Applying the Alice Standard to Electronic Stock Trading by Kyle Chapin, Esq.

On January 18, 2017, the Court of Appeals for the Federal Circuit affirmed the decision by the United States District Court for the Northern District of Illinois that two patents related to electronic stock trading contain patent eligible subject matter. These patents are owned by Trading Technologies International, Inc. and are directed toward reducing the time it takes for a trader to place an electronic trade. Specifically, the patents solve a problem where a trader attempts to enter a trade at a particular price, but they miss that price because the market had changed before the trade was entered and executed.

This holding is another guide post in a patent litigator’s understanding of the 2014 Supreme Court holding in Alice Corporation Pty. Ltd. v. CLS Bank International which turned patent-eligibility for software and business method patents upside-down. If you are unsure of the significance of Alice, the Court set out the framework for the patent-eligibility of patents that effected the validity of an enormous number of patents, overnight. The two-part test set out in Alice states that, a claim falls outside § 101 where (1) it is “directed to” a patent-ineligible concept, i.e., a law of nature, natural phenomenon, or abstract idea, and (2), if so, the particular elements of the claim, considered “both individually and ‘as an ordered combination,’” do not add enough to “‘transform the nature of the claim’ into a patent-eligible application.”

In the present case, the Court reviewed the two patents in view of the two-part Alice test. In holding the patents valid, the Court agreed with the District Court in stating that the patents “solve problems of prior graphical user interface devices…in the context of computerized trading [] relating to speed, accuracy and usability.” This improvement “recite[s] more than setting, displaying, and selecting data or information that is visible on the [graphical user interface] device.” For these reasons the Court concluded the subject matter of the patents were not abstract and therefore patent eligible under Step one of Alice.

Next, the Court looked to the improvement in a trader’s efficiency and accuracy in placing trades using the electronic trading system which, the Court stated, distinguishes “the routine or conventional use of computers or the Internet.” The Court pointed to the “specific structure and concordant functionality of the graphical user interface” as reasons the system is removed from being an abstract idea. According to the Court, this improvement in efficiency and accuracy on the part of the trader are the “inventive concept” necessary to meet Step 2 of Alice. Thus, the Court held Trading Technologies International, Inc.’s patents were valid.

This decision provides further guidance and additional examples that can help guide patent litigators to a better understanding of the elements necessary to have patent-eligible subject matter within various software and business method patents.

Teva is blocked from selling the generic version of Alimta by Stephen Lewellyn, Esq.

On January 12, 2017, the Court of Appeals for the Federal Circuit handed Eli Lilly a win against Teva Pharmaceuticals that blocks Teva from selling its generic version of the cancer treatment drug Alimta.

The Court, following its precedent in Akamia V, found Teva’s proposed product labeling for its generic drug would induce infringement of U.S. Patent No. 7,772,209, which is owned by Eli Lilly. This patent claims a method of administering pemetrexed disodium to a patient and includes the step of administering an effective amount of folic acid before pemetrexed disodium. In practice, the folic acid is taken by the patient  at the direction of the treating physician. The direction includes taking a prescribed amount of folic acid following specific schedule. After which, the pemetrexed disodium is given to the patient by the physician. But, if the folic acid is not taken as directed, pemetrexed disodium is not given to the patient.

Since completing the claimed method requires action by two separate people, the question of induced infringement was at issue concerning the step of administering folic acid, which is completed by the patient.

Under Akamia V, when no single actor performs all the steps of a method claim, infringement only occurs “if the acts of one are attributable to the other such that a single entity is responsible for the infringement.” In one circumstance, performance of method steps is attributable to a single entity when that entity “directs or controls” others in completing the steps. Directing or controlling of others performance includes an actor that (1) conditions participation in an activity or receipt of a benefit upon others’ performance of one or more steps of the patented method, and (2) establishes the manner or timing of that performance.

Here, the Court found treating a patient with Teva’s generic drug satisfied both prongs because the treatment is conditioned on the patient first taking folic acid by the patient following a specific regiment that was prescribed by the doctor. This decision provides further guidance on how multi-actor method claims can be infringed under Akamia V.

District Court of Delaware Narrowly Applies the IPR Estoppel Provisions by Stephen Lewellyn, Esq.

A recent Delaware district court decision narrowly interpreted the estoppel provision of an Inter Partes review (IPR) to not include prior art and arguments that could have been raised, but were not raised by the Petitioner in the IPR. Intellectual Ventures I LLC v. Toshiba Corp., Civil Action No. 13-453, Slip Op. (DN 559) at 25–27 (D. Del. Dec. 19, 2016) (Memorandum Opinion).

Judge Robinson, arriving at the narrow interpretation first looked to the statutory language of 35 U.S.C. § 315(e)(2), which states in relevant part: “[t]he petitioner in an inter partes review of a claim in a patent under this chapter that results in a final written decision under section 318(a) … may not assert [] in a civil action arising in whole or in part under section 1338 of title 28 … that the claim is invalid on any ground that the petitioner raised or reasonably could have raised during that inter partes review.”

Recognizing that the prior art and arguments at issue could have reasonably been raised by the Petitioner in the IPR, and under the statute the Petitioner would be estopped from raising them in the district court case, Judge Robinson looked to the Federal Circuit’s literal interpretation of the above language and found no estoppel. Particularly, in Shaw Indus. Grp., Inc. v. Automated Creel Sys., Inc., 817 F.3d 1293 (Fed. Cir. 2016), the Court determined that because PTAB did not institute an IPR on a particular ground the Petitioner “did not raise – nor could it have reasonably raised – the [rejected] ground during the IPR.”

Finding no estoppel, Judge Robinson stated: “Although extending the [Federal Circuit’s] logic to prior art references that were never presented to the PTAB at all (despite their public nature) confounds the very purpose of this parallel administrative proceeding, the court cannot divine a reasoned way around the Federal Circuit’s interpretation in Shaw.”

I predict this decision will be appealed to the Federal Circuit to weigh in on estoppel when prior art could have been, but were not raised by the IPR Petitioner. Nevertheless, as it stands now, at least in the District of Delaware, the estoppel provision does not seem to apply in such circumstances.

A Change in Design Patent Damages by Kyle Chapin, Esq.

On December 6, 2016, the Supreme Court of the United States issued a decision in the latest installment of the Samsung v. Apple saga of cases. In the opinion authored by Justice Sotomayor, the Supreme Court broadened the interpretation of the term “article of manufacture” as it is used in the determination of damages for design patent infringement cases. See Samsung Electronics Co., LTD., et al., Petitioners v. Apple Inc., 580 U.S. ____ (2016).

Before this case, Courts interpreted the term “article of manufacture” as it is used in 35 U.S.C. §289 to include the entire end-product sold by the infringer. This means that a patent owner would then be able to recover all of the profits associated to that product as damages.

In affirming the District Court’s $399 million damages award to Apple, the United States Court of Appeals for the Federal Circuit used Samsung’s entire smart phone as the “article of manufacture”. Whereas, the patents that Apple asserted against Samsung only covered the bezel that extends along the perimeter of the face of the Apple smartphone, a rectangular front face with curved corners and a raised rim, and a grid of 16 colorful icons on a black screen. Id at 3. These patents do not cover any of the electronic components that provide the phone with its function.

In this case, the Supreme Court broadened the previous interpretation of the term “article of manufacture” to also include a component of a completed end-product rather than the end product in its entirety. Id. at 8. In broadening the term, the Supreme Court declined to resolve whether the article of manufactures for the design patents at issue in this case were the entire smartphone or the specific component described in each design patent. Id.

What does this case teach us? Damages in design patent infringement cases are no longer required to include all of the profits made by the infringer. This decision allows design patent damages to be calculated by the amount of profits a jury determines came from the inclusion of the “article of manufacture” in the completed end product.

New Copyright Regulations Require Action by Internet Service Providers for designating agents under the Digital Millennium Copyright Act by Alexandra Taylor, Esq.

As the United States Copyright Office continues to modernize its processes to be in line with current technology, the Office has implemented new regulations that require action on behalf of Internet service providers who wish to take advantage of the safe harbor provision of the Digital Millennium Copyright Act.

The DMCA provides safe harbor protection for ISPs from copyright infringement liability based on certain categories of conduct by the ISPs: (1) transitory digital network communications, (2) system caching, (3) information residing on systems or networks at direction of users, and (4) information location tools.

In order to qualify for this safe harbor protection, certain ISPs must designate an agent to receive notifications of claimed copyright infringement by (1) making contact information for said agent available for public viewing on the ISP’s website, and (2) provide that same contact information to the Copyright Office for the Office’s directory of designated agents.

Previously, the Copyright Office maintained a paper-based directory of designated agents. However, the new copyright regulations require all ISPs that have designated an agent with the Copyright Office prior to December 01, 2016 to submit a new designation electronically using the Office’s online registration system by December 31, 2017. Any designation not made through the Office’s online registration system will expire and become invalid after December 31, 2017. During the transition period from paper-based to the electronic directory, the Copyright Office will maintain two directories of designated agents in both forms of paper and electronic.

The Copyright Office has further advised that during the transition period, to search for an ISP’s most up-to-date designation, begin by using the electronic directory; the paper-based directory should only be consulted if an ISP has not yet designated an agent in the electronic directory.1

1 https://www.copyright.gov/dmca-directory/.

Don’t View an Infringement as a Lottery Ticket by William Brees, Esq.

 

The United States District Court for the Northern District of California recently granted a Motion for Summary Judgment in case that should remind potential plaintiffs not to sleep on their rights. In Dropbox, Inc. v. Thru Inc., the Court granted Dropbox, Inc. summary judgment on Thru, Inc.’s counterclaims for trademark infringement under the Lanham Act (Federal Law), trademark infringement under California common law, unfair competition under California Law, and cancellation of Dropbox, Inc.’s Federal trademark registration.

In trademark law, if one party used a trademark prior to another party in for similar goods or services and in the same region, the first party will usually be able to stop the second party from using the trademark with those goods or services. Thru Inc. used the trademark DROPBOX for file sharing software in 2004, four years prior to use of the DROPBOX trademark by Dropbox, Inc. Thru Inc. learned about Dropbox and its use of the DROPBOX trademark in 2009. But Thru Inc. didn’t take any action until 2008 when Counsel for Thru Inc. asserted its priority in communications with Dropbox, Inc. Thru failed to file any sort of action until 2014 when it filed a Petition for Cancellation against the Federal Trademark Registration that had by that time issued to Dropbox, Inc. for the DROPBOX trademark. Dropbox, Inc. eventually countered by filing the suit in the Northern District of California.

Through discovery, Dropbox, Inc. learned that Thru Inc. was well aware of its use of the DROPBOX trademark as well as its business dealings from 2009 to 2014, when it eventually filed the Petition for Cancellation. Several Email chains involving Thru Inc. executives referred the perceived infringement of the DROPBOX trademark as a “lottery ticket” to be cashed in by filing a lawsuit at the time when Dropbox, Inc. was attempting to take its business public through an Initial Public Offering. Rather than filing a lawsuit to enforce the rights the facts show it should have had in the trademark, Thru Inc. waited until the most opportune time as it watched Dropbox, Inc. gain in both popularity and users.

Watching Dropbox, Inc. grow wound up costing Thru Inc. the ability to enforce the rights it had in the DROPBOX trademark. Trademark owners need to be mindful that acting in a timely fashion to stop an infringement is usually going to be a more effective approach than counting on a big payday down the road.