Articles Posted in Federal Circuit

March 19, 2014

Divided Federal Circuit Rules En Banc to Retain Cybor Rule of De Novo Review for Claim Construction

Washington, D.C. – The United States Court of Appeals for the Federal Circuit concluded in a six-to-four decision that the rule in Cybor – that claim construction is an issue of law subject to de novo review on appeal – will be retained under the principles of stare decisis.

In 1998, the Federal Circuit, sitting en banc, decided Cybor Corp. v. FAS Technologies, Inc. Among the issues in Cybor was the standard of appellate review of district court decisions concerning the meaning and scope of patent claims (“claim construction”). The Federal Circuit held that, for purposes of appellate review, claim construction was to be considered to be a question of law, not one of fact, and subject to de novo review.

Recently, in Lighting Ballast Control LLC v. Philips Electronics North America Corp, the Federal Circuit was asked to revisit the Cybor holding. In addition to the arguments presented by the parties, patent attorneys for thirty-eight organizations and individuals filed twenty-one amicus briefs.

The opinion of the Court, written by Judge Newman, was joined by Judges Lourie, Dyk, Prost, Moore, and Taranto; it included a concurring opinion by Judge Lourie. A dissenting opinion, written by Judge O’Malley, was joined by Chief Judge Rader and Judges Reyna and Wallach.

The court, again sitting en banc, retained the rule, as stated in Cybor, that no deference will be given by the appellate court to the trial court’s decisions concerning the meaning and scope of patent claims.

Among the arguments presented for reversal of Cybor was an assertion that treating claim construction as a matter of law increases uncertainty, “negates settlement and increases litigation costs.” The court found these arguments unpersuasive. Instead, it discussed two reasons to maintain the Cybor rule.

The court cited the ruling of the U.S. Supreme Court in Markman v. Westview Instruments, Inc., 517 U.S. 370 (1996) (also known as “Markman II“), in which the Court had stressed that issues of claim construction should be considered “purely legal.” Moreover, the Supreme Court has emphasized the importance of “uniformity in the treatment of a given patent.” For example, the possibility of differing claim constructions could lead to different results for infringement and validity, as well as the possibility of disparate district court constructions. De novo review by an appellate court ensures national uniformity, stability and predictability in claim construction.

The court also cited the rule of stare decisis in its refusal to abandon the fifteen-year-old rule established in Cybor and the subsequent years of experience with that rule, stating that it had been presented with “no argument of public policy, or changed circumstances, or unworkability or intolerability, or any other justification for changing the Cybor methodology and abandoning de novo review of claim construction.” The court held that the demanding standard for departure from established law had not been met and retained the de novo review of claim construction established in Cybor.

Practice Tip #1: The issues addressed in claim construction are not considered to be questions of weight of the evidence or credibility of witnesses, but rather of the scope of the claims as set forth in the patent documents.

Practice Tip #2: Claim construction is typically conducted relatively early in the trial court’s proceedings, before addressing questions such as patent infringement, patent validity and damages. At the outset, the trial court must establish the metes and bounds of the claims that define the scope of the intellectual property.

Practice Tip #3: In a dissent that was, at times, strongly worded, Judge O’Malley opined that “no one in the legal community–except perhaps the members of the majority–has come to believe that either the wisdom or vitality of Cybor is settled.” She cited previous statements of Circuit Judges who challenged Cybor as improperly relying on the legal fiction that there are no facts to be decided in claim construction and as “profoundly misapprehend[ing]” the Supreme Court’s decision in Markman.

December 27, 2013

Federal Circuit Rejects Broad Right of Public Access to Patent Trials

By Overhauser Law Offices, LLC

Washington, D.C. – The United States Court of Appeals for the Federal Circuit held that a showing of good cause was sufficient to support parties’ requests to file documents under seal. The case was heard by Circuit Judges Sharon Prost, William C. Bryson and Kathleen O’Malley.

Courts have traditionally acknowledged a right of free access to patent information. Lately, however, judges have increasingly restricted the general public’s access to patent litigation. The Federal Circuit spoke to this in the matter of Apple Inc. v. Samsung Electronics Co., Ltd., which recently resulted in a new verdict for Apple, this time for $290 million. picture of the court.jpg

In the patent litigation that led to that verdict, the parties had agreed that certain documents were to be filed under seal. Judge Lucy H. Koh had rejected this agreement and instead had required that the parties provide “compelling reasons” for sealing documents. The parties appealed this ruling.

The Federal Circuit discussed the public-policy implications of shielding patent infringement trials from the public eye. It rejected the notion that general public interest in a trial involving patent litigation is sufficient to require that the briefs and evidence be made available to the public. Instead, the Federal Circuit held that the public’s interest must be more than mere curiosity where the information at issue was not central to the court’s decision on the merits of the case. It also held that the interests of the parties in maintaining the confidentiality of their information must be considered. The court wrote, “[w]hile protecting the public’s interest in access to the courts, we must remain mindful of the parties’ right to access those same courts upon terms which will not unduly harm their competitive interest.”

The Federal Circuit reversed the district court, holding that a showing of “compelling reasons” was not the correct standard to apply when determining if parties should be allowed to file documents under seal. Instead, under the law, only a showing of “good cause” is required.

Practice Tip: This case is unusual in that it reached the appeals court. Typically, when patent attorneys for the parties agree to keep information secret, most district court judges are willing to allow evidence and briefs to be filed under seal. It is perhaps due to the considerable public interest in this case that Judge Koh declared before the trial that “the whole trial is going to be open.”

August 29, 2013

Raymond T. Chen Confirmed to U.S. Court of Appeals for the Federal Circuit

By Overhauser Law Offices, LLC

Washington, D.C. — Raymond T. Chen has been confirmed to the United States Court of Appeals for the Federal Circuit.

Judge Chen was nominated to the Federal Circuit by President Barack Obama on February 7, 2013. On August 1, 2013, the United States Senate voted 97-0 to confirm his nomination. Judge Chen assumed the duties of his office on August 5, 2013.

Prior to his confirmation, Judge Chen served as Deputy General Counsel for Intellectual Property Law and Solicitor at the United States Patent and Trademark Office from 2008 to 2013. He was an Assistant Solicitor in that office from 1998 to 2008. From 1996 to 1998, Judge Chen was a Technical Assistant at the United States Court of Appeals for the Federal Circuit. Before joining the court staff, Judge Chen was an Associate with Knobbe, Martens, Olson & Bear from 1994 to 1996. Before entering law school, Judge Chen worked as a scientist at Hecker and Harriman from 1989 to 1991.

May 15, 2013

Federal Circuit Denies Petition by ArcelorMittal France for Rehearing in Patent Infringement Case

By Overhauser Law Offices, LLC

Washington, D.C. — The United States Court of Appeals for the Federal Circuit denied the petition of ArcelorMittal for a rehearing in its patent infringement lawsuit against AK Steel involving ULTRALUME®.

AK Steel produces flat-rolled carbon and stainless and electrical steels. Their products are primarily for automotive, infrastructure, manufacturing, construction, and electricity-generation and distribution markets. The company, headquartered in West Chester, Ohio, also employs people in Indiana, Pennsylvania, and Kentucky.

ArcelorMittal is a multinational steel manufacturing corporation headquartered in Avenue de la Liberté, Luxembourg. It is the world’s largest steel producer, with an annual crude steel production of 97.2 million tons as of 2011.

At issue in this suit was a claim of patent infringement by ArcelorMittal France and ArcelorMittal Atlantique et Lorraine (collectively “ArcelorMittal”) against AK Steel et al. of Patent No. 6,296,805, entitled “Coated hot- and cold-rolled steel sheet comprising a very high resistance after thermal treatment,” (“the ‘805 patent”) which has been issued by the U.S. Patent Office.

The ‘805 patent covers boron steel sheeting with an aluminum-based coating applied after rolling the sheet to its final thickness. The steel is used for “hot-stamping,” a process which involves rapidly heating the steel, stamping it into parts of the desired shape, and then rapidly cooling them. The rapid heating and cooling alters the crystalline structure of the steel, converting it to austenite and then martensite. By altering the steel’s microstructure in this manner, hot-stamping produces particularly strong steel. Because hot-stamped steel is so strong, parts created using the process can be thinner and lighter than steel parts produced with other methods while being just as strong.

ArcelorMittal sued AK Steel and two other steel producers in the United States District Court for the District of Delaware, alleging infringement of the ‘805 patent. In 2011, a jury found that defendants AK Steel, Severstal Dearborn, Inc., and Wheeling-Nisshin Inc. had not infringed ArcelorMittal’s patent and that the asserted claims were invalid as anticipated and obvious.

ArcelorMittal appealed from the judgment of the trial court, challenging both the district court’s claim construction and the jury’s verdict.

The federal circuit upheld the district court’s claim construction in part and reversed it in part. It also reversed the jury’s verdict of anticipation. With respect to obviousness, a new trial was required because a claim-construction error by the district court prevented the jury from properly considering ArcelorMittal’s evidence of commercial success.

Despite the mixed results – partially affirming, partially reversing, partially vacating and remanding for a new trial – the decision of the federal circuit has confirmed that AK Steel did not infringe Arcelor’s patent and can sell Ultralume, its aluminized boron steel product.

Practice Tip: Patent decisions of the Federal Circuit, a federal appellate court, are unique in that they are binding precedent throughout the United States. Decisions of the Federal Circuit can be superseded only by decisions of the U.S. Supreme Court or by legislation. As such, Federal Circuit decisions are often the final word nationwide on the issues of patent law that the court decides. In contrast, the authority of other federal appellate courts is restricted by geographic location. In those courts, the federal common law often varies among the circuits (a “circuit split”).

May 13, 2013

Court of Appeals for Federal Circuit Can Not Agree When Computer Implemented Methods Are Patentable

By Overhauser Law Offices, LLC

As reported by the American Intellectual Property Law Association, in a severely splintered decision, the en banc Federal Circuit was unable to agree on a rationale for analyzing the abstract idea exception to patent eligibility for computer implemented method claims, computer-readable media, and system claims. CLS Bank International v. Alice Corp., en banc Fed. Cir., No. 11-1301, 5/10/13.

Instead, the court issued a 58-word per curiam opinion for the Court, affirming by a majority vote the patent ineligibility of method and computer-readable media claims are ineligible, and affirming by a 5-5 tie vote the patent ineligibility system claims. Six separate opinions (totaling 127 pages) were issued by judges stating their agreement or disagreement with the result in the appeal.

The challenged patents in this case are directed to a computerized trading platform for exchanging obligations in which a trusted third party settles obligations between a first and second party so as to eliminate “settlement risk.” Seven Judges (Chief Judge Rader and Judges Lourie, Dyk, Prose, Reyna, Wallach, and Moore) voted to affirm the decision that the method and media claims were ineligible were. As to the system claims, those who would find ineligibility were Judges Lourie, Dyk, Prost, Renya, and Wallach; those who would find eligibility were Chief Judge Rader and Judges Newman, Linn, O’Malley, and Moore.

Judge Lourie’s Opinion

In its en banc order for this case, the Court posed two questions for briefing: (1) what test should the court adopt for determining if a computer-implemented invention is patent ineligible “abstract ideal,” and when does a computer lend patent eligibility to an otherwise ineligible idea; and (2) should it matter whether the invention is claimed as a method, system, or storage medium, and should such claims be considered equivalent for purposes of Section 101.

Judge Lourie filed a concurring opinion joined by Judges Dyk, Prost, Renya, and Wallach. He wrote that the Supreme Court in Section 101 cases has cautioned against the preemption of fundamental tools of science, against the use of formalistic approaches that permit drafting strategies to circumvent Section 101 exclusions, and against bright-line rules that do not accommodate changing technology. His opinion makes the following points:

Preemption: The Section 101 concern is not preemption per se since any patent inherently includes some preemption in the right to exclude. “Rather, the animating concern is that claims should not be coextensive with a natural law, natural phenomenon, or abstract idea; a patent-eligible claim must include one or more substantive limitations that, in the words of the Supreme Court, add ‘significantly more’ to the basic principle, with the result that the claim covers significantly less.”

Inventive concept: The Supreme Court’s reference to an “inventive concept” requirement under Section 101 is not a reference to “inventiveness” for patentability. Instead, it is the “genuine human contribution to the claimed subject matter” and must be “a product of human ingenuity.” Nor should the Court’s use of terms such as “routine” or “conventional” in discussing patent ineligibility be confused with the novelty and nonobviousness. The question, is whether steps combined with a natural law or abstract idea are so insignificant that the claim effectively covers the natural law or abstract idea itself.

Threshold requirement and presumption of validity: It is incorrect to argue that patent eligibility under Section 101 is a “threshold test” that must always be considered first among all of the possible bases for finding invalidity. District courts are entrusted with great discretion to control their dockets, including the order of issues presented during litigation. In addition, the presumption of validity under 35 U.S.C. 282 applies when Section 101 patent ineligibility is raised as an invalidity challenge.

Method claims: The method claims in this case involve the concept of reducing settlement risk by facilitating a trade through third-party intermediation, an abstract idea that is not patent eligible standing alone. Limitations of keeping and maintaining shadow records do not add “anything of substance to the claims.” The requirement for computer implementation is not specific enough and lacks express language defining the computer’s participation. “Furthermore, simply appending generic computer functionality to lend speed or efficiency to the performance of an otherwise abstract concept does not meaningfully limit claim scope for purposes of patent eligibility.”

Computer-readable medium claims: Although the computer readable storage medium claims recite a physical device, the patent eligibility analysis must look past drafting formalities and focus on the “true substance of the claims.” The claim term is stated in broadly and every substantive limitation pertains to the method steps of the program code embodied in the medium. Thus, the claim is not truly drawn to the medium but rather to the underlying method. Despite the Beauregard format, these claims are equivalent to the methods they recite for patent eligibility purposes.

System claims: These claims recite a computerized system to carry out steps that mirror the method claims of maintaining, controlling, and adjusting shadow records. The computer-based limitations recited in the system claims cannot support any meaningful distinction from the computer-based limitations that failed to supply an “inventive concept” to the related method claims. Applying a different approach for system claims than for method claims “would reward precisely the type of clever claim drafting that the Supreme Court has repeatedly instructed us to ignore.”

We are not here faced with a computer per se. Such are surely patent-eligible machines. We are faced with abstract methods coupled with computers adapted to perform those methods. And that is the fallacy of relying on Alappat, as the concurrence in part does. Not only has the world of technology changed, but the legal world has changed. The Supreme Court has spoken since Alappat on the question of patent eligibility, and we must take note of that change. Abstract methods do not become patent-eligible machines by being clothed in computer language.

Chief Judge Rader’s Opinion

Chief Judge Rader filed a concurring-in-part, dissenting-in-part opinion, joined by Judges Linn, Moore, and O’Malley. He stated that the asserted system claims were wrongly ruled ineligible. However, Judges Linn and O’Malley disagreed with the view of Judges Rader and Moore that method and media claims were ineligible. Judge Rader’s opinion makes the following points:

Court created subject matter exceptions: The claims are the key to the patent eligibility inquiry into the subject matter exclusions of abstract ideas, laws of nature and natural phenomena and abstract ideas. “Any claim can be stripped down, simplified, generalized, or paraphrased to remove all of its concrete limitations, until at its core, something that could be characterized as an abstract idea is revealed. * * * A court cannot go hunting for abstractions by ignoring the concrete, palpable, tangible limitations of the invention the patentee actually claims.”

Specific Claim limitations: A claim may be premised on an abstract idea, but the question is whether the claim contains limitations that meaningfully tie that idea to a concrete reality or actual application of that idea. “The key to this inquiry is whether the claims tie the otherwise abstract idea to a specific way of doing something with a computer, or a specific computer for doing something; if so, they likely will be patent eligible, unlike claims directed to nothing more than the idea of doing that thing on a computer.” As explained in Alappat, a special purpose computer, i.e., a new machine, specially designed to implement a process may be sufficient.

Inventive concept and presumption of validity: The “inventive concept” language in the Section 101 inquiry should not be read to conflate patent eligibility principles with validity principles, or to insert an “inventiveness” or “ingenuity” factor into the inquiry. The term is a shorthand for asking whether the recited steps of the claim are inherently required to implement the abstract idea. In footnote 5, Judge Rader complains that Judge Lourie’s interpretation of “inventive concept” as the “genuine human contribution” incorrectly injects “ingenuity” into the analysis. The presumption of validity that applies to other validity challenges also applies to patent eligibility challenges under Section 101, which require proof by clear and convincing evidence.

System claims: The system claims are patent eligible. The Supreme Court has said that a useful and important clue to patent eligibility for a method claim may be where the method is tied to a machine; “it would seem that a claim embodying the machine itself, with all its structural and functional limitations, would rarely, if ever, be an abstract idea,” Judge Rader observed.

In footnote 7, Judge Rader disagreed with Judge Lourie that a computer must do something other than what a computer does before it can considered patent eligible. Everything done by a computer can be done by a human. Requiring a computer to do something that a human could not would mean that computer implementation could never product patent eligibility. “Indeed, even an increase in speed alone may be sufficient to result in a meaningful limitation.” Labeling the claimed system an abstract concept “wrenches all meaning from those words, and turns a narrow exception into one which may swallow the expansive rule (and with it much of the investment and innovation in software).”

The recited steps in the system claim are not inherent in the abstract idea of using an escrow, which can be done without a data processing system that includes a data storage unit coupled to a computer which has been modified by software to receive transactions adjust records, and generate electronic instructions according to specific structural limitations in both software and hardware formats.

Method claims: Writing only for himself and Judge Moore, Judge Rader observed that method claim describes the general and theoretical concept of using a neutral intermediary in exchange transactions to reduce risk that one party will honor the deal, i.e., an escrow arrangement. The question then is whether the recited steps are inherent in an escrow and claimed at a high level of generality, such that in fact the claim is not to a practical application of the concept of an escrow, but in effect claims the abstract concept of an escrow. Judge Rader concluded that each step of the method merely recites a general step inherent within the concept of an escrow, using a third party intermediary in this fashion. While the claim limits use of an escrow to the context of this particular field, that attempted limitation is not enough.

In a separate opinion entitled “Additional Reflections,” Judge Rader noted “when all else fails, consult the statute.”