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Octane Fitness, LLC v. ICON Health and Fitness, Inc. and Highmark, Inc. v. Allcare Health Mgmt. Sys. Inc.

Posted in Litigation Commentary by Kristen Fries on April 30, 2014

The determination of whether a case is “exceptional” under the attorney fee-shifting provision of The Patent Act is left to a broad discretion of the District Court.

In two slip opinions rendered April 29, 2014, SCOTUS addressed issues regarding awarding attorneys fees under 35 U.S.C. § 285 to prevailing parties in “exceptional” patent infringement cases. Under 35 U.S.C. § 285, a District Court is authorized to award attorney’s fees to prevailing parties in “exceptional cases.” The CAFC had used a Brooks Furniture standard defining an “exceptional case as one which involves “material inappropriate conduct” or is both “objectively baseless” and “brought in subjective bad faith.” Under the Brooks Furniture standard, an exceptional case must be established by clear and convincing evidence.

 

OCTANE FITNESS

In the opinion delivered by Justice Sotomayor, the Court, in a 9-0 decision, construed the term “exceptional” in its plain and ordinary meaning and held that exceptional means “uncommon,” “rare,” and “not ordinary.” The Court held that the CAFC has applied too rigid of a standard in determining whether a case is an exception case and rejected the Brooks Furniture standard.

According to Justice Sotomayor, the § 285 statute is “patently clear” and imparts flexibility on the District Court to decide whether a case is exceptional. Octane, slip op. at 7. “[A]n ‘exceptional’ case is simply one that stands out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated.” Id. at 7-8. Therefore, the intent of the statute only requires that the litigation present either subjective bad faith or exceptionally meritless claims. Additionally, the Court held that a preponderance of the evidence standard is the appropriate standard to use to establish entitlement of fees, rather than a clear and convincing evidence standard. Id. at 11.

Reversed and Remanded

 

HIGHMARK

In this opinion, also delivered by Justice Sotomayor, the Court used the Octane case as precedent to unanimously hold that “an appellate court should apply an abuse-of-discretion standard in reviewing all aspects of a district court’s § 285 determination.” Highmark, slip op. at 5.

Vacated and Remanded

 

The Octane opinion can be found here and the Highmark opinion can be found here.

Note: The holdings in these cases, relaxing the standard required for district courts to determine whether a case is “exceptional” may aid in thwarting certain “patent trolls” from asserting patent claims that are meritless or brought in bad faith. Stay tuned to see how these rulings affect the litigation process, the legislative process regarding patent reform, and if the holdings will actually send the trolls back under the bridge or if the trolls will just find another way out.

Alice Corp. v. CLC Bank Int’l: Notable Quotes from the Oral Arguments.

Posted in Litigation Commentary by Kristen Fries on April 18, 2014

The link to the transcript for the March 31, 2014 oral arguments before the SCOTUS in Alice Corp. v CLC Int’l can be found here.

Background: Alice Corporation, petitioner, owns the four patents-in-suits which are directed toward a computerized trading platform for the execution of a previously agreed-upon exchange, known as “settlement.” The inventions include electronically maintained accounts for each party in the settlement and after receiving transactions from each party, the computer system effects the exchange. The United States District Court for the District of Columbia declared each of Alice’s patents invalid for not defining patent-eligible subject matter. The U.S Court of Appeals for the Federal Circuit affirmed the decisions, in an en banc rehearing.

Issue: Whether claims to computer-implemented inventions – including claims to systems and machines, processes, and items of manufacture – are directed to patent-eligible subject matter within the meaning of 35 U.S.C. § 101 as interpreted by this Court.

Per usual, we will preface our thoughts with the following disclaimer:  “It is generally a futile effort to predict how the Supreme Court will rule on any given issue.”  That being said, below are some quotes that we found of particular interest:

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Hyatt v. USPTO – Procedural Limbo in the Patent Process?

Posted in Litigation Commentary by Jake Ward on March 2, 2014

Gil Hyatt

(Photograph Courtesy of Gilbert P. Hyatt)

Gilbert P. Hyatt v. USPTO (D. Nevada 2014)

We recently had an opportunity to speak with Mr. Gil Hyatt.  Gil is a well-known and prolific inventor in early computer technology, being named on more than 70 issued patents.  Over the years, he has also been a successful litigant in many patent-related matters.  As recently as 2012, Gil prevailed in a case at the U.S. Supreme Court against the U.S. Patent and Trademark Office (USPTO).

On January 3, 2014, Gil filed a complaint against the USPTO relating to two appealed patent applications.  The appealed patent applications have been pending at the USPTO since the early 1970s, i.e., over 40 years.  Gil alleges that the delay of the USPTO in these appealed patent applications is unreasonable under the Administrative Procedure Act, 5 U.S.C. § 701(1).

As a patent practitioner, the facts of this case are quite shocking.  According to USPTO statistics, the typical amount of patent pendency is 28.3 months.  This means that, if an inventor were to file a patent application today, the inventor would normally expect to receive a patent in about 2-1/2 years.  Gil’s patent applications have been pending for 16x longer than is normal.

According to Gil’s complaint, the USPTO has engaged in “a deliberate strategy to deny him adjudication of his pending patent applications.”  In both cases, the USPTO has apparently furnished no written answer to the filed appeal briefs, and no decision has been made by the Appeal Board.  Many formal petitions for action on the merits and requests for status updates have purportedly been filed by Gil, also to no avail.  A number of interviews with USPTO officials have also taken place, allegedly without resulting in any action.

These conversations with USPTO officials have also caused Gil to believe that the USPTO is intentionally refusing to grant any more patents to him.  Indeed, no patent has issued to Gil since 1997.  According to the complaint at paragraph 46:

During an in-person conference with the Director of the Technology Center responsible for examination of Mr. Hyatt’s patent applications – which is documented in the record of two of Mr. Hyatt’s patent applications – Mr. Hyatt pointed out “the scenario of applications going round and round from the examining groups to the Board and then back to the examining groups and then back to the Board.” The Director confirmed that this was the policy that the PTO was pursuing toward him.

The Hyatt patent applications apparently exist in a state of procedural limbo at the USPTO.  There is no doubt that this situation is quite unusual.  However, since his patent applications are not published, the “file wrappers” or official records of actions taken by both Gil and the USPTO remain secret at this time.  There is also no way of knowing the importance of the inventions being claimed, or the general impact that the patents would have if they were to issue.  We will be following this case closely, and are most interested in reading the USPTO’s answer to the complaint when filed.

For other articles on Mr. Gilbert P. Hyatt, and his actions in court and at the USPTO, see the following links:

http://articles.latimes.com/keyword/gilbert-hyatt

http://www.marketsandpatents.com/articles/wp_value.html

http://patentlyo.com/patent/2014/01/hyatt-v-uspto-three-generations-of-poor-examination-are-enough.html

http://www.bloomberg.com/news/2014-02-24/inventor-waits-43-years-for-another-chance-to-shock-tech.html

Importance of Design Patents in the Recent Apple-Samsung Litigation.

Posted in Litigation Commentary by Jake Ward on August 28, 2012

An interesting article at Forbes yesterday, on the increasing importance of design patents for technology companies.  Highly suggested read.

Bilski v. Kappos: Notable Quotes from the Oral Arguments.

Posted in Litigation Commentary by Jake Ward on November 9, 2009

The link to the transcript for the November 9th oral arguments before the SCOTUS in Bilski v. Kappos can be found here.

Per usual, we will preface our thoughts with the following disclaimer:  “It is generally a futile effort to predict how the Supreme Court will rule on any given issue.”  That being said, below are some quotes that we found of particular interest:

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Scheduled SCOTUS Oral Arguments in Bilski v. Kappos – November 9, 2009.

Posted in Litigation Commentary by Jake Ward on November 9, 2009

Oral arguments in Bilski v. Kappos are scheduled for today, November 9, 2009.  Previous AT! coverage of Bilski here, here, here, and here.

In short, the CAFC in Bilski has held that business methods are not patentable unless they satisfy the machine-or-transformation test.  In other words, patentable business methods must either: 1) transform matter into a different state or thing, or 2) be tied to particular machine.  The Bilski decision expressly held inadequate the 1998 ruling in State Street Bank, which had established that business methods were patentable if they produced a “useful, concrete, and tangible result”. 

The questions presented in the petition for U.S. Supreme Court review were:

1. Whether the Federal Circuit erred by holding that a “process” must be tied to a particular machine or apparatus, or transform a particular article into a different state or thing (“machine-or-transformation” test), to be eligible for patenting under 35 U.S.C. § 101, despite this Court’s precedent declining to limit the broad statutory grant of patent eligibility for “any” new and useful process beyond excluding patents for “laws of nature, physical phenomena, and abstract ideas.”

2. Whether the Federal Circuit’s “machine-or-transformation” test for patent eligibility, which effectively forecloses meaningful patent protection to many business methods, contradicts the clear Congressional intent that patents protect “method[s] of doing or conducting business.” 35 U.S.C. § 273.

Further details on Bilski v. Kappos may be found via the SCOTUS  Wiki here.  A transcript of the oral arguments will follow, as soon as available.

Tafas v. Dudas; SmithKline Beecham Corp. v. Dudas – Hearing Today.

Posted in Litigation Commentary by Jake Ward on February 8, 2008

The Summary Judgment hearing for Tafas/GSK v. USPTO in U.S. District Court (E.D. Virginia) is scheduled for today, Friday, February 8, 2008, at 10:00 AM.  As previously posted by AT!, the litigation is related to the USPTO’s proposed claims and continuations rules and a preliminary injunction of the rules is presently in place.  See here, here, here, and here.  The Patent Docs have some exceptional background on the litigation, including copies of briefs filed, here.

Some are speculating that a decision from Judge James C. Cacheris may be rendered from the bench today.  The PLI Blog will be report-blogging on the case throughout the day.  Stay tuned.

JW Update (2/8/08 – 2:05PM) – Per Gene Quinn at the PLI Blog, the court has taken the matter under advisement and has recessed for the day.  A decision is expected within the next few days to weeks.

Scrabulous: Not a Triple-Word Score.

Posted in General Commentary, Litigation Commentary by Mike Dockins on January 21, 2008

According to Reuters, Mattel and Hasbro have recently warned Facebook that the online application Scrabulous may be infringing Mattel and Hasbro’s copyright and, presumably, trademark in relation to the popular board game Scrabble®. 

If you have not yet been hooked by the Scrabulous phenomenon, consider yourself lucky. Sources indicate that it can be quite addictive.  Scrabulous has a registered user base of 2.3 million, 600,000 of which play the game daily.  The move to shut down Scrabulous has also prompted a new community on Facebook named “Save Scrabulous”.  The “Save Scrabulous” community has over 12,000 members.

So is there copyright infringement?  Independent creation is a defense to copyright infringement, but only if independent creation is a possibility.  If you were to put enough monkeys with typewriters in a room on Mars, for example, they may independently create Shakespeare and have a valid copyright in the work. 

One test for copyright infringement is access and substantial similarity.  The creators of Scrabulous cannot in good faith claim, however, that they never had access to Scrabble®.  The game of Scrabble® is sold in 121 countries in 29 different languages. One hundred million games have been sold worldwide, and estimations are that Scrabble is found in one out of every three American homes. 

As for substantial similarity, well, we have not played Scrabulous ourselves, so it is impossible to make a first-hand determination.  However, below is a comment from one of the more reasonable Scrabulous fans at “Save Scrabulous”, as reported at this Forbes article:

The copyright infringement is obvious and, in retrospect, the developers of Scrabulous should have done more to create their own spin on it [rather than using the same color schemes and numerical systems and having the rules to Scrabulous game link to the Scrabble Wikipedia page].

You be the judge.  Images of the respective games are reproduced below.

 Scrabulous Image           Scrabble Image

Scrabulous                            Scrabble®

Access?  Check.  Substantial similarity? Check. 

But what about trademark infringement?  In trademark law, two words or phrases do not have to be identical for there to be a trademark infringement.  An infringement may be found wherever there is a likelihood of confusion as to the source, sponsorship, or ownership of the goods (or services).  A likelihood of confusion in this instance appears to be very high.  The goods (the game) are nearly identical in the way they are played as well as how they look.  Further, the marks themselves are very similar, sharing the same first five letters (S-C-R-A-B).

Similar marks?  Check.  Substantially identical goods?  Check.  Trademark infringement seems to be yet another obstacle the Scrabulous makers will have to hurdle.

So what options do Facebook and/or the creators of Scrabulous (JW Edit – 1/25/2008; good comment tekel) have?  The most reasonable recourse may be to consider selling Scrabulous to Mattel/Hasbro, or obtaining a license as soon as possible.  Any comments from our readers?

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