SoCal IP Law Group

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Monthly Archives: May 2013

SoCal IP Institute :: June 3, 2013 :: Copyright Sanctions and Mandatory Cross-Appeals

Our weekly SoCal IP Institute meeting on Monday, June 3, 2013 will be a discussion of one district court copyright sanctions case and a Federal Circuit decision regarding cross appeals of invalidity. Brief synopses of the cases appear below.

Ingenuity 13 LLC v. John Doe, Case No. 2:12-cv-8333-ODW (JCx) (C.D. Cal.  May 5, 2013) (available here).

This case has been quite popular in the legal press.  The outcome, thus far, is that the lawyers representing the plaintiffs in this case have been sanctioned with $81,319.72 in attorney’s fees and costs.  The facts, broadly speaking, are recited by Judge Wright:

Plaintiffs have outmaneuvered the legal system. They’ve discovered the nexus of antiquated copyright laws, paralyzing social stigma, and unaffordable defense costs. And they exploit this anomaly by accusing individuals of illegally downloading a single pornographic video. Then they offer to settle—for a sum calculated to be just below the cost of a bare-bones defense. For these individuals, resistance is futile; most reluctantly pay rather than have their names associated with illegally downloading porn. So now, copyright laws originally designed to
compensate starving artists allow, starving attorneys in this electronic-media era to plunder the citizenry.

Judge Wright issued an order to show cause why sanctions should not be entered against the plaintiff and plaintiff’s counsel.  He also sought for each of several named individuals including the principals of the plaintiff and of the plaintiff’s counsel appear before him at a hearing.  Only one counsel, Mr. Gibbs, appeared before him at that hearing.  Based upon all that the court was able to deduce, the plaintiffs, who appear to be the lawyers prosecuting the cases, maintained full control of the entire operation, stole the identity of a man in Minnesota to hold him out as the principal of the plaintiff, and filed numerous lawsuits based upon a scant internet investigation, then sought to settle the cases quickly.  Once the scheme was discovered, the plaintiffs then sought to deceive the court as to the true status of the cases, the investigation undertaken prior to an allegation of infringement, the ownership involvement of a number of lawyers, and of the actual ownership of the allegedly infringed works.

Based upon the court’s difficulty in obtaining true information regarding any of the facts of the matter, the court found that it was inadequately placed to issue a large, seven-figure sanction.  The court openly suspected that such a sanction would be avoided regardless.  Instead, the court awarded an attorney’s fees and costs sanction under its inherent authority in Rule 11 and passed all information that the court has obtained regarding the attorneys’ conduct on to the U.S. Attorney’s office for the Central District of California, to the IRS criminal division, and to all relevant state and federal bar associations to which any of the alleged plaintiffs belong or in which they had cases presently pending.

Lazare Kaplan Int’l., Inc. v. Photoscribe Technologies, Inc. et al. (Fed. Cir. 2012-1247 April 19, 2013) (available here).

In this case, Lazare Kaplan appealed from a summary judgment of invalidity after a prior judgment and appeal that those same claims were not infringed and not invalid.  After the original trial held in 2008, the jury returned a verdict that Photoscribe did not infringe claims 1 or 7 under the doctrine of equivalents. The district court then issued a final judgment that claims 1 and 7 were not invalid and not infringed, either literally or under the doctrine of equivalents. Lazare Kaplan filed a notice of appeal from the judgment of noninfringement. Photoscribe, however, did not file a notice of appeal from the judgment that the asserted claims were not invalid.  On remand after the appeal, the court entered summary judgment of invalidity.

Lazare Kaplan appealed this decision on the basis that Photoscribe had not reserved the issue of invalidity with a cross-appeal and, as a result, that issue was not addressable on remand.  The Federal Circuit found that Lazare Kaplan was correct and further than Fed. R. Civ. P. 60(b), which enables a party to seek relief from a final judgment, did not save Photoscribe’s issue.  Doing so would undermine the purpose of the mandatory cross-appeal in this case.  As a result, the case was remanded with instructions to vacate the judgment of invalidity.

All are invited to join us in our discussion during the SoCal IP Institute meeting on Monday, June 3, 2013 at Noon in our Westlake Village office. This activity is approved for 1 hour of MCLE credit. If you will be joining us, please RSVP to Noelle Smith by 9 am Monday morning.

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SoCal IP Institute :: May 20, 2013 :: Subject matter jurisdiction and standing

Our weekly SoCal IP Institute meeting on Monday, May 20, 2013 will be a discussion of one Federal Circuit case regarding subject matter jurisdiction and a 9th Circuit case regarding copyrights.  Brief synopses of the cases appear below.

Forrester Environmental v. Wheelabrator Technologies, Case No. 12-1686 (Fed. Cir. May 16, 2013) (available here).

The Federal Circuit vacated and remanded defendant’s summary judgment motion regarding plaintiff’s state law business tort claims. The Federal Circuit held that the district court lacked subject matter jurisdiction over plaintiffs’ claims because: 1) defendant’s allegedly inaccurate statements regarding its patent rights concerned conduct taking place entirely in Taiwan; 2) the use of a patented process outside the United States is not an act of patent infringement; and thus, 3) there is no prospect of a future U.S. infringement suit arising out of the Taiwan company’s use of the parties’ products in Taiwan, and accordingly no prospect of inconsistent judgments between state and federal courts.

Righthaven LLC v. Hoehn, Case No. 11-16571 (9th Cir. May 9, 2013) (available here).

Dismissal of two copyright infringement suits is :1) affirmed in part, where agreements assigning plaintiff the bare right to sue for infringement of newspaper articles, without the transfer of any associated exclusive rights in the articles, did not confer standing to sue; and 2) vacated in part, as to the portion of the district court’s order granting summary judgment on fair use in one of the suits, because given plaintiff’s lack of standing, the district court lacked jurisdiction to rule in the alternative on the fair use defense.

All are invited to join us in our discussion during the SoCal IP Institute meeting on Monday, May 20, 2013 at Noon in our Westlake Village office. This activity is approved for 1 hour of MCLE credit. If you will be joining us, please RSVP to Noelle Smith by 9 am Monday morning.

SoCal IP Institute :: May 13, 2013 :: CLS Bank Int’l. v. Alice Corp – Patent Eligibility of Software Under 35 U.S.C. § 101

Our weekly SoCal IP Institute meeting on Monday, May 13, 2013 will be a discussion of Section 101 patent eligibility in the recent CLS Bank Int’l. v. Alice Corp. en banc decision.  A brief synopsis of the case appears below.

CLS Bank Int’l. v. Alice Corp., Case No. 2011-1301 (Fed. Cir. May 10, 2013) (en banc) (available here).

We previously discussed CLS Bank Int’l. v. Alice Corp. here and here.  The Conejo Valley Bar Association’s Amicus brief, signed by some SoCal IP Law Group attorneys, is available here.

CLS sued Alice for a declaratory judgment of noninfringement of four patents (1, 2, 3, 4) generally directed to exchanging risk of financial derivatives.  The elements of each patent, expressed in various claim forms, may be automated and implemented using a computer.  Alice appealed the grant of a summary judgment at the district court that certain claims of the Alice patents were invalid.   A three judge Federal Circuit Panel reversed, holding the method, computer-readable media and system claims all patent eligible under 35 U.S.C. §101.  CLS sought rehearing en banc, and that request was granted.

This case is a plurality decision with seven judges (of ten total) agreeing as to the invalidity of some claims, but no more than five judges agreeing as to the basis for that outcome.  Specifically, a seven judge plurality of the court affirmed the district court’s decision with respect to the method and computer-readable medium claims finding that those claims recite patent-ineligible subject matter under 35 U.S.C. § 101.  The decision on the system claims is split five / five, falling back to the district court’s determination of patent ineligibility even though eight judges found that method and system claims should rise and fall together.  As a result of the split, the outcome is decided, but nothing in any opinion is precedent. The various opinions are the result of the en banc rehearing ordered in response to CLS’ request.

The majority opinion summarizes the current state of 101 jurisprudence as follows:

While simple enough to state, the patent-eligibility test has proven quite difficult to apply. . . . What is needed is a consistent, cohesive, and accessible approach to the § 101 analysis—a framework that will provide guidance and predictability for patent applicants and examiners, litigants, and the courts.

The majority opinion, written by Lourie and joined by Dyk, Prost, Reyna and Wallach, reviewed Supreme Court precedent and summarized the resulting case law as directing the court in several ways. First, the claim must not be abstract so that it, “subsume[s] the full scope of a fundamental concept.”  If so, the court must look for “meaningful limitations that prevent the claim as a whole from covering the concept’s every practical application.”  Second, the application must not be overly formalistic.  If they were, the majority cautioned, subject-matter eligibility may depend only on the draftsman’s art or the skill of the individual or individuals preparing the claims. Finally, the majority indicated that the precedent urges a “flexible, claim-by-claim approach.”

The majority set forth a “systematic determination” based upon this approach.  First, one must determine “whether the claimed invention fits within one of the four statutory classes set forth in § 101 and, if so, whether any of the exceptions (abstract idea, law of nature, etc.) applies.  When § 101 questions arise, the court should determine what fundamental concept appears to be “wrapped up in the claim, so that the subsequent steps can proceed on a consistent footing.”  The court summarized this step:

In short, one cannot meaningfully evaluate whether a claim preempts an abstract idea until the idea supposedly at risk of preemption has been unambiguously identified.

At this stage, a claim construction may be useful in determining the preempted idea.  Once the idea is “nailed down,” “the balance of the claim can be evaluated to determine whether it contains additional substantive limitations that narrow, confine, or otherwise tie down the claim so that, in practical terms, it does not cover the full abstract idea itself.”  These limitations may be called the “inventive concept,” but are directed more to a distinction over an abstract idea or law of nature than to their actual content as containing the invention for purposes of §§ 102 and 103.  The inventive concept must be more than a trivial (“routine” or “conventional”) appendix to the otherwise abstract idea.  The majority also noted that courts need not consider § 101 first and that all patents maintain a presumption of validity, including § 101 validity.

Following this procedure with respect to the Alice claims, the majority here found that none of the recited steps of the claimed process moved the claimed hedging risk for transactions between two parties using a intermediary “shadow account” to ensure that both parties have sufficient funds to complete a transaction beyond mere abstract idea.  The use of the computer to do so did not add “significantly more” to this abstract idea.  Specifically, the computer-implemented recitations were viewed as almost illusory, the requirement of a supervisory institution, the court found, amounted to nothing more than a traditional escrow service and, finally, the end-of-day instructions were required to cause the method to work.

The majority opinion found similarly with respect to computer-readable medium claims and system claims.  In particular, the majority found that both claims should be considered effectively identical for purposes of § 101 eligibility.  In addition, for the the system claims, the inclusion of “a computer,” “a data storage unit,” and “a communications controller” were irrelevant because all computers include such systems.  Because two other judges agreed with the outcome of the majority, but not with the methodology, all asserted claims were found invalid under § 101.

A concurring-in-part and dissenting-in-part opinion was filed by Judges Rader, Linn, Moore and O’Malley.  This opinion quibbled with the methodology arguing for a “meaningful limitation” on the method claims and to a “specific way” of doing something on a computer or a “specific computer” for doing something in system claims.  Judges Linn, Moore and O’Malley would reverse the district court with regard to the system claims (thus making those claims patent eligible).  Judges Rader and Moore would affirm that the method and media claims were patent ineligible.

A separate dissenting-in-part opinion by Judges Moore, Linn and O’Malley set forth their reasoning for finding the method claims patent eligible.  Linn and O’Malley filed a dissent explaining that method and system claims need not rise and fall together and that the other opinions fail because they are divorced from the record of the case regarding the claims.

A separate opinion, concurring-in-part and dissenting-in-part filed by Judge Newman agreed with the majority view that the method and system claims rise and fall together, but would find that all the claims are patent eligible.  Judge Newman succinctly summarized the plurality:

In deciding to rehear the patent dispute between CLS Bank and Alice Corporation, the en banc court undertook to remedy distortions flowing from inconsistent precedent on section 101. This remedial effort has failed.

Finally, Judge Rader also filed some “additional reflections” suggesting that all lawyers and judges should, perhaps consider:

When all else fails, consult the statute!

He suggests that all of this inventive discussion is far from the real issue at hand and that, generally speaking, a return to a simpler view of the statute would perhaps be the best path to follow in order to bring some clarity to these issues.

All are invited to join us in our discussion during the SoCal IP Institute meeting on Monday, May 13, 2013 at Noon in our Westlake Village office. This activity is approved for 1 hour of MCLE credit. If you will be joining us, please RSVP to Noelle Smith by 9 am Monday morning.