My apologies for the long absence, dear readers.  Just as the U.S. Supreme Court is set to take its collective seat again for a new term this coming Monday, October 2, 2017, however, I am back with more intellectual property legal highlights.

In the past three or four years, the Supreme Court has been taking an increased interest in intellectual property cases, granting certiorari for more IP cases than ever before and coming down with landmark decisions across the IP legal spectrum.  The 2017 term is already shaping up to be yet another high watermark.  First, the Court has already granted a petition for certiorari for an important patent cases.  The Justices will be faced with a constitutional challenge to the review procedures under the America Invents Act (AIA) under the “separation of powers” doctrine and the Seventh Amendment’s given right to a jury trial in Oil States Energy Services, LLC v. Greene’s Energy Group, LLC, No. 16-712.

Second, the Court has a full plate of other petitions for certiorari to consider in the new term on significant and divisive IP issues, including:

  1. the role of the patent specification in deciding patent eligibility, in Synopsys, Inc., v. Mentor Graphics Corporation, No. 16-1288;
  2. known interchangeability evidence for patent equivalence, in Tomita Technologies USA, LLC v. Nintendo Co., Ltd., No. 17-292;
  3. patent infringement through the performance of one or more steps of a patented process by multiple independent actors, in Voter Verified, Inc. v. Election Systems & Software LLC, No. 16-1505;
  4. issued copyright registration vs. filed application for filing an infringement suit, in Fourth Estate Public Benefit Corporation v., LLC, No. 17A150;
  5. vicarious liability for copyright infringement, in Perfect 10, Inc. v. Giganews, Inc., No. 17-320;
  6. when copyright causes of action arise, in Olenicoff v. Wakefield, No. 17-56;
  7. Internet service providers’ liability for copyright infringement and the requirement of volitional conduct, in BWP Media USA, INc. v. T&S Software Associates, Inc., No. 17-122;
  8. whether a likelihood of confusion assessment in a trademark infringement suit is a question of law or fact, in Kibler v. Hall, No. 16-1365;
  9. the test for a parody fair use of a trademark with respect to trademark dilution, in Louis Vuitton Malletier, S.A. v. My Other Bag, Inc., No. 17-72;
  10. necessary pleadings with respect to trademark use in a motion to dismiss under Federal Rule 12(b)(6), in Kassa v. Detroit Metro Convention & Visitors Bureau, No. 16-1512; and
  11. online sellers’ liability for counterfeit sales by third parties, in Hart v., Inc., No. 16-1549.

At least some of these issues have been mired in split-Circuit decisions, or even simply caught in the land of the undecided.  Hopefully, the Court will offer some guidance.

In June of 2014, the United States Supreme Court upheld the decision of the United States Court of Appeals for the Federal Circuit in striking a blow against the patent eligibility of software and business methods by concluding that the patent claims in the patents at issue in the infringement case of Alice Corp. Pty Ltd v. CLS Bank Int’l were directed toward ineligible subject matter for patent protection.  In so doing, the Supreme Court attempted to promulgate a standard for determining patent eligibility under 35 U.S.C. § 101.  The pronounced test involves a two-part inquiry: (1) whether the claims directed to an abstract idea; and (2) subsequently, whether the claims add significantly more in their implementation such that the abstract idea is transformed into a patent eligible invention.  Following the decision, many scholars and practitioners were disappointed, however, to have received little practical guidance from the Supreme Court, which limited its consideration of what constitutes an abstract idea to only the claims at issue in Alice and did not elucidate what was necessary to transform a claim directed at an abstract idea into a patent eligible invention.

Notwithstanding the somewhat hazy standard it instituted, the Supreme Court has not been shy about encouraging lower courts and the United States Patent and Trademark Office (USPTO) to apply it.  Such adherence has resulted in a new form of a § 101 “Alice” rejection being issued by Patent Examiners at the USPTO and lower courts striking down software and business method patents with greater frequency.  The latest instance of this occurred on November 14, 2014 in the Federal Circuit case of Ultramercial Inc. v. Hulu, LLC, Fed. Cir., No. 10-1544, November 14, 2014.  The main patent claims at issue would be familiar to anyone who has spent some time on websites such as YouTube, Pandora, and particularly in this case, Hulu.  U.S. Patent No. 7,346,545 revolved around a method of exchange where a consumer receives free streams of video or other media by watching a paid advertisement.  The judges of the Federal Circuit, though careful to say that this is not necessarily true for all claims in all software patents, found the claims directed to the abstract idea of advertising as an exchange of currency, also utilized on television and the radio.  The method at issue, which outlined the steps of the exchange, was not found sufficiently concrete or tangible to pass muster under the first prong of the Supreme Court’s test.  The Federal Circuit deemed the method an abstract idea.

Moreover, the court did not find the claims to add any elements to transform the claims into a patent eligible invention by adding that ever-elusive “inventive step.”  According to the court, the method was nothing more than an implementation of an abstract idea through conventional steps, and the claims’ additional limitations, such as updating an activity log, were all considered just as routine, conventional, and well-understood.  The court went further to state that the mere addition of novel or non-routine elements does not necessarily transform the abstract idea to make it patent eligible.  The claims must add “significantly more” to the abstract idea, offer some type of technological, physiological, or otherwise transformative leap to satisfy patent eligibility.  Perhaps most importantly, following in the wake of Alice in particular, the court emphasized that the addition of the Internet alone cannot make the abstract idea patentable.  Instruction to use or implement the abstract idea on the Internet (or in the case of Alice, on a computer in general) does not constitute that “inventive step” necessary for eligibility, particularly in light of the prevalence and permeation of such technology in today’s society.

Arguably, the Alice standard has already made it tougher to attain and maintain software and business-type method patents.  The Supreme Court’s two-part framework offers the contours of an analysis, but was not actually accompanied by clear, practical decision-making standards.  As such, patent applicants in the USPTO and patent litigants throughout the federal districts are still confused and wary, and will remain so at least until a solid body of case law accumulates interpreting and implementing the Alice test.  It appears, however, that courts are at least beginning to make strides toward that end, even though recent decisions do not pave a smooth and easy road for software inventions.

Patent infringement suits today are quite the rich man’s game.  From the moment it is initiated, a patent infringement suit takes an enormous toll on a defendant, of which arguably the greatest portion includes attorneys’ fees and litigation costs in federal court.  As such, proceedings before the newly renamed Patent Trial and Appeal Board (PTAB), formerly Board of Patent Appeals and Interferences, can be very attractive for litigants.

Typically, proceedings before the PTAB are more efficient and less expensive than those filed in federal court.  Partly in light of the ever-growing costs of litigating patents, the relatively new American Invents Act (AIA) has established the inter partes review (IPR) and post-grant review (PGR) processes in order to, at least in part, discourage litigation.  In particular, under the AIA, an IPR proceeding must be resolved within three months, and though the costs to petition for an IPR before the PTAB is steep at $20,000, the amount is very often low compared to the staggering millions that may be spent on litigation.  Furthermore, the AIA prescribes the stay of federal action once an IPR is instituted.

In a recent decision by the United States District Court for the Eastern District of Pennsylvania, the court granted a defendant’s motion to stay proceedings pending a decision by the PTAB.  In Destination Maternity v. Target, Target was accused of copying Destination Maternity’s patented designs for maternity pants that have flexible material over the stomach area in order to adjust for different stages of the pregnancy.  In opposition, Target petitioned for IPR before the PTAB for twenty-seven of the twenty-nine claims asserted against it by Destination Maternity, and plans to petition for review of the remaining claims as well.

In deciding to grant the stay, the court weighed several factors, promulgated by common law and formalized in the AIA, including (1) whether a stay would unduly prejudice or present a clear tactical disadvantage to the nonmoving party; (2) whether a stay will simplify the issues in question and trial of the case; and (3) whether discovery is complete and whether a trial date has been set.  The AIA also includes a fourth factor, namely, whether a stay will reduce the burden of litigation on the parties and on the court (AIA § 18(b)).  Regardless, the court was swayed by the first three factors enough to grant a stay.

Destination Maternity argued that Target had waited too long to petition for IPR and that it would be prejudiced by losing valuable market share to Target due to the delay.  The court, however, decided that Target was just one of several of Destination Maternity’s main market competitors and any market share loss in the interim would not be substantial enough to constitute prejudice.  The court noted that Destination Maternity had many competitors in the market, including H&M, Babies R’ Us, Walmart, Old Navy, J.C. Penney, and Gap, the latter two of which Destination Maternity had threatened, but failed, to sue over the same infringement claims as it did Target.  Furthermore, the court also decided with respect to the second factor that the PTAB decision would simplify the issues and streamline the case, and with respect to the third factor, that discovery was not yet complete and the case was not at an advanced stage.

In addition to the new review processes and associated preclusion effects that may hinder patent litigation generally, it remains to be seen whether the nascent AIA can help to stem the tide of rising costs of litigating patent infringement claims, or at least avoid them altogether.  For now at least, it seems as though courts are at least willing to give it a chance.

Promoting the advancement of science through a system of guaranteeing certain exclusive rights to inventors of new and useful articles reaches back to the very foundation of the United States Constitution.  Article II, Section 8 specifically provides that Congress shall have the power “[t]o promote the Progress of Science and the useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.”  Ever since that enigmatic phrase was scribed, patent law in the United States has struggled with identifying just what types of subject matter are eligible for patent protection.

Patent law defines four categories of patentable subject matter, into at least one of which any invention must fall to be eligible for patent protection: process, machine, manufacture, or composition of matter.  In contrast, laws of nature, physical phenomena, and abstract ideas cannot receive patent protection.  As discovery and innovation grow, courts continue to struggle with categorizing new inventions as either patentable or not patentable subject matter.

The most recent struggle, looming for the U.S. Supreme Court in June of 2014, is whether new software, arguably the most prevalent current form of innovation, will definitively be deemed too abstract to patent.  Decisions to date have been adjudicated mostly with respect to the principles determining the patentability of mathematical algorithms set out in the Supreme Court Trilogy decisions (Gottschalk v. BensonParker v. Flook, and Diamond v. Diehr) and the patentability of business methods in the seminal 2010 Bilski v. Kappos decision.  In so doing, the Supreme Court has mostly decided the eligibility of software for patent protection on a case-by-case basis, maintaining unclear standards and divisive majority opinions on whether software patents categorically can be considered patentable or not.

In May of 2013, in Alice Corp. Pty Ltd v. CLS Bank Int’l, an extremely divided ten-judge panel of United States Court of Appeals for the Federal Circuit ruled that Alice Corp.’s patented software, which provides a way to reduce the settlement risk in financial transactions between two parties, was actually ineligible for patent protection, but produced seven different opinions on the patentability of computer software inventions.  In the end, the court failed to settle on a cognizable standard that would once and for all determine the eligibility of computer software for patent protection.  This decision has been granted certiorari by the Supreme Court, with oral arguments currently set for March 31, 2014.  In the meantime, the upcoming decision has drawn the attention of many scholars and players in the software industry, evidenced by over forty amicus curiae briefs filed by third parties.  It seems that many hope the Supreme Court will finally either deem software definitively patentable subject matter, or force software engineers to look to other legal means through which to protect their innovations.