Sunday, June 29, 2014

Give and Take
A lot has already been written about the recent Supreme Court decisions in Limelight Networks, Inc. v. Akamai Technologies, Inc.  and Alice Corp. v. CLS Bank Int’l .
This posting will not go into the details of either case, as that has already been done by others.

Instead, this post will try to make some sense out of the recent interest displayed in patent cases by the Supreme Court, using this pair of cases as a point of reference.

First, both of these cases were appealed to the Supreme Court from the Court of Appeals of the Federal circuit (CAFC).

The CAFC was created when Congress passed the Federal Courts Improvement Act of 1982. The Act merged the United States Court of Customs and Patent Appeals with the appellate division of the United States Court of Claims. The CAFC is the only Federal court with jurisdiction based upon subject matter rather than location. With regard to patents, the CAFC hears appeals from the Patent Trial and Appeal Board (PTAB; formerly Board of Patent Appeals and Interferences (BPAI)) of the USPTO as well as appeals from the various United States District Courts.

This means that CAFC decisions in patent cases are binding precedent on all of the lower federal courts which are the courts of first instance for infringement litigation. It also means that the USPTO, including the PTAB, shapes policy in consideration of CAFC decisions.

The Supreme Court is, of course, the highest court in the land with respect to patent related matters, as for all other matters. However, traditionally the Supreme Court has accepted patent cases infrequently and has often granted certiorari only to vacate the decision of the CAFC and remand the case for further consideration by that court (as happened in Alice Corp. v. CLS Bank Int’l), usually in light of one or more Supreme Court Decisions.

My own initial reaction to the pair of cases under discussion is that Limelight v. Akamai represented a return to the status quo in which the Supreme court gave back to us something we had come to cherish, while Alice v. CLS Bank represented a disruption in the status quo in which something we had come to cherish was taken from us by the Supreme Court. That initial reaction led to the “give and take” title of this posting.

After giving the matter more thought, it seems more correct to say that the Supreme Court has, in both cases under consideration, preserved the status quo, at least from the viewpoint of the Court.

More specifically, when the en banc CAFC decided Limelight v. Akamai., in 2012 that court ruled that induced infringement could occur even in the absence of direct infringement by a single party. This represented a significant departure from the previously accepted definition of induced infringement which required that a single actor induce a second actor to commit direct infringement.

The CAFC acknowledged this departure from previous policy and explicitly stated that the court was overturning its own previous policy as exemplified by BMC Resources v Paymentech (2007) and Multiauction v Thomson (2008) and earlier CAFC decisions and promulgating a concept of divided infringement in which induced infringement occurs when an infringing act is induced by a single actor that influences two or more other actors to perform acts which, together, infringe a patent claim.

The CAFC acknowledged that Supreme Court precedent required that indirect (i.e. induced) infringement can only occur if direct infringement occurs citing Deepsouth Packing v Laitram (1972); Aro Mfg. v Convertible Top Replacement (1961) and Henry v A.B. Dick (1912) but side-stepped the issue by noting that the Supreme Court had never expressly ruled that the direct infringement must be attributable to a single actor. As the CAFC put it “Requiring proof that there has been direct infringement as a predicate for induced infringement is not the same as requiring proof that a single party would be liable as a direct infringer.” This was a clear departure from both CAFC and Supreme Court precedent.

In Limelight v. Akamai the CAFC was reversed by the higher Court because the Supreme Court felt that insufficient attention had been paid to precedent. This case was clearly a swift return to the status quo.

Turning our attention now to Alice v. CLS Bank, the situation here is more complicated. The CAFC heard this case twice. A first panel (Linn, Prost and O’Malley) heard the case in July 2012 and concluded that the claims at issue were directed to patent eligible subject matter under § 101.

The CAFC panel ruled that “…when-- after taking all of the claim recitations into consideration—it is not manifestly evident that a claim is directed to a patent ineligible abstract idea, that claim must not be deemed for that reason to be inadequate under § 101.” ;

while noting:

When it comes to subject matter patentability, we do not write on a blank slate. Just a few months ago, the Supreme Court reversed us in a § 101 case for a second time in its last three terms, hinting (not so tacitly) that our subject matter patentability test is not sufficiently exacting. [Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S. Ct. 1289 (2012); Bilski v. Kappos, 130 S. Ct. 3218 (2010); see also WildTangent, Inc. v. Ultramercial, LLC, (No. 11-962), 2012 WL 369157 (2012), granting cert., vacating, and remanding Ultramercial, LLC v. Hulu, LLC, 657 F.3d 1323 (Fed. Cir. 2011).]”

A petition for en banc rehearing was granted by the CAFC in October 2012. An en banc court heard the case and a divided court decided in May 2013 that the same claims were not directed to patent eligible subject matter under § 101. In addition to the per curiam opinion of the court, a concurring opinion, three opinions which dissented in part and a dissenting opinion, as well as “additional reflections” by Chief Judge Rader were filed. Following this en banc reversal, the case was appealed to the Supreme Court, which upheld the CAFC’s (second) decision.

The CAFC’s (second) decision, and the Supreme Court’s subsequent confirmation, bring to an end the era of decisions influenced strongly by the CAFC’s 1994 decision In re Alappat which held that a installation of software on a computer to provide a new function creates (in effect) a new machine which meets the § 101 standards for patent eligibility. The CAFC’s first panel decision in Alice v. CLS Bank relied heavily on In re Alappat while the CAFC’s second en banc decision in Alice v. CLS Bank distanced itself from In re Alappat and gave more weight to historic Supreme court decisions (Benson; Flook and Diehr) as well as the recent § 101 Supreme court decisions in Bilski and Mayo Collaborative Services v. Prometheus Laboratories, Inc.

It is the loss of the Alappat principles that prompted the “take” portion of the title of this post. However, seen through the eyes of the Supreme court, the In re Alappat decision was a departure from the status quo and the final resolution of Alice v. CLS Bank represents a return to the status quo (albeit after 20 years).

Many colleagues are upset by the apparent conflation of §101 subject matter eligibility with the requirement for an “inventive concept” which we tend to equate with the §103 obviousness analysis.

However, the Supreme Court has long held this to be the proper analysis:

Respondent's process is unpatentable under 101, not because it contains a mathematical algorithm as one component, but because once that algorithm is assumed to be within the prior art, the application, considered as a whole, contains no patentable invention. Even though a phenomenon of nature or mathematical formula may be well known, an inventive application of the principle may be patented. Conversely, the discovery of such a phenomenon cannot support a patent unless there is some other inventive concept in its application. [PARKER v. FLOOK, 437 US 584 (1978)]; and

“In Flook, this Court clarified Benson in three significant respects. First, Flook held that the Benson rule of unpatentable subject matter was not limited, as the lower court believed, to claims which wholly pre-empted an algorithm or amounted to a patent on the algorithm itself. 437 U.S., at 589-590. Second, the Court made it clear that an improved method of calculation, even when employed as part of a physical process, is not patentable subject matter under 101. Id., at 595, n. 18. Finally, the Court explained the correct procedure for analyzing a patent claim employing a mathematical algorithm. Under this procedure, the algorithm is treated for 101 purposes as though it were a familiar part of the prior art; the claim is then examined to determine whether it discloses "some other inventive concept. Id., at 591-595. ” [Diamond v. Diehr - 450 US 175 (1981)].

The Supreme Court has even previously admonished the lower courts for not adhering strictly to its precedents:

“Although the Court of Customs and Patent Appeals in several post-Flook decisions held that program-related inventions were not patentable subject matter under 101, see, e. g., In re Sarkar, 588 F.2d 1330 (1978); In re Gelnovatch, 595 F.2d 32 (1979), in general Flook was not enthusiastically received by that court. In In re Bergy, 596 F.2d 952 (1979), the majority engaged in an extensive critique of Flook, concluding that this Court had erroneously commingled "distinct statutory provisions which are conceptually unrelated." 596 F.2d, at 959. In subsequent cases, the court construed [450 U.S. 175, 205] Flook as resting on nothing more than the way in which the patent claims had been drafted, and it expressly declined to use the method of claim analysis spelled out in that decision. The Court of Customs and Patent Appeals has taken the position that, if an application is drafted in a way that discloses an entire process as novel, it defines patentable subject matter even if the only novel element that the inventor claims to have discovered is a new computer program. The court interpreted Flook in this manner in its opinion in this case. See In re Diehr, 602 F.2d 982, 986-989 (1979). In my judgment, this reading of Flook - although entirely consistent with the lower court's expansive approach to 101 during the past 12 years - trivializes the holding in Flook, the principle that underlies Benson, and the settled line of authority reviewed in those opinions.” [Diamond v. Diehr supra]

Thus, from a historic perspective, the Supreme Court’s decision in Alice Corp. v. CLS Bank Int’l is hardly a surprise.

The Supreme Court has again asserted its judicial superiority over the CAFC, despite that lower court’s legislative mandate to function as a subject matter specific court.

In terms of predicting how the Supreme Court will handle patent related matters in the future, the pair of cases analyzed here suggest that the Court has a low tolerance for statutory interpretations by lower courts that do not base themselves strictly on Supreme Court Precedent.

Hopefully, the Supreme Court's control over the CAFC in patent related matters will promote progress in the useful arts as the founding fathers intended.

In the short term, it seems likely that a vast number of granted US patents on computer implemented inventions will turn out to be invalid if they are ever litigated due to the long standing disparity between the Supreme Court view of §101 and a more expansive view taken by the CAFC.

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