Greenblum & Bernstein, P.L.C.
Recent Litigation News in Intellectual Property
In This Issue
· U.S. Supreme Court Affirms Alice Corp. v. CLS Bank
· Federal Circuit Affirms Invalidity Due to Obviousness
· Federal Circuit Grants Writ of Mandamus to Sever and Transfer
· Federal Circuit Reverses Summary Judgment of Non-Infringement
In Alice Corp. Pty. Ltd. V. CLS Bank Int’l (Case No. 13-298), the Supreme Court affirmed the en banc Federal Circuit holding that Alice Corp.’s patent claims are ineligible pursuant to 35 U.S.C. § 101 because they are directed to an abstract idea. The Federal Circuit had affirmed the district court finding of ineligibility in a per curium opinion, without agreeing on the test or the reasoning.
The patents at issue cover methods and apparatus as well as data processing systems for managing risk in financial exchanges; the risk that only one party will meet its obligation. Claims include the method for exchange, a computer system configured to carry out the method, and a medium containing the program code for the method.
The Court explained that laws of nature, natural phenomena, and abstract ideas are implicit exceptions to section 101 and are not patentable. Their exclusion is based on the principle of pre-emption. Monopolization of the “basic tools of scientific and technological work,” would pre-empt their use in all fields, impeding innovation rather than promoting it. The courts must “distinguish between patents that claim the building blocks of human ingenuity and those that integrate the building blocks into something more, thereby transforming them into a patent-eligible invention.”
The Court set forth the steps from Mayo, first determining “whether the claims at issue are directed to one of those patent-ineligible concepts,” and second, if they are, asking “what else is there in the claims before us?” In this second step the Court considers the individual elements of the claim, and the whole claim “as an ordered combination” to determine whether it is transformed into a “patent eligible application” of the ineligible concept.
The Court found that like the algorithm in Benson, or the method for hedging financial risk in Bilski, Alice Corp.’s claims “are directed to an abstract idea.” The Court therefore turned to the second step and concluded that “the method claims, which merely require generic computer implementation, fail to transform that abstract idea into a patent-eligible invention.”
The Court “examined[d] the elements of the claim to determine whether it contains an ‘inventive concept’ sufficient to ‘transform’ the claimed abstract idea into a patent-eligible application.” This “requires ‘more than simply stating the [abstract idea] while adding the words ‘apply it,’” as a safeguard against “‘drafting effort[s] designed to monopolize the [abstract idea].’” According to Mayo, adding general, conventional steps does not provide “inventive concept,” and Benson held that implementation by existing computers “is not a patentable application.” “Flook stands for proposition that the prohibition against patenting abstract ideas cannot be circumvented by attempting to limit the use of [the idea] to a particular technological environment.” “[C]laims in Diehr were patent eligible because they improved an existing technological process, not because they were implemented on a computer.” Applying these cases, the Court held that “the mere recitation of a generic computer cannot transform a patent-ineligible abstract idea into a patent-eligible invention.” As adding the words “apply it” is not enough, nor is limiting it to the use of a generic computer; “[s]tating an abstract idea while adding the words ‘apply it with a computer’ simply combines those two steps, with the same deficient result.”
The Court noted that this is in agreement with the pre-emption concerns of § 101. The use of computers in most fields precludes “generic computer implementation” from providing “practical assurance that the process is more than a drafting effort designed to monopolize the [abstract idea] itself.” The Court held that the claims do not “do more than simply instruct the practitioner to implement the abstract idea of intermediated settlement on a generic computer.” The Court considered the individual elements of the claims, finding them to “do no more than require a generic computer to perform generic computer functions.” Then the Court considered the claims “as an ordered combination,” finding that they merely instruct the application of the abstract idea using a generic computer. The “claims to a computer system and a computer readable medium fail[ed] for substantially the same reasons,” and the Court affirmed the holding of ineligibility.
Federal Circuit Affirms Invalidity Due to Obviousness
In Bristol-Myers Squib Co. v. Teva Pharmaceuticals USA, Inc. (Appeal No. 2013-1306), Bristol-Myers Squib (BMS) sued Teva Pharmaceuticals (Teva) for patent infringement and the district court found the asserted claims of the patent to be invalid as obvious.
BMS contended that a person having ordinary skill in the art would have had to make too many decisions to arrive at the patented product, selecting: a class of nucleoside analog (the manmade version of DNA building blocks), a lead compound from the class, the portion of the molecule to alter, the position and type of chemical element, and the bond. The Federal Circuit concluded that the district court’s analysis was well supported, noting that the nucleoside analog was known as a “promising area” for the art, that the lead compound was being treated as such in the field, there was motivation to select the portion of the molecule, position and chemical element, and that the selected bond was the more conservative choice. The Court held that the list of choices equated to “a small, finite number of changes to try,” and “skilled artisans would have had a reason to select the route that produced the claimed invention.”
BMS also argued secondary considerations of nonobviousness including, commercial success, long-felt need, and unexpected results. The district court found some evidence of secondary considerations; but the success was “less dynamic” than needed, long felt need was interrupted by two other drugs treating the same disease which were invented before the patented invention, and the unexpected results were “differences in degree” which “are not as persuasive in rebutting obviousness as differences in kind.” The district court found and the Federal Circuit affirmed that the evidence “provided some support to BMS’s argument to nonobviousness, but did not find it sufficient.” The Federal Circuit therefore affirmed the judgment that the patent claim at suit is invalid as obvious. BMS has requested en banc review.
Federal Circuit Grants Writ of Mandamus to Sever and Transfer Action from Eastern District of Texas to Western District of Washington
In In re Nintendo of America, Inc. (Appeal No. 2014-132), Secure Axcess filed suit against Nintendo and eleven retailer defendants in the Eastern District of Texas for patent infringement. The district court denied a motion by Nintendo and the retailers to sever and stay the claims against the retailers, and transfer the action against Nintendo to the Western District of Washington. The Defendants filed a petition for writ of mandamus.
The district court denied the motion to sever and stay, noting the Plaintiff’s argument that it could “obtain a higher royalty against the retailers in light of higher retail prices and the practice of bundling.” Having decided against severance, the district court denied the request for transfer as it was “unclear whether the entire action could have been brought in the transferee venue.”
The Federal Circuit noted that Nintendo’s key executives, sales and marketing decision makers, and related documents were located in Washington. The Federal Circuit further noted that Secure Axcess is “a company that acquires, licenses, and enforces patents,” and that although its executives work in various parts of the country, all business cards list a 200 square foot office in the Eastern District of Texas as the principal place of business. No witnesses were found to reside in the Eastern District of Texas.
The Federal Circuit held that the royalty rate argument against severance is “outweighed” as the prosecution of the retailers would be advanced or mooted by the result of the case against Nintendo. Secure Axcess “has no claim against the Retailers unless the infringement claims against Nintedo are resolved in favor of Secure Axcess.”
The Federal Circuit stated that the “benefits of trying the case against Nintendo in the Western District of Washington are indisputable,” and therefore ordered that the “district court order denying the motion to sever, transfer, and stay is vacated, and the district court is directed to grant petitioners’ motion.”
Federal Circuit Reverses Summary Judgment of Non-Infringement Based on Claim Construction
In Hill-Rom Services, Inc., v. Stryker Corp. (Appeal No. 2013-1450), Hill-Rom filed suit against Stryker for infringement. The parties stipulated to noninfringement based upon the court’s claim construction, and Hill-Rom appealed. The district court construed the term “datalink” to include a cable, and not a wireless connection. Hill-Rom argued that the plain and ordinary meaning is “a link that carries data” incorporating both wired and wireless connections. Stryker argued that the specification limited it to a wired connection.
The Federal Circuit agreed with Hill-Rom, noting that the only two exceptions to the plain and ordinary meaning in claim construction are: (1) when the patentee acts as a lexicographer and defines the term, or (2) when the patentee disavows the full scope of the term. The Federal Circuit also explained that claims are read in view of the specification, but are not given limitations from embodiments in the specification. Although a wireless connection is not disclosed in the specification, the Federal Circuit noted that “a specification need not disclose what is well-known in the art,” and that including wireless connections is “not inconsistent with the examiner’s statement that the ‘038 patent does not teach a wireless receiver.” The Court also found that this construction is supported by claim differentiation.
The district court applied judicial estoppel in construing another term, but the Federal Circuit held that statements made during the prosecution of a later, unrelated patent cannot create judicial estoppel and that the later position was not “clearly inconsistent with the earlier position.” The Federal Circuit therefore reversed the grant of summary judgment of noninfringement and remanded for further proceedings.