Developments In Patent Law 2013: Court Decisions December 2012 To December 2013

Author:Mr Bradley Wright
Profession:Banner & Witcoff

    1. Statutory Subject Matter - Computer Software and Genes

      CLS Bank International v. Alice Corp. PTY. Ltd., 717 F.3d 1269 (Fed. Cir. 2013), superseding 685 F.3d 1341 (Fed. Cir. 2012). Alice Corp. is the owner of four patents that cover a computerized trading platform for exchanging obligations in which a trusted third party settles obligations between a first and second party to eliminate settlement risk, which is the risk that only one party's obligation will be paid. Three types of patent claims were at issue: (1) method claims; (2) computer-readable media claims; and (3) system claims. The district court held that all the claims were not patent- eligible under 35 U.S.C. § 101 because they fell within the "abstract ideas" exception to patentability. A panel of the Federal Circuit initially reversed, holding that the claims were directed to practical applications of the invention falling within the categories of patent eligible subject matter. The panel stated that it must be "manifestly evident that a claim is directed to a patent ineligible abstract idea" before it will be ruled invalid. The Federal Circuit later granted a petition for rehearing en banc.

      The en banc court (decided by 10 judges who were eligible to hear the case) reversed the panel decision and issued a total of 6 separate opinions, plus a seventh "additional views" passage by Chief Judge Rader. In a per curiam opinion, a majority of the judges agreed that the method and computer-readable media claims were invalid, but disagreed as to the reasoning. An equally divided (5-member) court affirmed the district court's decision that the system claims were also invalid. Judge Lourie (joined by 4 others) concluded that all claims were invalid because they "preempt a fundamental concept" - the "idea" of the invention is third-party mediation, and clever claim drafting cannot overcome that preemption. Judge Rader, writing for a 4-member minority, agreed that the method and computer-readable media claims were invalid because they recited an abstract concept, but would have upheld the patentability of the system claims, pointing out that a machine cannot be an "abstract idea." Judge Moore, writing for 4 judges, also pointed out that the system claims should not be considered an abstract idea. Judge Newman would have found all of the claims patent-eligible. Judges Linn and O'Malley would also have found all claims to be patent-eligible because the parties agreed that all claims required the use of a computer. Judge Rader's "additional views" lamented the lack of agreement on the issue.

      Ultramercial, LLC v. Hulu, LLC, 722 F.3d 1335 (Fed. Cir. 2013), on remand from WildTangent, Inc. v. Ultramercial, LLC, 132 S.Ct. 2431 (2012) (vacating earlier decision). A claim for a method of distributing copyrighted materials by allowing free access to the materials in exchange for watching an advertisement was held to constitute statutory subject matter under 35 U.S.C. § 101. The district court held that the claims were invalid because they did not recite statutory subject matter. The Federal Circuit reversed, concluding that many of the recited steps required computer programming, and one step even recited that the media products be provided "on an Internet website." The Supreme Court vacated and remanded the case for further consideration by the Federal Circuit.

      On remand, a panel of the Federal Circuit reaffirmed its earlier decision, concluding that judicially-recognized exceptions to patentability (e.g., laws of nature, physical phenomena, and abstract ideas) should be interpreted narrowly. Moreover, attacks on patent validity, including whether an invention falls within an eligible category, must be proven by clear and convincing evidence. The panel relied in part on a dictionary definition of "abstract" to conclude that "An abstract idea is one that has no reference to material objects or specific examples - i.e., it is not concrete." Relying in part on the Supreme Court's 1981 decision in Diamond v. Diehr, the panel noted that it is improper to dissect a claim into old and new elements and then to ignore the presence of the old elements in the analysis. According to the panel, "a claim may be premised on an abstract idea . . . the question for patent eligibility is whether the claim contains limitations that meaningfully tie that abstract idea to an actual application of that idea through meaningful limitations." The panel also stated that, "[if] the computer plays a meaningful role in the performance of the claimed invention, it is as a matter of fact not likely to pre-empt virtually all uses of an underlying abstract idea, leaving the invention patent eligible."

      Based on the facts in this case, the panel concluded that the district court had erred in requiring that the patent owner come forward with an interpretation of the patent claims that would render them patent-eligible; the claims should instead have been presumed to be patentable. The panel also concluded that the district court erred in characterizing the invention as "the mere idea that advertising can be used as a form of currency," instead of looking at specific claim limitations invoking computers and applications of computer technology. Based on the specific steps recited in the claim, the panel held that it did not cover the abstract idea of using advertising as currency. It pointed specifically at the step of "providing said media products for sale on an Internet website." In viewing the claim as a whole, the panel majority concluded that the invention involved an extensive computer interface.

      Judge Lourie wrote a concurring opinion, arguing that the court should have applied the five-member plurality opinion from CLS Bank v. Alice Corp., 717 F.3d 1269 (Fed. Cir. 2013). Applying that two-part test, Judge Lourie concluded that first, a court must identify whether the claimed invention fits within one of the four statutory classes set out in 35 U.S.C. § 101; and second, it must assess whether any of the judicial exceptions to subject matter eligibility applies, including whether the claims are drawn to an abstract idea. In this case, Judge Lourie agreed that the patent claims required more than merely the abstract idea of using advertising as an exchange or currency.

      Association for Molecular Pathology v. Myriad Genetics, Inc., 133 S.Ct. 2107 (2013). Myriad obtained several patents directed to detecting the location and sequence of certain genes that can lead to a dramatic increase in breast cancer risk. Several plaintiffs sued Myriad, contending that the patents are invalid, and the district court granted summary judgment that the patents were invalid. The Federal Circuit reversed, but the Supreme Court vacated the decision and remanded for reconsideration in view of the Supreme Court's 2012 decision in Mayo Collaborative Services v. Prometheus Labs, 132 S.Ct. 1289 (2012). Following remand, the Federal Circuit again affirmed, but the Supreme Court again granted certiorari, and issued a decision upholding the patentability of certain claims directed to synthetically created composite DNA (cDNA), but concluding that claims directed to isolated DNA segments were not patent-eligible. According to the Court, DNA segments were an unpatentable product of nature, whereas the cDNA segments were entirely man-made. The Court noted that no method claims were at issue in the case.

      Accenture Global Services, GMBH v. Guidewire Software, Inc., 728 F.3d 1336 (Fed. Cir. 2013). A district court held on summary judgment that all claims of Accenture's patent, directed to a system for generating tasks to be performed in an insurance organization, were invalid because they were not directed to patent-eligible subject matter. Accenture appealed only the holding as to the system claims, which recited elements including "an insurance transaction database," "a task library database," "a client component in communication with the insurance transaction database," and "a server component in communication with the client component." Judge Lourie, writing for a panel majority, applied the test set forth in his plurality opinion in CLS Bank (see above) and concluded that the system claims recited merely an abstract idea. Judge Lourie concluded that the system claims were quite similar in structure to the method claims, which Accenture had not appealed. According to Judge Lourie, the various "components" recited in the system claim were all present in the invalidated method claims, although worded differently. Chief Judge Rader filed a dissenting opinion, stating that "any claim can be stripped down, simplified, generalized, or paraphrased to remove all of its concrete limitations, until at its core, something that could be characterized as an abstract idea is revealed."

    2. Anticipation

      Cheese Systems, Inc. v. Tetra Pak Cheese and Powder Systems, Inc., 725 F.3d 1341 (Fed. Cir. 2013). Cheese Systems brought a declaratory judgment action against Tetra Pak, seeking a declaration that it did not infringe a patent directed to a cheesemaking machine. The district court held that Cheese Systems infringed and that the patent was not invalid as anticipated by a prior art reference. The Federal Circuit affirmed, holding that a brief mention of a critical feature in a prior art reference was insufficient to anticipate. According to the Federal Circuit, "Without a clear and unambiguous teaching, a jury could only speculate, hardly a compelling case for anticipation."

    3. On-Sale Bar to Patentability

      Hamilton Beach Brands, Inc. v. Sunbeam Products, Inc., 726 F.3d 1370 (Fed. Cir. 2013). Hamilton Beach sued Sunbeam for infringing patents relating to latching slow-cooker lids that allowed slow-cooker pots to be carried to a party with food in them. (Hamilton Beach's commercial product is the "Stay or Go" slow cooker, whereas Sunbeam was selling its product under the "Cook &amp...

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