IP News

The Federal Circuit reviewed '101 subject matter eligibility under the two-step framework articulated in Alice. Id. at 5 ('Laws of nature, natural phenomena, and abstract ideas are not patentable.') (citing Alice Corp. v. CLS Bank Int'l, 134 S. Ct. 2347, 2354 (2014))). The first step determines 'whether the claims at issue are directed to one of [the] patent-ineligible concepts.' Id. (citing Alice, at 2355). Notably, '[a]n abstract idea does not become nonabstract by limiting the invention to a particular field of use or technological environment, such as the Internet.' Id. The second step 'ask[s] whether the remaining elements, either in isolation or combination with the non-patent-ineligible elements, are sufficient to 'transform the nature of the claim into a patent-eligible application.' Id. at 5-6 (citing Alice, at 2358 (internal quotations and citations omitted)).

At step one of the Alice framework, the '137 patent claims 'an abstract idea: tracking financial transactions to determine whether they exceed a pre-set spending limit (i.e., budgeting).' Id. at 7. At step two the Federal Circuit found 'no inventive concept' because the claims recite only 'generic computer elements. Instructing one to 'apply' an abstract idea and reciting no more than generic computer elements performing generic computer tasks does not make an abstract idea patent-eligible.' Id. at 9.

The '372 patent, representatively, claims an 'interactive interface configured to provide dynamic website navigation data to the user.' Id. at 10. At step one, the Federal Circuit looked to how broad the claims could be construed, because a 'fundamental' practice within a field present that may manifest in different forms is an abstract idea. Id. at 11. The panel found that providing content based on user location is an abstract idea because 'a newspaper might advertise based on the customer's location;' likewise 'tailoring information based on navigation data' such as the time of day that a user accesses a website is a practice long followed in the television industry to determine the types of advertisements delivered to viewers. Id. at 11-12. At step two, the panel found that an 'interactive interface' does not consist of an inventive element because it 'is a generic computer element' with 'no additional limitation beyond applying an abstract idea, restricted to the Internet, on a generic computer.' Id. at 13-14. The panel contrasted Intellectual Ventures' claims to those recently held patent-eligible because directed towards 'a problem unique to the Internet' such as particular problems in the mechanics of Web browsing. Id. at 14-15.

Therefore, within the Alice framework, the Federal Circuit affirmed the invalidity of both '137 and '372 patents. The Federal Circuit also affirmed the district court's claim construction and noninfringement ruling of the third patent at issue. Costs were granted to appellees Capital One. Id. at 19.

Patent Term Adjustments'Do Not Apply To Continuing'Applications Based On'Delays In Application'Prosecution

On June 25, 2015, a unanimous Federal Circuit panel of Circuit Judges Moore, Schall, and Reyna issued an opinion, authored by Judge Reyna, in Mohsenzadeh v. Lee, Case No. 2014-1499. The opinion affirmed the district court's finding that the Patent and Trademark Office (PTO) was correct in denying patent term adjustments to Mohsenzadeh's continuing applications.

Patent term adjustment under 35 U.S.C. '154 allows for 'restoring patent term to patentees for delays attributable to the PTO that occur prior to the issuance of a patent.' Slip op. at 2. After a patent is granted, the PTO must 'extend the term of the patent by one day for each day the issuance of a patent is delayed.' Id. at 2-3. Extension is 'reduced for delays attributable to the applicant's unreasonable prosecution efforts.' Id. at 3.

Mohsenzadeh filed his initial application on July 6, 2011. The PTO failed to notify Mohsenzadeh of a restriction requirement until Sept. 21, 2006. Mohsenzadeh elected claims that duly issued as a patent on June 22, 2010. The PTO granted an adjustment of an additional 2,104 days for its delay in providing notice of the restriction requirement. On Jan. 8, 2010, Mohsenzadeh filed two divisional applications corresponding to the unelected claims, claiming priority to the initial, parent application. Both applications issued as patents, with zero days of patent term adjustment.

Mohsenzadeh requested reconsideration of the adjustments by the PTO and argued that each deserved 1,476 days of additional term corresponding to the PTO delay in notifying him of the restriction requirement for the parent application. The PTO denied his request pursuant to agency regulation. Mohsenzadeh filed an action against PTO director Lee in district court. Both Mohsenzadeh and the PTO argued the plain language of '154, and the district court granted summary judgment to the PTO. Mohsenzadeh appealed to the Federal Circuit.

On appeal, the Federal Circuit reviewed the 'district court's grant of summary judgment under the law of the regional circuit ' [here] de novo, 'viewing all facts and reasonable inferences therefrom in the light most favorable to the nonmoving party.” Id. at 8 (citations omitted). Statutes were interpreted without deference.

In interpreting the statutory text, the Federal Circuit found that '154 'clearly shows that Congress intended delay in the prosecution of an application to be restored to a single patent, the patent issuing directly from that application.' Id. at 9. Further, the panel found that, had Congress intended to apply delay during parent applications to continuing applications, 'it would have done so expressly' because the 'relationship between parent applications and continuing applications' was addressed in the 'previous subsection of the same statute.' Id. Thus, the district court's judgment denying patent term adjustment was affirmed based on the plain meaning of '154.

Federal Circuit Clarifies'Standard of Review and'Affirms Denial of Award for '285 Exceptional Case Attorney's Fees

On July 10, 2015, a unanimous Federal Circuit panel of Circuit Judges O'Malley, Clevenger, and Hughes issued an opinion, authored by Judge O'Malley, in SFA Systems, LLC v. Newegg Inc., Case No. 2014-1712. The opinion affirmed the district court's decision not to award prevailing party Newegg attorney's fees as an 'exceptional case' under '285.

In 2009, SFA Systems (SFA) sued Newegg and other online retailer defendants for infringement of two 'computer sales system' patents in the Eastern District of Texas. Slip op. at 2. By 2011, all other accused retailers settled and a pair of actions were consolidated into the instant case. Before consolidation, a first Markman order issued rejecting certain Newegg claim constructions; in 2013, after consolidation, a second Markman order issued also rejecting Newegg positions and denying Newegg's motion for summary judgment. The very next day, 'SFA moved to dismiss the case against Newegg with prejudice under Federal Rule of Civil Procedure 41(a), and covenanted not to sue Newegg on the patents at issue.' Id. at 4. The district court dismissed the case. Newegg motioned to recover costs and fees. The district court granted Newegg costs, but denied recovery of attorney's fees under '285. Newegg appealed.

Under 35 U.S.C. '285, 'a court in exceptional cases may award reasonable attorney fees to the prevailing party.' The Supreme Court articulated the standard for 'exceptional' in Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749 (2014):

an 'exceptional' case 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.

Id. at 5 (citing Octane Fitness, at 1756). The Federal Circuit clarified from Octane Fitness that '[a] party's postion on issues of law ultimately need not be correct ' [to be] found reasonable ' Importantly, this means that we need not rule on the correctness of the district court's decision on all underlying issues of law in reviewing a district court's exceptional case determination. We need only determine whether the district court abused its discretion.' Id. at 7 (emphasis in original).

In reviewing SFA's litigating position, the Federal Circuit noted that SFA's claim construction positions were not unreasonable ' indeed, at Markman hearing Newegg's positions were rejected by the district court, not SFA's. Therefore, the Federal Circuit found that the district court did not err in finding SFA's positions reasonable.

Looking to the manner in which the case was litigated, the panel enumerated several examples of litigation misconduct, including the 'patentee's destruction of relevant documents and lodging of incomplete and misleading extrinsic evidence' (Id. at 10); 'exploiting the high cost to defend complex litigation to extract a nuisance value settlement' (Id. at 10-11 (citations omitted)); 'misrepresent[ing] both the law of claim construction and the constructions ultimately adopted by the court (Id. at 11); introduc[ing] and rel[ying] on expert testimony that failed to meet even minimum standards of reliability (Id.); and 'su[ing] the accused infringer's customers to prompt the accused infringer to file a declaratory judgment action, only to withdraw its claims after substantial litigation had taken place.' Id. at 12.

In this case, Newegg presented limited evidence of SFA's exceptional conduct: '1) SFA dismissed its claims against Newegg once it was faced with the prospect of a trial in which the merits of its claims would be tested; 2) SFA sued many defendants for infringement of the same patents; and 3) SFA frequently settled with prior defendants for relatively small amounts.' Id. The panel found that the 'district court did not abuse its discretion in finding that the existence of other lawsuits by SFA does not, without more, render this case exceptional.' Id. at 13. Additionally, in reviewing the district court record, the panel noted that 'SFA does not always seek nuisance value settlements for amounts far les than the cost of litigation,' and that there was 'no evidence of misrepresentation or misleading statements by SFA.' Id. at 13-14. Therefore, the Federal Circuit concluded that the district court did not abuse its discretion in denying Newegg's motion for attorney's fees under '285.

Howard J. Shire is Editor-in-Chief of this newsletter and a Partner in the New York office of Kenyon & Kenyon LLP. Brent T. Hagen is a Law Clerk with the firm.

Federal Circuit Affirms '101'Subject Matter Invalidity of Internet-Related Software'Patents Under Alice

On July 6, 2015, a unanimous Federal Circuit panel of Circuit Judges Dyk, Reyna, and Chen issued an opinion, authored by Judge Dyk, in Intellectual Ventures I LLC v. Capital One Bank (USA), Case No. 2014-1506. The panel affirmed the patent invalidity holding of the district court under the '101 Alice framework, finding Intellectual Ventures' patents claiming unpatentable abstract ideas.

Patent owner Intellectual Ventures filed suit against Capital One in the Eastern District of Virginia in 2013 alleging infringement of three patents directed towards 'activities on the Internet, and ' photography organization using a computer.' Slip op. at 3. After the district court's claim construction, the court granted summary judgment of invalidity due to ineligible subject matter under '101 for all asserted claims of two the patents, '137 and '382, and parties stipulated to noninfringement of the third patent, '587. Intellectual Ventures appealed. The Federal Circuit reviewed the summary judgment, '101 subject matter eligibility, and claim construction holdings.

The Federal Circuit reviewed '101 subject matter eligibility under the two-step framework articulated in Alice. Id . at 5 ('Laws of nature, natural phenomena, and abstract ideas are not patentable.') (citing Alice Corp. v. CLS Bank Int'l , 134 S. Ct. 2347, 2354 (2014))). The first step determines 'whether the claims at issue are directed to one of [the] patent-ineligible concepts.' Id. (citing Alice, at 2355). Notably, '[a]n abstract idea does not become nonabstract by limiting the invention to a particular field of use or technological environment, such as the Internet.' Id. The second step 'ask[s] whether the remaining elements, either in isolation or combination with the non-patent-ineligible elements, are sufficient to 'transform the nature of the claim into a patent-eligible application.' Id. at 5-6 (citing Alice, at 2358 (internal quotations and citations omitted)).

At step one of the Alice framework, the '137 patent claims 'an abstract idea: tracking financial transactions to determine whether they exceed a pre-set spending limit (i.e., budgeting).' Id. at 7. At step two the Federal Circuit found 'no inventive concept' because the claims recite only 'generic computer elements. Instructing one to 'apply' an abstract idea and reciting no more than generic computer elements performing generic computer tasks does not make an abstract idea patent-eligible.' Id. at 9.

The '372 patent, representatively, claims an 'interactive interface configured to provide dynamic website navigation data to the user.' Id. at 10. At step one, the Federal Circuit looked to how broad the claims could be construed, because a 'fundamental' practice within a field present that may manifest in different forms is an abstract idea. Id. at 11. The panel found that providing content based on user location is an abstract idea because 'a newspaper might advertise based on the customer's location;' likewise 'tailoring information based on navigation data' such as the time of day that a user accesses a website is a practice long followed in the television industry to determine the types of advertisements delivered to viewers. Id. at 11-12. At step two, the panel found that an 'interactive interface' does not consist of an inventive element because it 'is a generic computer element' with 'no additional limitation beyond applying an abstract idea, restricted to the Internet, on a generic computer.' Id. at 13-14. The panel contrasted Intellectual Ventures' claims to those recently held patent-eligible because directed towards 'a problem unique to the Internet' such as particular problems in the mechanics of Web browsing. Id. at 14-15.

Therefore, within the Alice framework, the Federal Circuit affirmed the invalidity of both '137 and '372 patents. The Federal Circuit also affirmed the district court's claim construction and noninfringement ruling of the third patent at issue. Costs were granted to appellees Capital One. Id. at 19.

Patent Term Adjustments'Do Not Apply To Continuing'Applications Based On'Delays In Application'Prosecution

On June 25, 2015, a unanimous Federal Circuit panel of Circuit Judges Moore, Schall, and Reyna issued an opinion, authored by Judge Reyna, in Mohsenzadeh v. Lee, Case No. 2014-1499. The opinion affirmed the district court's finding that the Patent and Trademark Office (PTO) was correct in denying patent term adjustments to Mohsenzadeh's continuing applications.

Patent term adjustment under 35 U.S.C. '154 allows for 'restoring patent term to patentees for delays attributable to the PTO that occur prior to the issuance of a patent.' Slip op. at 2. After a patent is granted, the PTO must 'extend the term of the patent by one day for each day the issuance of a patent is delayed.' Id. at 2-3. Extension is 'reduced for delays attributable to the applicant's unreasonable prosecution efforts.' Id. at 3.

Mohsenzadeh filed his initial application on July 6, 2011. The PTO failed to notify Mohsenzadeh of a restriction requirement until Sept. 21, 2006. Mohsenzadeh elected claims that duly issued as a patent on June 22, 2010. The PTO granted an adjustment of an additional 2,104 days for its delay in providing notice of the restriction requirement. On Jan. 8, 2010, Mohsenzadeh filed two divisional applications corresponding to the unelected claims, claiming priority to the initial, parent application. Both applications issued as patents, with zero days of patent term adjustment.

Mohsenzadeh requested reconsideration of the adjustments by the PTO and argued that each deserved 1,476 days of additional term corresponding to the PTO delay in notifying him of the restriction requirement for the parent application. The PTO denied his request pursuant to agency regulation. Mohsenzadeh filed an action against PTO director Lee in district court. Both Mohsenzadeh and the PTO argued the plain language of '154, and the district court granted summary judgment to the PTO. Mohsenzadeh appealed to the Federal Circuit.

On appeal, the Federal Circuit reviewed the 'district court's grant of summary judgment under the law of the regional circuit ' [here] de novo, 'viewing all facts and reasonable inferences therefrom in the light most favorable to the nonmoving party.” Id. at 8 (citations omitted). Statutes were interpreted without deference.

In interpreting the statutory text, the Federal Circuit found that '154 'clearly shows that Congress intended delay in the prosecution of an application to be restored to a single patent, the patent issuing directly from that application.' Id. at 9. Further, the panel found that, had Congress intended to apply delay during parent applications to continuing applications, 'it would have done so expressly' because the 'relationship between parent applications and continuing applications' was addressed in the 'previous subsection of the same statute.' Id. Thus, the district court's judgment denying patent term adjustment was affirmed based on the plain meaning of '154.

Federal Circuit Clarifies'Standard of Review and'Affirms Denial of Award for '285 Exceptional Case Attorney's Fees

On July 10, 2015, a unanimous Federal Circuit panel of Circuit Judges O'Malley, Clevenger, and Hughes issued an opinion, authored by Judge O'Malley, in SFA Systems, LLC v. Newegg Inc., Case No. 2014-1712. The opinion affirmed the district court's decision not to award prevailing party Newegg attorney's fees as an 'exceptional case' under '285.

In 2009, SFA Systems (SFA) sued Newegg and other online retailer defendants for infringement of two 'computer sales system' patents in the Eastern District of Texas. Slip op. at 2. By 2011, all other accused retailers settled and a pair of actions were consolidated into the instant case. Before consolidation, a first Markman order issued rejecting certain Newegg claim constructions; in 2013, after consolidation, a second Markman order issued also rejecting Newegg positions and denying Newegg's motion for summary judgment. The very next day, 'SFA moved to dismiss the case against Newegg with prejudice under Federal Rule of Civil Procedure 41(a), and covenanted not to sue Newegg on the patents at issue.' Id. at 4. The district court dismissed the case. Newegg motioned to recover costs and fees. The district court granted Newegg costs, but denied recovery of attorney's fees under '285. Newegg appealed.

Under 35 U.S.C. '285, 'a court in exceptional cases may award reasonable attorney fees to the prevailing party.' The Supreme Court articulated the standard for 'exceptional' in Octane Fitness, LLC v. ICON Health & Fitness, Inc. , 134 S. Ct. 1749 (2014):

an 'exceptional' case 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.

Id. at 5 (citing Octane Fitness, at 1756). The Federal Circuit clarified from Octane Fitness that '[a] party's postion on issues of law ultimately need not be correct ' [to be] found reasonable ' Importantly, this means that we need not rule on the correctness of the district court's decision on all underlying issues of law in reviewing a district court's exceptional case determination. We need only determine whether the district court abused its discretion.' Id. at 7 (emphasis in original).

In reviewing SFA's litigating position, the Federal Circuit noted that SFA's claim construction positions were not unreasonable ' indeed, at Markman hearing Newegg's positions were rejected by the district court, not SFA's. Therefore, the Federal Circuit found that the district court did not err in finding SFA's positions reasonable.

Looking to the manner in which the case was litigated, the panel enumerated several examples of litigation misconduct, including the 'patentee's destruction of relevant documents and lodging of incomplete and misleading extrinsic evidence' (Id. at 10); 'exploiting the high cost to defend complex litigation to extract a nuisance value settlement' (Id. at 10-11 (citations omitted)); 'misrepresent[ing] both the law of claim construction and the constructions ultimately adopted by the court (Id. at 11); introduc[ing] and rel[ying] on expert testimony that failed to meet even minimum standards of reliability (Id.); and 'su[ing] the accused infringer's customers to prompt the accused infringer to file a declaratory judgment action, only to withdraw its claims after substantial litigation had taken place.' Id. at 12.

In this case, Newegg presented limited evidence of SFA's exceptional conduct: '1) SFA dismissed its claims against Newegg once it was faced with the prospect of a trial in which the merits of its claims would be tested; 2) SFA sued many defendants for infringement of the same patents; and 3) SFA frequently settled with prior defendants for relatively small amounts.' Id. The panel found that the 'district court did not abuse its discretion in finding that the existence of other lawsuits by SFA does not, without more, render this case exceptional.' Id. at 13. Additionally, in reviewing the district court record, the panel noted that 'SFA does not always seek nuisance value settlements for amounts far les than the cost of litigation,' and that there was 'no evidence of misrepresentation or misleading statements by SFA.' Id. at 13-14. Therefore, the Federal Circuit concluded that the district court did not abuse its discretion in denying Newegg's motion for attorney's fees under '285.

Howard J. Shire is Editor-in-Chief of this newsletter and a Partner in the New York office of Kenyon & Kenyon LLP. Brent T. Hagen is a Law Clerk with the firm.