Teva Pharm. USA, Inc. v. Sandoz, Inc., 723 F.3d 1363, 1369 (Fed. Cir. 2013), reh’g en banc denied. Similar to the dissent in Lighting Ballast, Teva claims that Rule 52(a)(6) should have governed the Federal Circuit’s standard of review because determining the level of ordinary skill in the art is a question of fact. Unfortunately, Teva will not be heard until the Supreme Court’s October 2014 term. Until then, Lighting Ballast remains good law; de novo review of claim construction still applies.


Guest Post Written by Brian Apel

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July 13th, 2014 at 1:05 pm

Supreme Court to Rule on Patent Eligibility for Process Claims

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Last month, the Supreme Court heard oral argument in Alice Corporation v. CLS Bank. Many hope the Court’s decision in this case will help clarify the patent eligibly standard for process claims – particularly those process claims that are computer implemented and/or involve business method patents.

Patent eligibility is based on 35 U.S.C. § 101 which allows any “process, machine, manufacture, or composition of matter” to be eligible for patent protection. However, laws of nature, natural phenomena, and abstract ideas are not eligible for patent protection. It is important to note that patent eligibility is distinct from patentability (novel, useful, definite, non-obvious, etc.). For example, a chemist who discovers a previously unknown element cannot patent that element because it is a natural phenomenon. It is ineligible for patent protection regardless of how new and useful it is.

Traditionally, process claims were evaluated under the “machine-or-transformation test” which conferred patent eligibility on the process if (1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing. In the 1970s, broad claims to computer-implemented processes that utilized a mathematical algorithm or formula without meaningful limitations were held ineligible for patent protection under the abstract ideas exception despite requiring a computer in order to be performed. See Gottschalk v. Benson and Parker v. Flook. Four years ago, in Bilski v. Kappos, the Court affirmed the Federal Circuit’s ruling that the process of “hedging risk” in the commodities trading industry is also an abstract idea not eligible for patent protection. However, the Court went on to declare that the machine-or-transformation test is not dispositive of patent eligibility for claimed processes, especially in business method patents, but rather that the test is a “useful and important clue” in determining patent eligibility.

Now, in CLS Bank, the Supreme Court is faced with the patent eligibility of certain method, media, and system claims of particular business method patents that utilize escrow to protect against financial risk. Although the Federal Circuit sitting en banc decided 7-3 that both the method and media claims were not directed to patent eligible subject matter, the 7-member majority was split 5-2 on the justification. On the question of patent eligibility of the system claims, the court evenly split 5-5. By its own admission, the Federal Circuit is “irreconcilably fractured” on the complex issue of patent eligibility for process claims – particularly those that are computer-implemented and those in business method patents. Without destroying the software or finance industries, the Court could strike a balance by simply holding that business method patents tied only to a computer do not receive the benefit of the “clue” that the traditional “machine-or-transformation” test provides; the “abstract ideas” exception is controlling. This would allow business methods to remain generally patent eligible, preserve the utility of the “machine-or-transformation” test, and prevent software patents from becoming wholesale ineligible. Perhaps later this summer, the Supreme Court will provide clearer guidance for the Federal Circuit and the District Courts.

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April 26th, 2014 at 5:17 pm

Lawsuit against Aereo heads to the Supreme Court

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The New York-based startup Aereo has recently been making waves in the digital television world by creating a low-cost option for consumers to watch and record live broadcast television, providing a service similar to Internet-based streaming websites such as Hulu. Aereo, however, stands apart from these services: Aereo leases to each subscriber an individual remote antenna, allowing these subscribers to view and record certain live television broadcasts on Internet-connected devices without having to purchase a subscription to the entire broadcast packages offered by cable companies.

Although Aereo has enjoyed tremendous success in the two years since its founding, Aereo has recently been embroiled in legal battles over whether its business model constitutes a public performance, which would legally require Aereo to obtain retransmission consent from the content providers. Last month, the District Court of Utah became the first to temporarily shut down the service. Judge Dale A. Kimball of the District Court of Utah granted a preliminary injunction sought by broadcasting companies such as Fox claiming that Aereo is stealing their broadcast signals for profit, shutting down Aereo’s services in Salt Lake City and Denver. Such injunctions have been previously denied in the New York and Boston.

Aereo founder and CEO Chet Kanojia states that the television industry is terrified of Aereo, and that the company was “extremely disappointed” in the recent decision. Kanojia claims that the antennas used in this service must be treated the same as antennas that people use to pull TV signals for free.

This argument rings true in one deep respect – any individual can travel to Radio Shack and upgrade their television antenna. Yet, retransmission is currently illegal, and Aereo has created a service that works around this by renting antennas and virtual connections, a method that is hanging on by a mere technicality.

Broadcasting companies such as ABC, Fox, NBC, and CBS have the highest stake in seeing Aereo fall; they currently claim that Aereo is stealing their content, and that their practice could even lead to the end of broadcast television. Major broadcasters have expressed concern that cable providers, who currently pay broadcasters to the tune of $4 billion in transmission fees per year, may set up services similar to Aereo and will no longer pay fees, depriving broadcasters of all profit.

American Broadcasting Companies v. Aereo will be heard in front of the Supreme Court in April, featuring “two American archetypes in a battle that could upend the television industry.” As the New York Times states, this decision will have “far-reaching implications for a television industry already in upheaval, facing challenges from online streaming, Internet-enabled TVs, ad-skipping devices, and now, the tiny antennas that Aereo uses to capture broadcast signals.” The Aereo issue demonstrates the fundamental difficulty in technology and law – technology is outpacing law faster than ever, while legal standards struggle to keep up with ever-evolving industries.

Supreme Court to Revisit Question of Patentable Subject Matter

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Since the establishment of the Federal Circuit three decades ago, the Supreme Court has tended to distance itself from the development of patent law. As the Federal Circuit holds exclusive jurisdictions over appeals arising from disputes involving patents, circuit splits are unlikely to arise, and its judges are deeply familiar with the subject area. Thus it is not entirely surprising that as a general matter it is rare for the Supreme Court to review its judgments.

 However, in recent years the Supreme Court has reviewed several high profile Federal Circuit high-profile decisions, perhaps most notably in the area of the scope of patentable subject matter under 35 U.S.C. § 101. In Bilski v. Kappos, the Court agreed that an investment strategy was unpatentable subject matter, but indicated ambivalence towards the Federal Circuit’s chosen analysis. This year, in Mayo Collaborative Services v. Prometheus Laboratories, Inc, the Court held that claims over a medical diagnostic test were unpatentable “products of nature,” reversing the Federal Circuit.

On November 30, 2012, the Supreme Court granted review in Assoc. for Molecular Pathology v. Myriad Genetics, a case involving the patentability of human genes. The case has had a long journey through the federal courts. In 2011, the Federal Circuit found that claims over “isolated” DNA molecules are patentable subject matter, as well as certain associated method claims. This judgment was vacated and remanded to the Federal Circuit for further consideration in light of Mayo. On remand, the Federal Circuit once again held these patents to be directed towards patentable subject matter. Now before the Supreme Court again, it is likely that the Court will be directly addressing the question of whether human genes are patentable.

Petitioner argues that the patents at issue are invalid because they claim subject matter directed to a law or product of nature. They claim that these patents, which cover “isolated” forms of the BRCA1 and BRCA2 genes linked hereditary breast and ovarian cancer, have prohibited clinical testing, scientific research, and patients’ access to their genetic information. The respondent, Myriad Genetics, claims that the patents cover subject matter that was human-made and does not occur in nature. Myriad stresses the “enormous amount of human judgment” involved in their research and development of this area, and the importance of patent protection to support their industry.

This case is likely to be closely followed by many. Patentable subject matter is an area that the Supreme Court has shown a close interest in recently, lending much uncertainty to the state of the doctrine. Patent lawyers and scholars will wait to see whether the Supreme Court clarifies this area of law. The decision is likely to have a major impact on the biotechnology industry, who for many years has successfully obtained patents such as the ones at issue here with relatively little questioning of their validity. The public will be watching as well, as the question of whether human genes are patentable is a topic likely to generate excitement and intrigue from many.


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December 6th, 2012 at 8:34 pm

Supreme Court Decides Golan v. Holder

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A law providing that millions of works created by foreign authors that had been in the public domain qualify for U.S. copyright protection was upheld on Saturday, January 18, 2012, when the Supreme Court decided Golan v. Holder (No.10-545).  The case involved the constitutionality of § 514 of the Uruguay Round Agreements Act (now codified in the U.S. Copyright Act as 17 U.S.C. § 104A), which was passed in 1994.  Section 514 gives copyright protection in the U.S. to a foreign author who is a citizen of any of the member countries of the Berne Convention for the Protection of Literary and Artistic Works.  The effect of § 514 is that it restores the works of authors that are protected by the copyright laws of their own country but have been in the public domain in the U.S. because: (1) the work was published at a time when the U.S. was not protecting works from the author’s country or (2) the author did not comply with a copyright formality required in the U.S.  Restored works will return to the public domain eventually—they are given copyright protection for the length of time that the work would have had protection had it not been placed in the public domain.  Works done by Picasso, Virginia Woolf, Alfred Hitchcock, C.S. Lewis, and Prokofiev are examples of works which have been restored from the public domain due to the effect of § 514.

The petitioners in Golan were orchestra members and others who alleged that § 514 violated Article I, Section 8, clause 8 of the U.S. Constitution (also known as the Copyright Clause) by providing works which had previously been in the public domain with copyright protection.  The Copyright Clause states that Congress has the power “To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.”  Speaking about § 514, the named petitioner in Golan, Lawrence Golan, reported to QuestionCopyright.Org that while Golan will not affect larger orchestras with budgets that enable them to purchase pieces, “it currently prevents many, many smaller orchestras and educational institutions from physically performing these pieces.  It’s not a question of well, they just have to pay more.  If they don’t have more they can’t play the piece.  So they’re simply not playing those pieces.”

Justice Ginsburg wrote the majority opinion, in which Justices Scalia, Kennedy, Thomas, Sotomayor, and Chief Justice Roberts joined and held that § 514 does not violate the Copyright Clause.  The Court wrote that the “limited times” language from the Copyright Clause does not restrict Congress from taking works out of the public domain because the works gain copyright protection only for the period which they would have sustained had they not been placed in the public domain.  The Court also wrote that the Copyright Clause “empowers Congress to determine the intellectual property regimes that, overall, in that body’s judgment, will serve the ends of the Clause” and that the Copyright Clause does not only apply to newly created works, but also to works already existing.  Finally, the Court wrote that testimony heard by Congress suggested that § 514 would serve the goals of the Copyright Clause because it would “expand the foreign markets available to U.S. authors and invigorate protection against piracy of U.S. works abroad, thus benefitting copyright-intensive industries stateside and inducing greater investment in the creative process.”  Justice Breyer filed a dissenting opinion, in which Justice Alito joined, arguing that § 514 did not serve the purpose of the Copyright Clause to create incentives for authors to create new works.

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January 25th, 2012 at 1:34 pm

Fleeting Expletives, Partial Nudity, and the First Amendment: What approach will the Supreme Court take in FCC v. Fox Television Stations, Inc?

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This past Tuesday, the Supreme Court heard lively oral arguments in FCC v. Fox Television Stations, Inc. (No. 10-1293) addressing the constitutionality of the Federal Communications Commission’s (FCC) authority to regulate “indecency” on broadcast television.  Specifically, the Court heard Fifth Amendment Due Process arguments over the vagueness of the FCC’s particular indecency-enforcement regime as well as First Amendment arguments as to the constitutionality of the FCC’s general ability to regulate speech on broadcast media.

Since 2001, the FCC has applied a two prong, “context-based” approach for determining indecency on broadcast networks. First, the FCC examines whether the material broadcast describes sexual or excretory organs or activities. If the broadcast includes such subject-material, the FCC then considers whether the broadcast is “patently offensive” as measured by contemporary community standards for the broadcast medium. Factors relevant for a “patently offensive” determination include “(i) the explicitness or graphic nature of the description or depiction of sexual or excretory organs or activities, (ii) whether the material dwells on or repeats at length descriptions of sexual or excretory organs or activities, and (iii) whether the material appears to pander, is used to titillate, or to have been presented for its shock value.” See Brief for Petitioners at 8-9, FCC v. Fox Television Stations, Inc, No. 10-1293 (U.S. argued Jan 10, 2012).

Applying this approach, the FCC found three television broadcasts in violation of its indecency policy. Id. at 10-16. The first two broadcasts dealt with fleeting expletives while the third pertained to partial nudity.  Fox aired the fleeting expletives during its annual Billboard Music Awards broadcast. In 2002, Cher received an “Artist Achievement Award” and declared “f*** em” in reference to her critics during her acceptance speech.  One year later, Nicole Ritchie and Paris Hilton, hosts of the Billboard Music Awards, engaged in live dialogue about their Fox show “The Simple Life.” During this conversation, Ms. Ritchie commented “Have you ever tried to get cow s*** out of a Prada purse? It’s not so f***ing simple.” ABC Inc. later aired the partial nudity scene during its 2008 broadcast of NYPD Blue: Nude Awakening. The opening scene involved the showing of a woman’s buttocks for seven seconds from various viewpoints including that of a young boy.  The television networks aired all three of the broadcasts before 10pm. (Note: The FCC does not regulate network television for indecency from the time period of 10pm till 6am. The FCC also does not regulate cable television stations.)

Although the Supreme Court previously recognized the FCC’s authority to censor indecency in both broadcast television and radio, see FCC v. Pacifica Foundation, 438 U.S. 726 (1978),  network television studios mounted a joint offensive directly challenging the court’s earlier decision. Notable Supreme Court litigators Carter Phillips and Seth Waxman led the charge during the oral arguments Tuesday as representatives for Fox and ABC respectively. (The Supreme Court consolidated Fox and ABC’s separate actions against the FCC.) Solicitor General Donald B. Verrilli represented the government. Mr. Phillips and Mr. Waxman raised two main arguments including: (1) that under the First Amendment the FCC lacks any authority to regulate indecency on broadcast television as the factual underpinnings of Pacifica no longer exist, and alternatively (2) that the FCC’s “context-based,” indecency enforcement regime is facially invalid under the Fifth Amendment because of unconstitutional vagueness.

As much as one can glean from oral arguments, it appears that the majority of Justices will most likely avoid taking the network stations’ first recommended approach of overruling Pacifica and eliminating the FCC’s authority to regulate “indecency.” Whereas Justices Kagan, Alito, and Kennedy provided slight hints about their inclinations, four of the other Justices appeared to give strong impressions on what issues they will tackle in their upcoming opinion.

Justice Ginsburg, for example,  highlighted the vagueness approach from the beginning as she noted to Solicitor General Verrilli that ““from the briefs and what the FCC has been doing [she took it] that the major objection is that one cannot tell what’s indecent and what isn’t” and reiterating that “that is the major objection.” Justice Breyer seemed similarly more receptive to unconstitutional vagueness as opposed to the nuclear option of completely eliminating FCC regulation. Stating that removing FCC authority would be “very, very broad,” he pushed Mr. Phillips to acknowledge that “it’s absolutely clear . . . that if this Court wants to say we decided the outer limits of the First Amendment in Pacifica . . . the Court can clearly hold that way.”

Justice Scalia further suggested that removing FCC regulation would probably not change much as “[television networks] have their [own] guidelines that generally prohibit [nudity].” Moreover, he reflected on the symbolic value of imposing decency standards on broadcast media. “[J]ust as we require a certain modicum of dress for the people that attend this Court and the people that attend other Federal courts,” “the government is entitled to insist upon a certain modicum of decency [on public airwaves].” Finally, as Adam Liptak reported for the NY Times, Chief Justice Roberts, the only member of the court currently with young children, appeared to make a Freudian slip when he commented that “[a]ll we are asking for, what the government is asking for, is a few channels where you can say I’m not going to – – – they are not going to hear the S word, the F word. They are not going to see nudity.” Although a noted defender of First Amendment rights, Justice Roberts here did not give any impression that he would vote for dismantling the FCC’s enforcement authority.

With the Court now in final deliberations, it will certainly be interesting to see what positions the Justices ultimately take regarding expletives, nudity , and the FCC’s role in broadcast media. Until then, please see below for more resources on this subject.

Relevant Sources:

Cornell’s Legal Information Institute provides a detailed, yet succinct summary of the relevant history, facts, and issues of the case.  For a one-stop shop of the amicus curiae and parties’ briefs, see the American Bar Association’s Supreme Court Preview page.  The Second Circuit’s opinions and orders for Fox Television and ABC can be retrieved by clicking on the embedded links.  (The Second Circuit’s oral arguments in Fox Television Stations are also available on YouTube). Stay Tuned!

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January 25th, 2012 at 1:24 pm

Golan v. Holder: Copyright & the 1st Amendment

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Last Wednesday the Supreme Court heard oral arguments concerning Golan v. Holder, potentially one of the most influential copyright cases in United States history. This case centers around whether Congress has the power to restore copyright protection to works whose protection has expired and are in the public domain.

In 1994, Congress enacted the Uruguay Round Agreements Act (URAA) to implement the Uruguay Round General Agreement on Tariffs and Trade (GATT) that included the “copyright restoration” provision. This provision restores the copyright protections of many foreign works, nearly 50,000 in number that were previously in the public domain. Among those works removed from the public domain were Sergei Prokofiev’s “Peter and the Wolf,” the British films of Alfred Hitchcock, and stories by H.G. Wells.

The named petitioner in this case is Lawrence Golan, a professor and conductor at the University of Denver. Petitioner Golan has two main arguments: (1) Congress is prohibited from taking works out of the public domain by the Progress Clause of the United States Constitution, Article I, § 8, cl. 8. ; and (2) the “copyright restoration” provision, § 514, of the URAA violates the First Amendment of the United States Constitution.

The URAA adversely affects many interests. Artists hoping to create derivative works based on one of these foreign pieces are out of luck. The costs of using a copyrighted work are prohibitive to many individuals wishing to give their own artistic twist to these masterpieces. Furthermore, works that have ALREADY been produced based on one of these works have been saddled with unanticipated fees, destroying their financial viability. Film-making is another industry that will be adversely affected if the public domain is subject to restriction and uncertainty by granting Congress this power of restoration.

So, what does this have to do with technology or telecommunications??

While the URAA is concerned only with certain foreign works, the Supreme Court is addressing a broader question–whether works with expired copyrights can have these rights restored by congressional legislation. This broader question has the potential to shake up digital content sharing with significant impact on the public.

If Congress has the power to restore copyrights to works, that could lead to uncertainty as to what will happen to the public domain. Digital technologies enable new ways to appropriate works in the public domain to create, share and use them. However, movies and music productions that were once thought to be in the public domain and appropriate for sharing on the internet for use by the public will be at jeopardy. Users will be reluctant to share works that were once thought to have passed into the public domain, for fear that Congress might restore copyright protections and allow the copyright holders to seek redress. Discouraging provision of works that are in the public domain online for public consumption will greatly diminish the access to such works. Reluctance to utilize these works could have adverse consequences on technological innovation and creative development, unjustifiably capping the potential for artistic creation and sharing that these tools inspire.

Furthermore, digital content sharers will have to constantly monitor which works Congress has chosen to restore copyright protection to for fear of leaving such works online. This could place a considerable financial burden on publishers of digital content and might discourage them from publishing any material from the public domain whatsoever.

Individual innovation and enjoyment of these works will thus be adversely affected by reluctance to digitally share works that are in the public domain. If the Supreme Court rules in favor of the government in this case, then the public domain will cease to exist as we have come to know it. Innovation will be stymied and digital sharing of these works will cease to exist.

What are your thoughts?

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October 9th, 2011 at 5:58 pm

Posted in Cases,Commentary

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United States v. Antoine Jones: GPS Tracking, Privacy Expectations, and Public Places


In a little under two months, the United States Supreme Court will be hearing oral arguments in United States v. Antoine Jones, regarding the government’s ability to perform warrantless GPS tracking of a criminal suspect’s vehicle.

Although the case addresses only a narrow segment of Fourth Amendment jurisprudence, the Supreme Court’s holding may potentially have a broad impact on future conflicts between technological advances in police investigative techniques and societal expectations of informational privacy.

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October 1st, 2011 at 8:21 pm

Business Method Patents after Bilski v Kappos


The United States Court of Appeals for the Federal Circuit (CAFC), on October 30, 2008, decided In re Bilski (545 F.3d 943), which had serious implications for the future of business method patents. The eleven members of that court found that a method of hedging risk in the field of commodities trading was ineligible subject matter and soundly rejected the broad “useful, concrete and tangible result” test of State Street Bank and Trust Company v. Signature Financial Group, Inc., 149 F.3d 1368 (Fed. Cir. 1998). Instead, the nine judges of the majority opinion adopted the “machine or transformation test” as the exclusive test to determine if a claimed invention qualifies as a “process” under 35 U.S.C. § 101.  Under this test, a claimed process qualifies only if it: “(1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing.” (545 F.3d at 954). Under this test, the vast majority of business patents were in danger of being disqualified.

On June 28, 2010, the Supreme Court of the United States handed down Bilski v. Kappos (08-964), affirming the CAFC’s decision. The Court, however, rejected the CAFC’s assertion that the “machine or transformation” test is the sole test for determining if an invention is an eligible process under § 101. The Court, citing concerns that the “machine or transformation” test causes uncertainty in software and other high-tech patents, determined that although the test is “a useful and important clue, an investigative tool, for determining whether some claimed inventions are processes under §101”, but the CAFC was free to develop “other limiting criteria that further the purposes of the Patent Act and are not inconsistent with its text.” The majority opinion, written by Justice Kennedy, declined to “define further what constitutes a patentable process, beyond pointing to the definition of that term provided in § 100(b) and looking to the guideposts in Benson, Flook, and Diehr. “

Thus, the majority decision in Bilski is remarkably unhelpful in determining the bounds of § 101 eligibility. The court specifically states that business method patents are eligible subject matter, but offers no guidelines beyond referring to thirty year old precedents – precedents decided before business method patents were seriously considered. Kennedy writes that there is a need to protect innovation relating to the “information age”, but only states that the bar for eligibility needs to be high enough to prevent the patent office from being flooded with claims that would chill “creative endeavor and dynamic change.” Yet, while the court endorses the “machine or transformation test”, it very noticeably refrains from commenting on the validity of the State Street Bank “useful, concrete, and tangible” test.

Despite the inscrutable majority opinion, hints as to the future of the State Street Bank “useful, concrete, and tangible” test can be found in the two concurring opinions. Justice Stevens’ concurrence, joined by Breyer, Ginsberg, and Sotomeyer, would have categorically barred all business patents. It is very likely that Stevens could not garner the necessary support from Justice Scalia to make such a broad shift in patent law. Scalia did join in a short, separate concurrence written by Breyer that rejects the “useful, concrete, and tangible” test. Thus, at least five members of the Supreme Court view the State Street Bank test unfavorably.

The failure of the court to make any real distinctions on the eligibility of business method patents may spur congress into action. Kennedy’s opinion relied on 35 U.S.C. § 273, which grants a defense of prior use against business method infringement claims, to come to the conclusion that Congress “left open the possibility of some business method patents.” However, Senator Leahy, chairman of the judiciary committee, recently posted a short note on his website criticizing Bilski for “needlessly [leaving] the door open for business method patents to issue in the future” and stating that it was now “time for Congress to act.”

While the CAFC Bilski decision in 2008 may have temporarily closed the door on business method patents, it would be a fallacy to think that this Supreme Court decision opens the door wide again. A majority of the Justices on the Court, nearly all of the CAFC judges, and important members of congress are highly skeptical of business method patents.  Furthermore, by relying on a quirk of statutory interpretation to preserve the technical validity of business methods instead of making a substantial argument for or against, the Court is making it clear that they lack the will to act decisively on the matter.

Under State Street Bank rule, most business methods were eligible for patentability. After the CAFC Bilski decision, the vast majority of business methods were not eligible. Now, in the wake of Bilski v Kappos, there is only uncertainty. Those seeking to obtain patents on business methods will need to proceed cautiously and with full awareness of all developments in the area.

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July 3rd, 2010 at 9:38 pm

Who Determines Post-Verdict Damage Awards for Patent Infringement in a Post-eBay World?

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by: Michael Sadowitz, Associate Editor, MTTLR


It was once almost a foregone conclusion that a court would grant a permanent injunction to the patentee, when finding a patent valid and infringed.1 The injunction functioned as a powerful negotiations tool, and put the balance of power in the patentee’s hands. In eBay v. Mercexchange, the Supreme Court held that the traditional four-factor test for granting a permanent injunction (irreparable injury, inadequacy of remedies at law, balance of hardships favoring the party seeking the injunction, and public interest) applies to disputes arising under the Patent Act.2 Thus after eBay, a patentee might find herself prevailing with a judgment of infringement, but not be granted an injunction.3 The Supreme Court did not provide guidance as to appropriate relief in such cases. The Federal Circuit has not significantly reduced that uncertainty, but it has declared that district courts should consider pre- and post-verdict damages separately.4 Who determines these damages? Is it a matter for the judge or the jury? For now, the answer is either, and in some cases, perhaps neither.

The Federal Circuit: Pre-Verdict Infringement is Distinct from Post-Verdict Infringement

In Paice v. Toyota Motor Corp., the Federal Circuit found that the jury’s award of $25 per infringing vehicle was for pre-verdict infringement. The district court decided, with no articulated reasoning, to value the ongoing royalty at the same rate.5 The case was remanded to allow the district court to account for the change in the parties’ positions pre- and post-verdict.6

The Paicecourt allowed the district court, at its discretion, to have the parties attempt to negotiate a license before stepping in and assessing an ongoing royalty.7 Judge Rader, taking it a step further, would have required the court to have the parties negotiate or to obtain their permission before assessing the royalty.8 As Judge Rader saw it, the court was imposing a compulsory license but labeling it an “ongoing royalty.”9 However, if a compulsory license has the complexity and detail of other licenses, but an ongoing royalty is simply an imposition of damages for future infringement, then the compulsory licensee might be considered a willful infringer no longer, whereas the recipient of an ongoing royalty would still be willfully infringing.10 Since willful infringers are subject to enhanced damages up to a factor of three,11 the choice of courts to impose a royalty, a license, or to have the parties attempt a negotiation could have serious implications.

Likewise, in Amado v. Microsoft Corp. the Federal Circuit found that the jury’s reasonable royalty of $0.04 per infringing unit, which was trebled for willful infringement and imposed as an ongoing royalty by the district court, was based on pre-verdict infringement.12 Further, this case involved different economic factors than Paice because that court had to determine a royalty under the denial of an injunction whereas the Amado court had stayed the injunction imposed on Microsoft so they could continue infringing.13 Therefore, there was no willful infringement because the court-ordered stay permitted it, and the damage assessment under threat of an injunction should consider the economic factors that such a threat imposes.14

Both Paiceand Amado allowed the district court to decide the royalty without a jury’s determination and without requiring the parties the opportunity to bargain. The Paicecourt specifically rejected the argument that Paice had a Seventh Amendment right to a jury trial to determine the ongoing royalty since a legal remedy, damages, was at stake. The court stated that a question of monetary relief does not necessarily imply a question of damages and the district court had discretion to determine the ongoing royalty.15

Recent Eastern District of Texas Cases: Juries Should Decide Ongoing Royalties

A string of recent cases, all before Judge Ron Clark in the renowned Eastern District of Texas, lend support to the notion that ongoing royalties may be decided by juries more often than not in the future. In the absence of strong objections from the parties, Judge Clark will submit an ongoing royalty rate question to the juries in three cases pending trial.16 Judge Clark gives an example of such a question as follows:17

What rate or sum of money, if any, do you find is adequate as a reasonable royalty to compensate Plaintiff for the conduct you found to infringe that occurs in the future? Answer in a percentage or in dollars and cents.

Judge Clark stated that it makes sense to consider past and future damages simultaneously because there are some identical factors that go into both calculations.18 Judge Clark told the parties to have their damages experts analyze, and be prepared to answer questions related to, ongoing royalties or other future damages.19 \

Another Judge Clark case, Anascape v. Microsoft et al.,20 involved a situation similar to Amado, where a permanent injunction was stayed conditioned upon payment of an ongoing royalty. The stay was conditioned upon an ongoing royalty of 7% of the selling price for one type of video game controller and 5% for another type of controller, to be paid by defendant Nintendo.21 The jury awarded $21 million in damages for pre-verdict infringement.22 It appears, although not expressly stated, that the jury decided the ongoing royalty as well.

Can Post-Verdict Damages be Severed?

The plaintiff in Voda v. Cordis23 suggested severing the action for post-verdict damages. The court declined because it thought the only issue to be decided in a separate proceeding would be a “simple mathematical calculation based on defendant’s sales.”24 The jury awarded the plaintiff an ongoing royalty of 7.5% of defendant’s gross sales of infringing catheters.25 However, the somewhat bizarre Avid v. Phillips26 case allowed severance of the post-verdict damages claim without reasoning.27


Whether judges or juries decide post-verdict patent infringement damages appears to be largely up to the discretion of the district court. As long as the court considers pre- and post-verdict infringement separately, the Federal Circuit will likely not reverse the award based on which party decided the damages. If other courts follow Judge Clark in the Eastern District of Texas, it is likely that many future cases will allow the jury to decide ongoing damages. Who makes the calculation in a given case can have implications on the parties’ strategies for arguing damages, and if the jury decides, it could mean more judgments notwithstanding the verdict. Perhaps more importantly, if it is a question of fact, the jury’s determination is entitled to deference on appeal, whereas a question of law is subject to plenary review. The decision of who decides could be a battleground issue in future patent cases.

1 See, e.g., Connell v. Sears, Roebuck & Co., 722 F.2d 1542, 1548 (Fed. Cir. 1983) (“[t]he right to exclude recognized in a patent is but the essence of the concept of property”).
2 eBay, Inc. v. MercExchange, LLC, 547 U.S. 388, 391 (2006).
3 eBay, 547 U.S. at 393-94.
4 See Paice, LLC v. Toyota Motor Corp., 504 F.3d 1293, 1315 (Fed. Cir. 2007) (finding the jury’s award of $25 per infringing vehicle for pre-verdict infringement only), Amado v. Microsoft Corp., 517 F.3d 1353, 1362 (Fed. Cir. 2008) (finding the jury’s award of $0.04 per infringing unit for pre-verdict infringement only).
5 Paice, 504 F.3d at 1315.
6 Id. (Remanding so the court could “take additional evidence if necessary to account for any additional economic factors arising out of the imposition of an ongoing royalty”); id. at 1317 (Rader, J., concurring) (“But pre-suit and post-judgment acts of infringement are distinct, and may warrant different royalty rates given the change in the parties’ legal relationship and other factors”).
7 Id. at 1315 (majority opinion).
8 Id. at 1316 (Rader, J., concurring).
9 Id.
10 George M. Newcombe et al., Prospective Relief for Patent Infringement in a Post-eBay World, 4 N.Y.U. J. L. & Bus. 549, 574 (2008).
11 Id. at 576.
12 Amado, 517 F.3d at 1359.
13 Id. at 1362.
14 Id. (listing factors such as “the infringer’s likelihood of success on appeal, the infringer’s ability to immediately comply with the injunction, the parties’ reasonable expectations if the stay was entered by consent or stipulation, etc”).
15 Paice, 504 F.3d at 1316. The court cited for support an 1882 Supreme Court case that allowed the court, “in order to avoid a multiplicity of suits,” to decide compensation for past injury based on profits and not “by assessing damages.” Id. (citing Root v. Ry. Co., 105 U.S. 189, 207 (1882)).
16 See Seoul Semiconductor Co. Ltd. v. Nichia Corp. et al, 9:07-cv-00273 (E.D. Tex. July 9, 2008); SciCo v. Boston Scientific, 9:07-cv-0076 (E.D. Tex. July 9, 2008); Iovate Health Sciences Inc. et al v. Bio-Engineered Supplements & Nutrition, Inc., 9:07-cv-00046 (E.D. Tex. July 9, 2008).
17 Seoul Semiconductor, 9:07-cv-00273 at *1.
18 Id. at *2.
19 Id.
20 Anascape, Ltd. v. Microsoft Corp. et al., 9:06-cv-158 (E.D. Tex. July 23, 2008).
21 Id. at *3-4.
22 Id. at *2.
23 Voda v. Cordis Corp., 2006 WL 2570614 (W.D. Okla. Sept. 5, 2006), aff’d in relevant part, 536 F.3d 1311 (Fed. Cir. 2008)
24 Id. at *6.
25 Id. at *1.
26 Avid Identification Sys. v. Phillips Elecs. N. Am. Corp., 2008 WL 819962 (E.D. Tex. Mar. 25, 2008). In Avid, injunctions were denied because of “unclean hands” due to inequitable conduct before the USPTO which led to the unenforceability of one of the three patents-in-suit. Id at *13-14. The denial of an injunction for all three patents, where inequitable conduct was found relating to only one of the patents, was not explained by the court.
27 Id. at *13-14.

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October 22nd, 2008 at 8:32 pm

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