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Douglas Panzer
May 7, 2015

Software Patents with Means-Plus-Function Claims Must Disclose Algorithm

Software patents are a challenging field these days.  The big news of late has been the effect of the Supreme Court’s June 2014 ruling in Alice v. CLS Bank, which has caused many patents — especially in the business method and software realms — to fall into the category of unpatentable abstract ideas.  A decision this week by the Court of Appeals for the Federal Circuit — the court tasked with all federal patent appeals — further illustrates the stringent requirements for software patents and the danger of claiming software inventions in the means-plus-function form permitted under the Patent Act.

In a decision yesterday, May 6th, 2015, the CAFC affirmed a lower court decision invalidating a patent asserted by plaintiff EON Corp. IP Holdings, LLC against AT&T Mobility, Sprint, HTC, Qualcomm and Wirefly.

The Patent Act permits patent claims to be written in so-called “means-plus-function” language. 

Section 112, paragraph 6 states that:

An element in a claim for a combination may be expressed as a means or step for performing a specified function without the recital of structure, material, or acts in support thereof, and such claim shall be construed to cover the corresponding structure, material, or acts described in the specification and equivalents thereof.

35 U.S.C. § 112 ¶ 6.

That is, the claim may say “a means for <doing some function>” without specifying in the claim what the means is.  In order to properly achieve patentability, however, the patent’s specification must detail a structure corresponding to the claimed function.  Essentially, the specification has to disclose a means.  If it fails to do so, the patent does not fully teach one of skill in the art how to implement the invention and is indefinite (therefore invalid).

In this case, the CAFC reminded us that while some inventions are amenable to the disclosure of a physical structure, “[i]t is well-established that the corresponding structure for a function performed by a software algorithm is the algorithm itself.”  In this case it was also “uncontested that the only structure disclosed in the ’757 patent is a microprocessor,” not the algorithm.

EON, despite admitting the lack of structure, attempted to save its case and its patent.  The court summarized: “EON relies on an exception to the algorithm rule created in In re Katz Interactive Call Processing Patent Litigation, 639 F.3d 1303 (Fed. Cir. 2011). Katz held that a standard microprocessor can serve as sufficient structure for ‘functions [that] can be achieved by any general purpose computer without special programming.’ Katz, 639 F.3d at 1316. In Katz, claim terms involving basic ‘processing,’ ‘receiving,’ and ‘storing’ functions were not necessarily indefinite because a general purpose computer need not ‘be specially programmed to perform the recited function.’ Id. However, other claim terms involving conditionally coupling calls were indefinite because those functions required special programming.”

The court called the Katz exception a “narrow” one and wrote, “it is only in the rare circumstances where any general-purpose computer without any special programming can perform the function that an algorithm need not be disclosed.”  This case was not that rare circumstance.

The message to patent attorneys and those seeking software patents is clear.  If claiming software in means-plus-function form, the actual algorithm must be disclosed in the specification.  Patent attorneys should not rely on the general microprocessor exception as even the simplest control structures, such as an if-statement, may cause the algorithm to fall outside of the very narrow general purpose computer exception.

April 9, 2015

DietGoal Patent is Abstract Under Alice, Bravo!

Posted By Douglas Panzer @ 10:33 am
Filed under: Alice,Eligibility,Patent Litigation

THIS CAUSE having been heard and considered, it is
PER CURIAM (DYK, MAYER, and REYNA, Circuit Judges).
AFFIRMED. See Fed. Cir. R. 36.

That’s all she wrote.  Literally.  So read the entire order of The Court of Appeals for the Federal Circuit yesterday affirming the Southern District of New York’s summary judgment determination that a patent owned by seeming patent troll DietGoal represents an abstract idea, unpatentable under Section 101.  This can’t bode well for DietGoal’s dozen or so other suits against website owners and app producers.  The patent in suit is the latest to fall to the Supreme Court’s Alice standard.

The Abstract of the ’516 patent, while not determinative of the scope of the patent, certainly couldn’t have helped the plaintiff’s cause.  It reads:

The method can include the following steps. First, the Meal Database and the Food Database can be prepared. Second, the user can use the Picture Menus to choose meals for a particular time period to correspond to a customized eating plan. Third, the user can decide whether or not to change one or more of the meals he has chosen for the particular time period. If the user decides to change his chosen meals, the user can edit or create new meals using the Meal Builder. If the user decides not to change his choices, or after the user changes his choices, the user can save the meals for the particular time period.

So…yeah.  Make a list of meals (with pictures), pick one or more of those meals that you like and either change them or save them.  That’s some innovative stuff right there.  Judge Engelmayer of the Southern District of New York didn’t think so either, opining on summary judgment that “[t]he claims of the ’516 patent recite nothing more than the abstract concept of selecting meals for the day, according to one’s particular dietary goals and food preferences.”  This suit, filed in 2012, likely would never have made it to court post-Alice.

March 13, 2015

Large Attorney’s Fees Award in Patent Case Threatens National Security

Posted By Douglas Panzer @ 12:14 pm
Filed under: Attorney's Fees,Litigation,Patent Litigation

You gotta hear this one!  In the ongoing saga of Kilopass v. Sidense, a patent infringement case in the Northern District of California.  Kilopass brought the suit alleging infringement of three patents, false advertising, disparagement, intentional interference…the kitchen sink.  Through several rounds of motions, the claims were all eventually dismissed and the dismissal affirmed by the Federal Circuit.  Sidense moved for its attorney’s fees, asking for over $5 million (and a bump to $9 million based on a contingency bonus clause in its fee agreement).

Arguing against the fee assessment, Kilopass actually filed a brief arguing that faced with such a large fee award, ”Kilopass (a) would go bankrupt, (b) it would no longer be able to fulfill contracts with defense contractors, (c) these contractors would not be able to find adequate substitutes, and (d) this would in some way – which Kilopass has failed to articulate – result in harm to our nation’s safety.” Yes, they really made that argument.  The fee award against them would be a threat to national security.  A hail Mary if ever there was one.

As the judge said…the court was not persuaded.  Fee award for $5.3 million.

PDF of the Order Here: Kilopass v Sidense Attorney’s Fees Order

April 30, 2014

Supreme Court Sets Stage for Potential Financial Doom of Patent Trolls

Patent litigation has been a hot and growing judicial and legislative topic for several years now.  On April 29, 2014, the Supreme Court delivered two opinions that may prove to define an inflection point leading to a downward trend in that recent growth.

The fervent attention to patent litigation has been due in large part to the growing number of patent infringement suits brought each year by those patent owners known as non-practicing entities (NPE’s) or more derisively as “patent trolls” (depending on your perspective).  These are entities or individuals who own patents and sue to enforce them, but do not actually produce a product or service based on the patent.  Supporters of such litigation point out that while small corporate or individual inventors may not have the resources to commercialize their patents, protecting those patents through litigation is the only way to properly compensate and incentivize inventive “little guys” who would otherwise be trampled by infringing, larger companies.  Critics respond that NPE litigation actually stifles innovation and economic growth by unfairly rewarding patent owners who have taken no financial risk — especially when the patents are of questionable substance.

Tuesday’s Supreme Court decision in Octane Fitness v. Icon Health, No. 12-1184 represents a major lowering of the standard for patent defendants to show the court that the plaintiff should pay the defendant’s attorney’s fees when the defendant wins.  The Patent Act allows for a grant of attorney’s fees in “exceptional cases.”  Prior to this decision, a prevailing defendant had to show that the suit was “objectively baseless” and brought in “subjectively bad faith” to prove exceptional case status.  These factors also had to be proved by “clear and convincing” evidence.  The court’s holding in Octane says that standard is too rigid and that a determination of exceptional case status should be within the court’s reasonable discretion.   Justice Sotomayor wrote:

An “exceptional” case, then, 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. District courts may determine whether a case is “exceptional” in the case-by-case exercise of their discretion, considering the totality of the circumstances.

So the test for exceptional case status should now be that the case “stands out from others” based on the totality of the circumstances.  This is a major opening for a potential increase in fee awards.

On the same day, the Court also delivered its opinion in Highmark v. Allcare Health Management System, No. 12-1163.  This opinion states that when a lower court does award attorney’s fees, an appeals court should only overturn that award if it finds that the lower court decision represented an abuse of judicial discretion.  This standard is the standard most deferential to the trial court and means that (as interpreted by the Federal Circuit) appellate courts will only overturn fee awards when they find:

(1) the tribunal’s decision is clearly unreasonable, arbitrary, or fanciful; (2) the decision was based on an erroneous conclusion of law; (3) the tribunal’s findings are clearly erroneous; or (4) the record contains no evidence upon which the tribunal rationally could have based its decision.

(See Abrutyn v. Giovanniello, 15 F.3d 1048,1050-51, 29 U.S.P.Q.2d 1615, 1617 (Fed. Cir. 1994); W. Elec. Co. v. Piezo Tech., Inc., 860 F.2d 428, 430-31, 8 U.S.P.Q.2d 1853, 1855 (Fed. Cir. 1988); Heat & Control, Inc. v. Hester Indus., Inc., 785 F.2d 1017, 1022, 228 U.S.P.Q. 926, 930 (Fed. Cir.1986).)

In combination with the Octane decision, the Highmark case sets the stage for more findings of exceptional case status and a lower likelihood that such findings will be overturned on appeal.  Now we wait to see if this significantly affects the rate of NPE patent litigation.  Will the coffers of the NPE’s be cleaned out by the first loss?  Will investors in the litigation shy away from the increased risk?  Will defendants be emboldened to see cases through trial?  Stay tuned!

January 24, 2014

Threaten to Sue Your Licensee and You Better Be Able to Prove Infringement

Posted By Douglas Panzer @ 11:19 am
Filed under: Declaratory Judgment,Litigation,Patent Litigation,Patents

The Supreme Court of the United States ruled on Tuesday, January 22 that a patent owner defending against declaratory judgment of non-infringement continues to bear the burden of proving infringement, even when the declaratory judgment plaintiff is a licensee.

In Medtronic, Inc. v. Mirowski Family Ventures, LLC (12-1128) the Supreme Court unanimously reversed the ruling of the Federal Circuit (that NEVER happens in patent cases, right?) that Mirowski, as the patent owner, held the burden of showing that licensee Medtronic infringed certain licensed patents, despite the case arising out of Medtronic’s declaratory judgment action. The court reasoned that:

  1.   A patentee normally bears the burden of proving infringement of the patent;
  2.   The stated operation of the Declaratory Judgment Act is to leave the rights of the parties unchanged, but simply to dictate procedure;
  3.   “Burden of proof” is a substantive part of a claim, the kind which is to remain unchanged under #2.

The court also voiced concern that shifting the burden to a declaratory judgment defendant may create confusion in two regards.   First, shifting the burden to a declaratory judgment defendant would force the defendant to “prove a negative” and “work in the dark” to attempt to negate every possible theory of infringement.   Second, post-litigation confusion may remain if the declaratory judgment plaintiff loses his case simply for failure of proof, where the same actions by another party (or the same licensee in the future) may not constitute infringement in light of a more sufficient showing of evidence.

Opinion of the court: [here]

December 6, 2013

Overwhelming Support for House Anti-Patent Troll Bill

The US House of Representatives yesterday passed a proposed patent litigation reform bill aimed at making it much more difficult for non-practicing entities or “patent trolls” to bring patent infringement suits.  The bill passed with major bipartisan support in a 325 to 91 vote.  This bill, introduced by Representative Bob Goodlatte, sets new standards for suits by NPE’s, including such highlights:

  • Significant increases in the pleading specificity requirements for patent suits
  • Disclosure of the ultimate beneficiary of any damage award or settlement
  • New double-patenting rules
  • Judicially limited early discovery
  • Early determination of patent validity

The passage of this bill, referred to as The Innovation Act, is sure to be followed quickly by introduction in the Senate of a sister bill sponsored by Representative Patrick Leahy, one of the sponsors of the American Invents Act, which introduced the most sweeping patent legislation reforms in decades last year.

The Innovation Act is sure to continue the dialogue/debate regarding patent infringement suits brought by those not commercializing the patented subject matter.  On one extreme the argument will be raised that shell companies sweeping up dozens or even thousands of patents solely for the purpose of litigating them for profit is stifling of innovation, in contravention to the Constitution and the Patent Act.  On the other extreme we’ll find the argument that in this age of costly, complex and time-intensive litigation, such enforcement represents the only real means for individual or small company inventors to protect their inventions and in turn spur further innovation.  In true Goldilocks fashion, the answer likely lies somewhere in between.  Whether the Innovation Act becomes law and whether it finds the happy medium is one step closer to determination.

New York Times report: http://www.nytimes.com/2013/12/06/business/house-bill-raises-bar-for-suits-over-patents.html?emc=edit_tnt_20131206&tntemail0=y&_r=0

August 15, 2013

CAFC Case Update – Monolithic Power Systems v. O2 Micro: Bad Faith Not Required for Exceptional Case Finding Under 35 USC 285

Posted By Douglas Panzer @ 4:51 pm
Filed under: Attorney's Fees,Litigation,Patent Litigation,Patents

The Court of Appeals for the Federal Circuit, this week, published its decision in Monolithic Power Systems, Inc. v. O2 Micro Int’l, Ltd., ___ F.3d. ___ (Fed. Cir., August 13, 2013), clearly stating that an “exceptional case” finding under 35 USC §285 does not require a finding of “bad faith” or that the claim was “objectively baseless.”  The court viewed the totality of the circumstances surrounding patent owner and counter-claimant O2′s conduct in the litigation as well as O2′s litigation strategy in the present case and related litigation matters with defendant Monolithic and its customers.

The court upheld the district court’s sizeable fee award (over $8M), stating in relevant part:

We have observed that, as a general matter, many forms of misconduct can support a district court’s exceptional case finding, including inequitable conduct before the U.S. Patent and Trademark Office (“PTO”); litigation misconduct; vexatious, unjustified, and otherwise bad faith litigation; a frivolous suit; or willful infringement. Brasseler, U.S.A. I, L.P. v. Stryker Sales Corp., 267 F.3d 1370, 1380 (Fed. Cir. 2001) (citing Hoffmann-La Roche Inc. v. Invamed Inc., 213 F.3d 1359, 1365 (Fed. Cir. 2000)).

In its opinion, the district court cited Brooks Furniture for the exceptional case standard: “A case may be deemed exceptional when there has been some material inappropriate conduct related to the matter in litigation, such as…misconduct during litigation, vexatious or unjustified litigation,conduct that violates FED. R. CIV. P. 11, or like infractions”…[T]he district court also cited Taltech Ltd. v. Esquel Enterprises Ltd., 604 F.3d 1324, 1329 (Fed. Cir. 2010), to clarify that “[l]itigation misconduct and unprofessional behavior are relevant to the award of attorney fees, and may suffice to make a case exceptional.”

O2 Micro is incorrect in suggesting that findings of “bad faith” and “objectively baseless” litigation are always required in addition to a “litigation misconduct” finding for an exceptional case.   The district court applied the correct standard.

O2 Micro fails to appreciate the “well-established [rule] that litigation misconduct and unprofessional behavior may suffice, by themselves, to make a case exceptional under § 285.” MarcTec, LLC v. Johnson & Johnson, 664 F.3d 907, 919 (Fed. Cir. 2012) (internal quotation marks omitted). Instead, O2 Micro’s arguments challenging the exceptional case determination hinge on its mistaken conviction that there must be an additional “bad faith” component…

[T]he district court’s findings of an overall vexatious litigation strategy and numerous instances of litigation misconduct are sufficient to support an exceptional case determination. The record provides ample grounds for the district court to find that O2 Micro had undertaken a vexatious litigation strategy. Having presided over a decade of litigation between O2 Micro and MPS, the district court witnessed several instances in which O2 Micro sued MPS customers in order to prompt MPS to file declaratory judgment actions with the court. In each previous case, O2 Micro withdrew its claims and granted Covenants not to sue after substantial litigation had taken place…wasting the parties’ and the court’s resources.

O2 Micro repeatedly misrepresented…[and] failed to conduct an investigation into the veracity of its representations…obfuscated [facts]…[and] filed three “baseless motions.”…[I]t “ill behooves an appellate court to overrule a trial judge concerning litigation misconduct when the litigation occurred in front of the trial judge, not the appellate court.” Nilssen v. Osram Sylvania, Inc., 528 F.3d 1352, 1359 (Fed. Cir. 2008).

Monolithic, ___ F.3d ___, at 11-14 (emphasis added).

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