LOS ANGELES & SAN FRANCISCO
WEDNESDAY, JULY 20, 2016
What’s on deck for IP at the high court
By Michael Hawes and Bryant (“B.C.”) Boren
The U.S. Supreme Court just finished its 2015 term and will start up again in October 2016.
The Supreme Court’s changes to the IP landscape over the past several years have left patent and copyright holders with assets of changing value and practitioners unsure of the rules for intellectual property. Specifically, questions had arisen regarding enhanced damages and inter partes review. While this term’s rulings provide some clarity, the Supreme Court plans to address several new questions in the year to come.
ollowing rulings on patent eligibility, e.g., Bilski and Alice, that many saw as undermining patent enforcement, the court leaned the other
way last month when it rejected the U.S. Court of Appeals for the Federal Circuit’s rigid, two-step test for enhanced damages in patent infringement cases, making it potentially easier for plaintiffs to obtain them. In companion cases Halo Electronics
v. Pulse Electronics and Stryker v. Zimmer, the court unanimously held that the Federal Circuit had erred in setting too high a bar for patent owners to receive up to three times actual damages. The question presented was whether the Federal Circuit’s subjective/ objective test, which allows a defendant to avoid enhancement based on defenses prepared only for trial, provides the correct standard for awarding enhanced damages. The justices rejected that test, holding that the test unduly restricts discretion of the courts, because (i) there is no single formula for determining whether such damages are appropriate, and (ii) enhanced damages should be based on a preponderance of the evidence showing culpability or egregiousness of the infringing conduct “[c]onsistent with nearly two centuries of enhanced damages under patent law.”
The court stressed that the typical “garden- variety” patent infringement case would not merit enhanced damages and demonstrated its concern for safeguarding innovation while penalizing only the most egregious cases, e.g., those where competitors act “for no purpose other than to steal the patentee’s business.”
In Kirtsaeng v. John Wiley & Sons, a copyright infringement case, the court wrestled with a circuit split as to the appropriate test for awarding attorney fees to a prevailing party under 17 U.S.C. Section
505. The court held that substantial weight should be given to the objective reasonableness of the losing party’s position, but cautioned that that factor is not controlling and other considerations relevant to the
granting of fees must also be taken into account. A district court retains discretion in light of all relevant factors (e.g., litigation misconduct, repeated infringement, overaggressive claims, deterrence, etc.) to make an award as it sees fit, even if the losing party advances a reasonable claim or defense.
Finally, in Cuozzo Speed Technologies v. Lee, the court upheld the Patent Trial and Appeal Board’s (PTAB) use of the “broadest reasonable interpretation” (BRI) standard when reviewing unexpired patent claims in PTAB trials, specifically inter partes reviews (IPR), and insulated its decision to institute IPRs from appeal. Cuozzo was the first case addressing IPRs since they were created by the America Invents Act (AIA) in 2011. The BRI standard can read claims more broadly than the standard used in an infringement action and broad claims can ensnare more prior art resulting in an invalid claim.
The ruling preserves the current format of IPRs. There was significant amicus participation in Cuozzo, with the tech industry predominately urging affirmance and the pharmaceutical industry supporting the unsuccessful challengers.
Looking Ahead: 2016 Term
he court is scheduled to hear three important IP cases in the next term. Samsung Electronics
v. Apple concerns an appeal by Samsung over calculation of design patent damages awarded to Apple for the iPhone. A jury awarded Apple $399 million, Samsung’s entire profits, on the infringing products.
The court will decide whether entire profits is appropriate, as the Federal Circuit ruled, or whether the award should be limited to profit attributable to a specific component identified by the design patent.
The tech community has expressed concern about the effect of the entire profits rule on innovators and startups.
SCA Hygiene v. First Quality Products addresses whether, and to what extent, the defense of laches may bar a claim for patent infringement brought within the Patent Act’s six-year statutory limitations period (as specified in 35 U.S.C. Section 286).
The doctrine of laches, which requires a showing of unreasonable delay by the patentee, has long been applied in patent infringement cases, where it provides a defense to either legal or equitable claims for relief arising out of pre-suit activities. In Petrella v. Metro- Goldwyn- Mayer, however, the court addressed laches in the copyright context and held that it could not be invoked as a bar to the pursuit of a claim for damages brought within the three-year window established by Section 507(b) of the Copyright Act. If the Supreme Court applies the logic of Petrella to SCA Hygiene, an infringer who infringed a patent for the past 10 years would still be liable to the patentee for six years of pre-suit damages, even if the patentee unreasonably delayed in bringing suit. Under the Federal Circuit’s ruling, such a patentee could only get damages for postsuit activities.
Finally, in Life Technology Corp. v. Promega Corp., the court will decide whether the Federal Circuit erred in holding that supplying a single, commodity component of a multi-component invention from the United States can be an infringing act under 35 U.S.C. Section 271(f)(1). The case is of special concern to manufacturers with international supply chains. If the Supreme Court reverses the Federal Circuit, such manufacturers will face decreased risk from U.S. patent lawsuits.
Michael Hawes is a partner in Baker Botts’ Intellectual Property practice of the Houston office. You can reach him at michael.hawes@bakerbotts. com.
Bryant (“B.C.”) Boren is a partner at Baker Botts and chair of the firm’s IP/Technology Litigation Practice Group in the firm’s Palo Alto and San Francisco offices. You can reach him at bryant.c.boren@ bakerbotts.com.
Reprinted with permission from the Daily Journal. ©2016 Daily Journal Corporation. All rights reserved. Reprinted by ReprintPros 949-702-5390.