Three Things from SCOTUS Oral Argument in Alice v. CLS Bank

On Monday, March 31, 2014, the United States Supreme Court held oral arguments in the much-anticipated software battle between patentee Alice Corporation, the petitioner, and CLS Bank, the respondent who was victorious below thanks to an equally divided Federal Circuit.

Oral arguments are but one piece of the overall puzzle, so we can easily make too much of their importance, but they are the only way the concerned public can see behind the curtain at the Supreme Court. By many accounts, oral arguments are the least significant piece of the puzzle with many, if not most, Justices relying most heavily on the briefs. Indeed, during oral argument, Justice Breyer specifically stated that he had read each of the amici briefs, which seems a near herculean task given the number of other cases the Supreme Court considers and the sheer volume of briefs filed in this case. 

Even with oral arguments being less important than they may seem, there will be all kinds of attempts to predict what the likely outcome will be based on this sneak peek. Of course, it is impossible to know how a Justice will decide based on the questions asked during oral argument. Case in point — did anyone think the Chief Justice would rule in favor of Obamacare? But for now, the oral argument transcript is all we have to rely on. So with that in mind, here are three things that piqued my interest during the oral arguments.

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IBM Brief: Abstract Idea Jurisprudence Is Unworkable

On March 31, 2014, the United States Supreme Court will hear oral arguments in a case that could determine the fate of software patents in the United States. Recently, IBM filed an amicus brief at the United States Supreme Court in the case of Alice Corporation Pty. Ltd. v. CLS Bank International. While many attorneys contributed to this brief, former Solicitor General of the United States Paul D. Clement is the Counsel of Record on behalf of IBM.

I think it is fair to say that the IBM brief can be summarized as follows: ‘The abstract idea doctrine is unworkable.’ Bravo! If the Supreme Court cannot define the term “abstract idea,” which they have never done,  how can it be at all appropriate for the Court to apply the doctrine as if it has meaning? At least with respect to software, there is also no uniform application of the patent laws, which at least conceptually should raise concerns of disparate treatment of those similarly situated.

Something needs to be done to once and for all acknowledge that software is patent eligible. Even having to say that and hope it is what ultimately happens is truly saddening in the year 2014. Software is all around us and empowers practically everything, and according to a Government Accountability Office (GAO) report from August 2013, somewhere between 50% to 60% of all patent applications filed deal in some way with software. Software is the very backbone of innovation and the fact that we have to wonder whether it is patent eligible more than 46 years after the first software patent issued is really an indictment of the judicial system as it relates to patent law and jurisprudence.

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Will the Supreme Court Accept Soverain v. Newegg?

To many, Soverain v. Newegg is just another obviousness dispute; so why would the Supreme Court get involved? It is really more than your typical obviousness dispute, though. Increasingly, patent claims are held valid in a variety of different forums — they are initially granted, they are litigated in district court and at the ITC, and litigated again and again at the USPTO. In some instances, after all that litigation, and even after multiple successful reexaminations in favor of the patentee, the Federal Circuit will find the claims invalid as being obvious.

How is this the case? That is a good question. It stems from the fact that obviousness, which is supposed to be a mixed question of fact and law, is reviewed de novo by the Federal Circuit. It seems the Federal Circuit, which as an appellate court is not well-equipped to deal with determining facts, reviews the underlying facts de novo as well.

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Supreme Court to Hear Medtronic v. Boston Scientific

On May 20, 2013, the United States Supreme Court granted cert. in Medtronic v. Boston Scientific, a case that will answer whether the licensee in a declaratory judgment challenge bears the burden of proving that the alleged non-infringing product does not infringe, or whether the responding patentee must prove infringement. To read the Federal Circuit decision in the case, click here.

The Supreme Court explained the question presented as follows:

In Medlmmune, Inc. v. Genentech, Inc., 549 U.S. 118, 137 (2007), this Court ruled that a patent licensee that believes that its products do not infringe the patent and accordingly are not subject to royalty payments is “not required … to break or terminate its … license agreement before seeking a declaratory judgment in federal court that the underlying patent is … not infringed.”

The question presented is whether, in such a declaratory judgment action brought by a licensee under MedImmune, the licensee has the burden to prove that its products do not infringe the patent, or whether (as is the case in all other patent litigation, including other declaratory judgment actions), the patentee must prove infringement.

SCOTUS Ending Term with Patent Decisions

Over the past several days, the United States Supreme Court has issued several important decisions that will impact the patent system.

First, on June 13, 2013, the Supreme Court issued a decision in Association of Molecular Pathology v. Myriad Genetics, which has sometimes been referred to as “ACLU v. Myriad” in recognition of the fact that it was the American Civil Liberties Union that was responsible for bringing the challenge in the district court and pursuing the matter through the judicial system.

In Myriad, Justice Thomas wrote for a nearly unanimous Court.  Only Justice Scalia wrote a brief separate opinion in which he concurred in part and concurred in the judgment.

The majority decision in Myriad is not long, and the first 10 pages are background. Despite not giving much detailed attention to the significant legal issues presented, the Supreme Court did manage to do real and serious harm to much of the biotechnology industry.

Justice Thomas summarized the Court’s decision by saying:

“[W]e hold that a naturally occurring DNA segment is a product of nature and not patent eligible merely because it has been isolated, but that cDNA is patent eligible because it is not naturally occurring.”

The decision has widely been reported as the Court recognizing that cDNA is patent eligible, but the ruling is far more nuanced. In fact, Justice Thomas specifically recognized that some cDNA is not patent eligible. He wrote:

“cDNA is not a ‘product of nature’ and is patent eligible under §101, except insofar as very short series of DNA may have no intervening introns to remove when creating cDNA. In that situation, a short strand of cDNA may be indistinguishable from natural DNA.”

I have spoken with a number of people who are in the biotech industry and they all seem to think this decision means that cDNA is patent eligible and I shouldn’t make too much out of Thomas specifically saying that at least some cDNA is not patent eligible. Personally, I think this is misplaced hope; we all know how the district courts will respond, and it won’t be to an expansive reading of patent eligibility. While the USPTO seems poised to say that cDNA is patent eligible, the fact that some has been determined not patent eligible will be used by challengers and likely successfully so. Further, it seems clear that Thomas is saying that if something is man-made but identical to what appears in nature, it is not patent eligible. This fundamentally undercuts the most important aspects of Chakrabarty and would effectively kill research into such important areas as artificially grown organs, which by their very nature must be identical to what is produced in nature to be transplanted into the human body, for example.

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