Below are four recent appellate cases in which the courts have decided important patent law issues, and which are or could be quite favorable to Signature Systems in enforcing its patents. The four issues discussed below are (1) the expansion of the rules on divided infringement, (2) the requirements for establishing willful infringement and obtain increased damages, (3) the scope of an abstract idea in the context of computer software, and (4) the challenge to the constitutionality of administrative proceedings such as covered business method (CBM) reviews in the PTAB.
The Federal Circuit case of Akamai Technologies, Inc. v. Limelight Networks, Inc. is favorable to Signature in enforcing claims in the portfolio that require dual actors, such as consumers executing reward point exchanges via the Internet.
Previously, direct infringement could only be found when a single actor performs all the steps of a patented method (with some minor exceptions such as principal-agency relationships). Thus, in a typical Internet-based claim, a user may be asked to provide some input in order for the service to complete the process. Prior to this new case, that service was not an infringement since it did not itself perform all the steps of the method claim.
Under Akamai, direct infringement may now be found when an alleged infringer conditions participation in an activity or receipt of a benefit upon performance of a step or steps of a patented method and establishes the manner or timing of that performance. In those instances, the third party’s actions are attributed to the alleged infringer such that the alleged infringer becomes the single actor chargeable with direct infringement.
In the Akamai case, the user had to perform steps such as “tagging” and “serving” to work with the Limelight service. Prior to this ruling, there was no liability to Limelight since it did not perform those tagging and serving steps. Now, since Limelight established the manner and timing of the customer performing those steps, they are attributed to Limelight, and infringement occurs.
This case had been in litigation for nine years, going from the district court to the Federal Circuit to the US Supreme Court and back down to the Federal Circuit. The Supreme Court has denied certiorari from the Federal Circuit en banc decision, meaning that Akamai is now the current state of the law on this important issue.
In Halo Electronics, Inc. v. Pulse Electronics, Inc., the US Supreme Court overturned the “objective recklessness” standard previously established by the Federal Circuit.
Under the previous standard, a patent owner seeking enhanced damages must establish willful infringement by showing clear and convincing evidence that (1) the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent and (2) the risk of infringement was either known or so obvious that it should have been known to the accused infringer. In Halo, the Supreme Court overturned this rule by removing the “objective recklessness” standard from the analysis. Instead, the Court focused on the subjective question of whether the infringement represents an egregious case typified by willful misconduct. The Court also rejected the “clear and convincing evidence” standard of proof of willfulness used by the Federal Circuit and adopted the preponderance of evidence standard, which is easier to prove. Finally, the Court rejected the standard of review on appeal formulated by the Federal Circuit on the ultimate decision to enhance damages, instead adopting the “abuse of discretion” standard of review.
In sum, this decision makes it easier for a plaintiff in an infringement case, such as Signature, to establish a case of willfulness that could lead to enhanced damages (e.g. treble damages.)
In the case of McRO v. Bandai Namco Games America, Inc., the Federal Circuit reversed the district court below and found the claims at issue to be eligible under 35 USC 101 and Alice. The court found the claims eligible as passing part one of the two-part Alice test. That is, importantly, it found the claims were not directed towards an abstract idea under part one.
Notable takeaways from this case include:
- Courts “must be careful to avoid oversimplifying the claims” by looking at them generally and failing to account for the specific requirements of the claims
- Whether at step one or step two of the Alice test, in determining the patentability of a method, a court must look to the claims as an ordered combination, without ignoring the requirements of the individual steps
- The preemption concern arises when the claims are not directed to a specific invention and instead improperly monopolize “the basic tools of scientific and technological work”
- The abstract idea exception has been applied to prevent patenting of claims that abstractly cover results where “it matters not by what process or machinery the result is accomplished.”
- A patent may issue “for the means or method of producing a certain result, or effect, and not for the result or effect produced.”
- We therefore look to whether the claims in these patents focus on a specific means or method that improves the relevant technology or are instead directed to a result or effect that itself is the abstract idea and merely invoke generic processes and machinery.
This case is important since it provided much needed guidance on the issue of the identification of an abstract idea, which was left vague by the Supreme Court in Alice. It is also one of the few cases in which the Federal Circuit found claims using computer software to be upheld as eligible under section 101. This framework will be helpful for Signature in addressing any challenges of its patents as being abstract under section 101.
The US Supreme Court has now agreed to take the case of Oil States Energy Services V. Greene's Energy Group, to decide if post-grant proceedings decided by the Patent Trial and Appeal Board (PTAB), a branch of the USPTO, are allowed under the US Constitution. That is, can the PTAB/PTO invalidate a patent in an administrative proceeding after it has issued, or is the patent owner entitled to a jury trial to decide that issue. The core issue is whether the patent is a private right, in which case the owner is entitled to a trial in a federal district court, or whether it is a public right, in which case an administrative agency such as the PTO may decide its validity. Oil States is asking the Supreme Court to overturn the Federal Circuit decision that patents are public rights and that PTAB proceedings such as inter-partes review are therefore constitutional.
If the Supreme Court overturns the Federal Circuit decision by ruling that the PTAB proceedings are unconstitutional, then CBMs (covered business method proceedings), IPRs (inter-partes reviews, and PGRs (post-grant reviews) would appear to be eliminated as unconstitutional. This would then require a defendant wishing to challenge the validity/eligibility of a patent to do so in district court, likely as an affirmative defense in an infringement trial. This would favor plaintiffs such as Signature Systems since it would eliminate the ability of an infringer to quickly cut off the patent by the simplified procedures in the PTAB rather than following a full district court trial on the merits.
