IP News

A Patent on the Method of Filtering Internet Content Survives '101 Challenge

The Federal Circuit, in Bascom Global Internet Services, Inc. v. AT&T Mobility LLC, case 15-1763 (June 27, 2016), recently provided an important clarification to step 2 of the Mayo '101patentability test set forth in Mayo Collaborative Servs. v. Prometheus Laboratories, Inc., 132 S. Ct. 1289 (2012). The case came on appeal from the district court in the Northern District of Texas, which dismissed the patent-infringement complaint under Rule 12(b)(6) for failure to state a claim for relief, agreeing with defendant AT&T that the asserted patent was invalid under '101. Bascom's patent, filed in 1997, is directed to an Internet filtering software tool that allows control over the type of information that certain groups of users are able to receive over the Internet. Several filtering tools were in existence at the time the patent was filed, and Bascom's invention combined their advantages and avoided the drawbacks: the “claimed filtering system avoids being 'modified or thwarted by a computer literate end-user,' and avoids being installed on and dependent on 'individual end-user hardware and operating systems' or 'tied to a single local area network or a local server platform' by installing the filter at the ISP server.” Slip op. at 4 (quoting the '606 patent). The Federal Circuit, conducting a de novo review of the district court's determination of patent-eligibility under '101, performed the two-step Mayo analysis. In step 1, the court agreed with AT&T and the district court that Bascom's claims were directed to an “abstract idea” of “filtering content on the Internet,” because content-filtering “is a longstanding, well-known method of organizing human behavior, similar to concepts previously found to be abstract.” Slip op. at 12. In step 2, the Federal Circuit also agreed with the district court that none of the individual limitations is inventive by itself. But the court disagreed with the district court's analysis of the ordered combination of the'606 patent claim limitations, holding that, on the record before it, the “specific method of filtering Internet content cannot be said, as a matter of law, to have been conventional or generic.” Id. at 16. The Federal Circuit criticized the district court's analysis under Mayo step-two as being “similar to an obviousness analysis under 35 U.S.C. '103, except lacking an explanation of a reason to combine the limitations as claimed.” The Federal Circuit explained that the “inventive concept inquiry requires more than recognizing that each claim element, by itself, was known in the art. ' [A]n inventive concept can be found in the non-conventional and non-generic arrangement of known, conventional pieces.” Id. at 15. The Federal Circuit thus vacated the district court's dismissal order, and remanded.

Judge Newman concurred in the result, but argued that the '101 inquiry should, when appropriate, be made in the context of a complete patentability/validity determination, because the determination of patentability issues always resolves or moots the patent-eligibility inquiry under '101, but not vice versa: “When evidence of patentability is needed or presented to resolve a challenge to eligibility of claims to a new method or machine or manufacture or composition, the district court and the parties should have the flexibility to resolve patentability at this threshold. If the claims are unpatentable, any issue of abstractness, however defined, is mooted. And if the subject matter is patentable, it is not an abstract idea.” Id., Newman, J., concurring, at 6.

Public Interest Factor Does Not Bar a Permanent Injunction Against a Direct Competitor

In WBIP, LLC v. Kohler Co., No. 15-1038 (Fed. Cir. July 19, 2016), a case between two competitors in the manufacture and sale of marine generators (“gen-sets”) used on houseboats, patentee WBIP obtained a jury verdict that the asserted patents were infringed by Kohler and were not invalid, that the infringement was willful, and that WBIP's damages based on reasonable royalty calculation were about $9.6 M. The district court denied Kohler's post-trial motion for JMOL of invalidity, granted WBIP's motions for enhanced damages and attorney's fees, but denied WBIP's motion for a permanent injunction. The Federal Circuit affirmed the district court's willful infringement and validity determinations, but vacated and remanded the denial of a permanent injunction.

In an obviousness analysis, the Federal Circuit discussed in detail the “motivation to modify” and “objective evidence of non-obviousness” factors set forth in Graham v. John Deere Co. of Kan. City, 383 U.S. 1, 36 (1966). The Federal Circuit considered evidence of long-felt need, industry praise, skepticism, copying, and commercial success, and the nexus between the presented evidence and the claimed invention. The court disagreed with Kohler that objective considerations “can never overcome a strong prima facie case of obviousness,” explaining that a “determination of whether a patent claim is invalid as obvious under '103 requires consideration of all four Graham factors, and it is error to reach a conclusion of obviousness until all those factors are considered.” Slip op. at 10'11. Moreover, while the patentee is required to show a nexus between the objective evidence and the claimed invention, the evidence does not have to relate to the specific claim elements that are absent from the prior art:

Requiring patentees to prove that objective evidence is tied to a specific claim element ' and only that claim element ' runs counter to the statutory instruction that the obviousness analysis involves determining whether the claimed invention as a whole would have obvious.

Id. at 17'18 (emphasis in original, quotation marks omitted).

With respect to the permanent injunction issue, the Federal Circuit agreed with the patentee that the district court's analysis was an abuse of discretion. The district court determined that WBIP was a much smaller manufacturer of the subject gen-sets, hence the injunction would be against public interest as it “would deprive the consuming public of access to a potentially life-saving product.” Id. at 39. Based on this finding, and without addressing the remaining eBay factors (eBay Inc. v. MercExchange, LLC, 547 U.S. 388 (2006)), the district court denied WBIP's injunction request. The Federal Circuit noted that, if this analysis was sufficient, “it would create a categorical rule denying permanent injunctions for life-saving goods.” Id. at 40. The Federal Circuit thus vacated the denial of injunction and remanded for “a more thorough analysis of the eBay factors.” Id.

Patent Owner Does Not Have to Prove Non-Obviousness In IPR Proceedings

In In re: Magnum Oil Tools International, Ltd., No. 15-1300 (July 25, 2016), the Federal Circuit clarified the burdens of proof applicable in IPR proceedings. The Patent Trial and Appeal Board (Board) instituted an IPR of a Magnum Oil patent directed to technology in the field of oil drilling through use of hydraulic fracturing (or “fracking”). After the Board found all challenged claims invalid as obvious in a final written decision, the challenger and patent owner settled, and the patentee appealed. The U.S. Patent and Trademark Office (PTO) Director intervened in the appeal to defend its decision. The PTO's view was that, “upon institution of an IPR, the Board necessarily finds that the Petitioner has demonstrated a 'reasonable likelihood of success,'” and therefore the burden of producing evidence of non-obviousness in an IPR proceeding shifts to the patentee. Slip op. at 13. The Federal Circuit firmly rejected this approach, stating that in an IPR, the burden of production, as well as the ultimate burden of persuasion, remains on the petitioner at all times: “Where, as here, the only question presented is whether due consideration of the four Graham factors renders a claim or claims obvious, no burden shifts from the patent challenger to the patentee.” Id. at 16'17.

The Federal Circuit also held that the Board improperly shifted the burden to the patentee to disprove obviousness, without first requiring the petitioner to prove its assertion of obviousness by a preponderance of the evidence. And, the Board improperly relied on an argument that “could have been included in a properly-drafted petition,” but in fact was not: “while the PTO has broad authority to establish procedures for revisiting earlier-granted patents in IPRs, that authority is not so broad that it allows the PTO to raise, address, and decide unpatentability theories never presented by the petitioner and not supported by record evidence.” Id. at 25'26. Because the Board erred in shifting the burden of proof, failed to support its factual findings with substantial evidence, and relied on arguments not raised by the petitioner, the Federal Circuit reversed the obviousness determination.

Howard J. Shire is Editor-in-Chief of this newsletter and a Partner in the New York office of Kenyon & Kenyon LLP. Ksenia Takhistova is an associate in the New York office of the firm.