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Supreme Court Takes on Intellectual Property

 

Supreme Court Takes on Intellectual Property

By Meredith Lowry

 

The current term for the US Supreme Court is rife with intellectual property cases, with six cases alone in the patent arena. As the Court rarely takes intellectual property cases, this term looks to be an important one for intellectual property jurisprudence. To provide some insight into the matters before the Court, we have reviewed the cases and have provided a synopsis of each below.  

  

Medtronic v. Mirowski

Medtronic, Inc. v. Mirowski Family Ventures, LLC (No. 12-1128) is the first with a decision.  The case boils down to who has to prove infringement of a patent, the patent owner or the party suing the patent owner.

Medtronic, Inc. had licensed patents for implantable heart stimulators from Mirowski Family Ventures, LLC (MFV) for years. Medtronic decided to challenge the validity of the patents in 2003. However, since Medtronic was a licensee of MFV and had a valid right to manufacture the products, MFV could not counterclaim for infringement. 

The crux of the argument before the Supreme Court was whether the patent holder had the obligation to show infringement of the patents. The Federal Circuit had decided that Medtronic, the party asking for the declaratory judgment, had the burden of persuasion, rather than the patent holder itself, as Medtronic was the party seeking relief. Generally, the party seeking relief bears the burden of proving his case.  See Schaffer ex rel. Schaffer v. Weast, 546 U.S. 49, 56-57 (2005).

The Supreme Court unanimously disagreed with the Federal Circuit. A patentee bears the burden of proving infringement and the procedural operation of a declaratory judgment action does not change this burden.

  

Highmark v. Allcare & Octane Fitness v. ICON Health & Fitness

The Highmark Inc. v. Allcare Management Systems, Inc. case concerns attorney’s fees in patent cases as does Octane Fitness v. ICON Health and Fitness. Both cases are set for oral argument on February 26, 2014.

Allcare Management Systems, Inc. (Allcare) and ICON Health and Fitness (ICON) were involved in separate patent infringement cases, each asserting patent rights. Both lost. In patent cases, the conduct of a patent owner can lead a court to deem the case exceptional, which can lead to sanctions and an award of attorneys’ fees. To be considered exceptional, the prevailing party must show that the litigation was brought in bad faith and the litigation was objectively baseless. Brooks Furniture Mfg., Inc. v. Dutailer Int’l, Inc., 393 F.3d 1378, 1381 (Fed. Cir. 2005). This standard for exceptionality is high and very few defendants can show both elements.

In Allcare, the Federal Circuit concluded that Allcare had pursued frivolous claims and asserted meritless legal positions, which led the court to find the case exceptional. In Octane, the Federal Circuit did not find the case exceptional, but Octane, as the prevailing party, has asked the Supreme Court to reconsider the standard from exceptionality to allow a finding of exceptionality with only a showing of that the litigation was objectively unreasonable.

 

Alice v. CLS Bank

Alice Corp. Pty. Ltd. v. CLS Bank Int’l will be argued on March 31, 2014 and addresses the issue of whether computer-implemented inventions like software are valid and protectable under the patent laws.

Alice Corporation (Alice) owns four patents for a computerized trading platform used for escrow financial transactions. CLS Bank filed suit against Alice seeking a determination that either the Alice patents were not infringed by CLS or were invalid. In recent years, software patents have been scrutinized extensively for whether they qualify under the patent laws as patentable subject matter. Patentable subject is limited to new and useful processes, machines, manufactures, and compositions of matters. The Supreme Court affirmed in 2010 that methods are patentable so long as the method is not abstract, but did not clearly state whether software is patentable. Bilski v. Kappos, 561 U.S. ___ (2010).

The Supreme Court will now look at the Alice patents and potentially make a determination whether software patents are valid.  We say potentially because the Court can always make a determination on other grounds.

 

Nautilus v. Biosig

Oral arguments in Nautilus, Inc. v. Biosig Instruments, Inc. have not been set, but will likely be argued in April. The patent involved covers a heart rate monitor in the handles of a treadmill or stationary bike and at issue is the meaning of “in spaced relationship” for the electrodes. The claim language question hinges upon the patent law requirement that claims must be definite or specific.  When a claim is indefinite, it’s not valid and, therefore, not enforceable.

With Nautilus, the Federal Circuit held that patent claims that are discernable and yet open to interpretation as to the meaning are valid and definite. The Supreme Court has been asked to determine if multiple interpretations can truly be considered definite.

Several companies have filed amicus briefs supporting Nautilus in its quest for a stricter test for definite claims. One of these companies is Limelight, the petitioner in our next case.

 

Limelight v. Akamai

Oral arguments in Limelight Networks, Inc. v. Akamai Technologies, Inc. have also not been set, but like Nautilus, it will likely be argued in April. Also like Nautilus, a number of companies filed amicus briefs in support of the petitioner Limelight.

At issue in Limelight is what is required for a court to find induced infringement. Limelight and Akamai are both in the content delivery network business (CDN) which is the internet infrastructure that allows for quick delivery of content on the internet despite high demand. Akamai owns a patent that covers a method for efficient delivery of web content which (in simplistic terms) requires the placement of content on servers and modifying the content provider’s web page to retrieve that content from the servers. Limelight, like the patent, places content on servers to allow for efficient delivery of web content.  However, it did not modify the content provider’s web page. Instead, it instructed the content provider in how to modify the web page.

When we have a party replicate a product completely as claimed, we have direct infringement. Induced infringement is different in that the first party doesn’t complete all the steps necessary to infringe, but instead sets up another party to complete the infringing steps. It had been well settled that liability only occurred for induced infringement if there was also direct infringement. The Federal Circuit has overruled that requirement and found Limelight liable for induced infringement.

The Federal Circuit’s decision in Limelight has the potential to exacerbate the costs in the patent litigation arena. With the current litigation issues surrounding patent trolls, the precedent that companies could be liable for infringement based upon customers’ actions downstream could open the floodgates for more patent litigation and more cost during discovery.

 

ABC v. Aereo

American Broadcasting Companies, Inc. et al. v. Aereo, Inc. is a copyright case.  Oral arguments have not yet been set. The National Football League, Time Warner Inc., Viacom Inc. and others have filed amicus briefs in support of ABC and the other petitioners. The petitioners are suing for copyright infringement based upon the right the copyright owner has to prevent public performance and reproduction of the copyrighted work.

Aereo, Inc. (Aereo) provides broadcast television programs over the internet to subscribers for a fee. The program content is provided to subscribers much like a television with a digital video recorder (DVR). The Aereo system records individual copies of the programs for each subscriber based upon requests from the subscriber. The system also provides live broadcast to the subscriber if the program is currently being aired.

The Second Circuit had already decided in Cartoon Network LP, LLP v. CSC Holdings, Inc., known as the Cablevision case, that use of a DVR is not infringing under the copyright laws. As the Court concluded that Aereo’s system was not materially distinguishable from Cablevision’s system, the Court held that Aereo did not infringe.

 

Petrella v. MGM

Arguments were heard January 21, 2014 in Petrella v. Metro-Goldwyn-Mayer, Inc. This is another copyright case, this one handling a defense to copyright infringement known as laches.

Frank Petrella collaborated with a friend on a book and two screenplays that allegedly became the basis for the movie Raging Bull. In 1998, Petrella’s daughter began asserting that Metro-Goldwyn-Mayer, Inc. (MGM) infringed her father’s copyrights that she had inherited. Between 1998 and 2000, an attorney for Petrella corresponded with MGM threatening legal action. However a lawsuit was not filed until 2009.

Laches is the defense that prevents a plaintiff from sleeping on her rights when she is in full knowledge of the facts. Here, it was undisputed that Petrella knew of her rights since 1991. Despite this, Petrella argued that the Copyright Act specifies a three-year period for bring copyright suits that runs separately for each successive violation, essentially meaning that Petrella could date back to any sale or rebroadcast of the movie. The statute of limitations would bar recovery from infringement outside of the three-year window, but would allow recovery afterwards.

The Ninth Circuit found laches barred all recovery for Petrella and declined to determine infringement as a result. Post-Petrella, there is a massive split in the federal courts on the availability of laches as a defense in copyright cases and what it entails when it is shown. Hopefully, the Supreme Court will resolve this split.

Oral arguments do not appear to have gone well for Petrella. Accounts indicate that the justices did not like the idea that movie producers could be subject to a suit so long after a movie’s release.

 

Pom Wonderful v. Coca-Cola

Pom Wonderful LLC v. The Coca Cola Company is the only case brought under the Lanham Act, which is the federal act covering trademark and false advertising. The issue before the Court is whether the Food, Drug, and Cosmetic Act (FDCA), which regulates food and beverage labeling, bars a Lanham Act claim for deceptive marketing.

Pom Wonderful, LLC (Pom) sells pomegranate juice and pomegranate juice blends. Coca-Cola sells a pomegranate blueberry juice drink that is 99.4% apple and grape juices. Pom sued Coca-Cola for false advertising. Coca-Cola fired back challenging the existence of the suit based upon the theory that the FDCA preempts a claim under the Lanham Act.

Pom now seeks to overturn the Ninth Circuit’s ruling that the Lanham Act is preempted by the FDCA.

 

 

 

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