U.S. Supreme Court Issues Three New Patent Law Opinions in June


June 2014, Bloomfield Hills, MI -  This month the U.S. Supreme Court issued three patent law opinions, dealing with (1) the standards for patent claim indefiniteness, (2) active inducement of patent infringement, and (3) patentable subject matter.  Patent Law seems to have a harmonizing effect on the Supremes.  In many of their non-patent cases, they issue split decisions and differ on ideological grounds.  However, where patent law is involved, they frequently agree and the decisions in all of these cases were unanimous. This month, we provide a brief synopsis of each case, and where possible, identify key take-aways.

Indefiniteness - Patent Claims Must "Inform Those Skilled in the Art With Reasonable Certainty" About the Scope of the Invention

In Nautilus, Inc. v. Biosig Instruments, Inc., the Supreme Court reversed the Federal Circuit's holding that claims directed to a heart rate monitor were sufficiently definite to avoid invalidation and remanded the case to the Federal Circuit.  For a copy of the opinion, click here. The patent claims at issue concerned a heart monitor that includes a cylindrical bar with a display device and two electrodes on each half of the bar which are mounted "in spaced relationship with each other."  The issue in the case was whether the phrase "in spaced relationship with each other" rendered the claims indefinite.  The district court said "yes," the Federal Circuit said "no," and the Supreme Court said the Federal Circuit applied the wrong standard and remanded the case.


It's hard to know whether this decision has any real substance to it. The Supreme Court took issue with the standard that the Federal Circuit uses to decide indefiniteness issues.  According to the Federal Circuit, patent claims are indefinite only if they are "insolubly ambiguous" or "not amenable to construction."  Notably, the district court did construe the claims, but held that the construction did not resolve the imprecision in the claims, and therefore, that they were indefinite. The Supreme Court held that the Federal Circuit standard is improper, and that patent claims are indefinite if they fail to inform those skilled in the art about the scope of the invention with "reasonable certainty."


The Supreme Court noted that in some cases the Federal Circuit describes the "insolubly ambiguous" standard in a way that appears to be consistent with the "reasonable certainty" standard.  In addition, the Supreme Court did not decide whether the patent claims at issue in the Nautilus case were indefinite under the "reasonable certainty" standard.  Accused infringers seeking to invalidate patent claims will most likely characterize Nautilus as loosening the standards for indefiniteness and making it easier to invalidate claims. However, at this point, it is not really clear if the Supreme Court was merely clearing up a linguistic issue or actually signaling that prior indefiniteness decisions from the Federal Circuit were substantively wrong. 


Inducement of Infringement Requires Proof of Direct Infringement

In Limelight Networks, Inc. v. Akamai Technologies, 
Inc., (for a copy of the opinion, click here) the Supreme Court reversed the Federal Circuit's holding that Limelight could be liable for actively inducing the infringement of Akamai's patent claims even though, under the Federal Circuit's governing standards, no party could be held liable for directly infringing the claims.  We discussed the case in a September 2012 blog post.  
In order to find a party liable for inducing infringement, the courts have long held that someone must have actually committed direct infringement.  In other words, one could not be liable for inducing an act of patent infringement that never actually occurred.  
Limelight dealt with an issue that comes up frequently in cases involving internet or other computer-network implemented inventions: Divided infringement.  In a case called Muniauction v. Thomson Corp, the Federal Circuit held that a method claim could only be infringed if a single party performed all of the steps or if it controlled or directed others who performed some of the steps.  Limelight performed some of the steps of Akamai's claims, but Limelight's customers-which Limelight did not control or direct-performed others. Recognizing that its Muniauction decision precluded a finding that any one directly infringed Akamai's claims, the Federal Circuit nevertheless held that Limelight could be held liable for inducing infringement. The Supreme Court disagreed and reversed.
What is notable about the Limelight decision is the fact that the Supreme Court repeatedly states that it is not deciding whether Muniauction was correctly decided. Thus, the Limelight opinion assumes that direct infringement can only occur when a single party performs all of the steps of a method claim or performs only some of the steps while a party it controls or directs performs others.  The Supreme Court expressly declined to consider whether the Federal Circuit correctly decided Muniauction.

As a rule, patent drafters should try to draft claims such that one party is likely to perform all of their steps.  This has long been the case and still is.  However, because of the nature of telecommunications and the internet, the Muniauction rule may provide infringers with a way to circumvent patents by simply splitting up the performance of steps of a claimed method. The Limelight opinion indicates that the Supreme Court is sensitive to the issue, but that it believes the Federal Circuit's attempt to address the issue by changing the law of induced infringement is wrong.  Thus, we may eventually see the Supremes consider the holding of Muniauction and whether direct infringement of method claims can only occur when all steps are carried out by a single actor or those acting under its control or direction. 


Are Business Method Patents Dead? - Supreme Court Strikes Down Patent Claims Directed to Computerized Method of "Intermediated Settlement" 


If business method patents are not dead, after this month's decision in Alice Corp. v. CLS Bank International, they are at least on life support. For a copy of the opinion, click here.
In Alice Corp., the Supreme Court affirmed an en banc Federal Circuit holding that patent claims directed to a computerized method of "intermediated settlement" are not eligible for patent protection because they impermissibly seek to patent an "abstract idea." 


This decision is similar to the Supreme Court's decision in Bilski v. Kappos, 561 U.S. 593 (2010).  In Bilski the Supreme Court held that patent claims directed to a method for hedging against the financial risk of price fluctuations were invalid because they were not eligible for patent protection.  Bilski was decided before the Supreme Court decided Mayo Collaborative Services v. Prometheus Laboratories, Inc., and in Alice Corp. the Supreme Court used a two-step test from Mayo for determining whether claims improperly cover "laws of nature, natural phenomena, and abstract ideas" or instead cover patent eligible "applications of those concepts."  Applying the first step of the test, the Supreme Court held that the Alice Corp. claims were directed to one of those patent ineligible concepts, i.e., the abstract idea of intermediated settlement.  Applying the second step of the Mayo test, the Court held that the claims at issue did nothing more than recite the implementation of the abstract idea with a "generic computer," and that generic computer limitations could not transform an abstract idea into patent-eligible subject matter.


Contrary to what the opinion says, the claims at issue did not merely recite the "idea" of intermediated settlement.  Instead, they recited specific steps for performing intermediated settlement.  In addition, the decision does not suggest that the Patent Office improperly concluded that the specific combination of steps in the claims were novel and non-obvious over the prior art.  However, the Mayo test allowed the Supreme Court to reductively characterize the claims as merely covering "intermediated settlement" in the abstract.


In the Patent Statute, the requirement that patent claims must be novel and non-obvious is separate from the requirement that the claims must recite patent-eligible subject matter. However, in Alice Corp., the Supreme Court again conflates the novelty/non-obviousness analysis with the patent-eligibility analysis and appears to base its decision, at least in part, on the conclusion that "intermediated settlement" has been "long prevalent in our system of commerce." Slip Op. at 5. 


After Bilski and Alice Corp. it is difficult to see what business methods would ever be considered patentable. Even if such claims recite unique sequences of steps, they can be reductively characterized as covering "abstract ideas" under the test set forth in Mayo.  In that case, unless the claims recite some unique computer functionality, it appears that business method claims will fail the Mayo test. 

The Alice Corp. opinion does suggest that claims which "purport to improve the functioning of the computer itself" or which "effect an improvement in any other technology or technical field' may be eligible for patent protection.  Slip Op. at 15.  However, it seems strained to describe those types of patent claims as "business methods" because they rely on something other than a method of doing business to support patentability. Notably, three of the Supreme Court justices (Sotomayor, Ginsburg, and Breyer) issued a concurring opinion in which they held that any "claim that merely describes a method of doing business does not qualify" as a patent eligible process under the Patent Statute.




In This Issue
Indefiniteness - Patent Claims Must "Inform Those Skilled in the Art With Reasonable Certainty" About the Scope of the Invention
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Hansen IP Law is an intellectual property law firm that provides "Big Law" caliber services using a small firm platform.  Although based in suburban Detroit, we represent clients throughout the United States and abroad. We do not operate on a leveraged model.  Each of our clients is represented by an experienced intellectual property attorney with over a decade of "Big Law" experience, including as a partner in Los Angeles and Detroit firms. Unlike many firms of our size, we have substantial patent litigation experience in courts throughout the United States, which allows us to strategically strengthen your intellectual property portfolio.  For more information, please contact Steve Hansen at 248 504 4849 or srh@hanseniplaw.com. You can also visit us on the web at www.hanseniplaw.com.