In February we predicted what the Supreme Court might do with the ten intellectual property cases on its docket. How did we do? – we batted .500 (that sounds much better than tying a random number generator). Here is a comprehensive summary of the Supreme Court decisions and what they mean for you. We also identify four cases that the Supreme Court may consider next term.
What a Patent May Claim
We correctly predicted the Court would reaffirm the application of patent law to computer software, but hold the specific claims at issue invalid. In Alice Corp. Pty. Ltd. v. CLS Bank Int'l, 134 S.Ct. 2347 (2014), the Court did reject the claims at issue as unpatentable abstract ideas. The claims added "nothing of substance to the underlying abstract idea" – intermediated settlement of financial obligations.
We correctly predicted the Court would require tighter claim drafting so that what is claimed is distinct from what is not claimed. In Nautilus, Inc. v. Biosig Instruments, Inc., 134 S.Ct. 2120 (2014), the Court held a claim is invalid as indefinite unless it informs "with reasonable certainty" those skilled in the art about the scope of the invention.
Taken together, these two cases narrow the scope of patent protection, but improve the ability to enforce patents that issue under these stronger criteria.
Patent Enforcement Issues
In Medtronic, Inc. v. Mirowski Family Ventures, LLC, 134 S.Ct. 843 (2014), the Supreme court held a patent owner always has the burden of proving infringement, even if sued by a patent licensee for declaratory relief. This ensures a patentee is not disadvantaged by filing for declaratory judgment seeking a determination of patent invalidity.
Two cases, Highmark Inc. v. Allcare Health Management Systems, Inc., 134 S.Ct. 1744 (2014), and Octane Fitness, LLC v. ICON Health and Fitness, Inc., 134 S.Ct. 1749 (2014), addressed the award of attorneys' fees in patent cases. We incorrectly predicted the Court would eliminate the subjective element of the reasonableness test.
Instead, the Supreme Court ruled that the statutory standard of an "exceptional" case allowed an award of fees when either subjective bad faith or exceptionally meritless claims results in a case that “stands out from the others” with regard to the parties litigation positions or the unreasonable manner in which the case was litigated. We did not predict the Court's willingness to allow an award of attorneys' fees "in the rare case in which a party's unreasonable conduct – while not necessarily independently sanctionable – is nonetheless so exceptional as to justify an award of fees." Nor did we anticipate replacement of the clear and convincing standard of proof with the preponderance of evidence standard. This ruling may chill patent litigation by increasing the risk attorneys' fees may be awarded against the loser in a patent dispute.
We correctly predicted the appellate courts would defer to the District Court determination whether litigation was objectively baseless. The Supreme Court established that the District Court is entitled to a high degree of deference when determining whether a case is exceptional and can only be reversed for abuse of discretion. One effect of this ruling will be to reduce the amount of time spent reviewing fee awards on appeal.
In Limelight Networks, Inc. v. Akamai Technologies, Inc., 134 S.Ct. 2111 (2014), the Court addressed liability for inducing patent infringement where no one person carries out all the steps required for infringement. We predicted the lack of a single infringer should not matter. We were wrong. The Supreme Court held that the interests protected by a patent are simply not infringed if there is no direct infringement involving all claim elements. The Supreme Court left open, however, the possibility that direct infringement might not require a single actor to perform all of the steps. The Federal Circuit can reconsider its single actor rule on remand "if it so chooses".
Defenses to Copyright Enforcement
In Petrella v. Metro-Goldwyn-Mayer, Inc., 134 S.Ct. 1962 (2014), we predicted the Supreme Court would apply laches to bar a copyright claim by a plaintiff who waited 19 years to sue. Instead, the Supreme Court held that each discreet infringement is actionable within three years of its occurrence (based on the statute of limitations in 17 U.S.C. § 507(b)). This interpretation allows the copyright owner to wait and see if the harm caused justifies litigation. A contrary rule would compel needless litigation over infringements that might prove trivial.
Three dissenting Justices expressed concern with the loss of evidence resulting from the deaths of three potential witnesses (a fact relied upon in our erroneous prediction). The majority opinion concluded the copyright statute enacted by Congress anticipated the potential death of witnesses during the lengthy term of copyright protection and mitigated the effect of a loss of evidence by (1) limiting damages to the three years before suit was filed, (2) allowing an offset for identifiable expenses and (3) requiring registration and deposit by the copyright owner to establish what was protected. If there is detriment to the alleged infringer as a result of reliance on the copyright owner's representations, then the doctrine of equitable estoppel may apply.
In American Broadcasting Companies, Inc. v. Aereo, Inc., 134 S.Ct. 2498 (2014), the Supreme Court held that an Internet service allowing subscribers to watch broadcast television on their computer performed the copyrighted works publicly and infringed an exclusive right of the copyright owner. We predicted streaming and recording on demand is a public performance. The Supreme Court agreed, and treated Aereo as similar to a cable television provider. Three dissenting Justices argued that the subscriber, not Aereo, transmits the work.
This case continues the practice of treating content delivered over the Internet according to the same rules that govern traditional media, even if those rules predate the commercial use of the Internet.
False Advertising Under the Lanham Act
We incorrectly predicted the outcome in both the trademark cases accepted by the Supreme Court. In Lexmark Int'l., Inc. v. Static Control Components, Inc., 134 S.Ct. 1377 (2014), the Supreme Court resolved a split among the Circuit Courts that had resulted in three different tests for when standing (the right to file a lawsuit) arises for a false advertising claim. We predicted the Court would adopt the broad reasonable interest standard. Instead, the Supreme Court adopted a new test that allows standing to anyone who falls within the "zone of interest" protected by the statute and suffers damages proximately caused by false advertising. The zone of interest of the Lanham Act encompasses a commercial interest in reputation or sales and protects those who are not direct competitors of the advertiser. The Supreme Court incorporated the proximate cause element of traditional tort liability and expanded the class of injured parties that can pursue a false advertising claim. Consumers, however, do not suffer injury to commercial interest in sales or business reputation; therefore, consumers still cannot bring a false advertising claim.
Finally, in POM Wonderful LLC v. Coco-Cola Co., 134 S.Ct. 2228 (2014), the defendant claimed that because defendant's label complied with the labeling requirements of the Food Drug and Cosmetics Act ("FDCA") no liability could arise under the Lanahm Act. We predicted the Supreme Court would agree because the FDCA required specific label contents. But, the Supreme Court held an FDCA compliant label can still be misleading. The Lanham Act and the FDCA have co-existed for over 70 years and Congress did not intend FDCA regulations to preclude liability under the Lanham Act. The FDCA regulations cannot abrogate the obligations of the Lanham Act without congressional authorization. Instead, the Supreme Court held the two statutes are "complimentary". Consequently, compliance with even a comprehensive regulatory scheme does not preclude liability for false, misleading advertising under the Lanham Act.
We predicted only two of the ten cases before the Supreme Court would be reversed. Instead, five cases were reversed and two vacated and remanded. Of the ten cases, seven were decided unanimously.
It is also noteworthy that the Court appeared to give more attention to statutory language than any other consideration when resolving these cases.
The Supreme Court has already accepted review of three IP cases for its next term.
Teva Pharmaceuticals, USA, Inc. v. Sandoz, Inc., 723 F.3d 1363 (Fed. Cir. 2013), cert. granted, 134 S.Ct. 1761 (2014), addresses whether a factual finding in support of patent claim construction by the District Court is reviewed on appeal de novo (the current practice) or only for clear error (under Fed. R. Civ. P. 52(a)).
Hana Financial, Inc. v. Hana Bank, 735 F.3d 1158 (9th Cir. 2013), cert. granted, 134 S.Ct. 2842 (2014), addresses whether the jury or the Court determines if a trademark may claim the priority date of an older mark by tacking because the two marks are "legal equivalents".
B & B Hardware, Inc. v. Hargis Industries, Inc., 716 F.3d 1020 (8th Cir. 2013), cert. granted, 134 S.Ct. 2899 (2014), addresses whether a ruling by the Trademark Trial and Appeal Board that a trademark creates a likelihood of confusion precludes relitigation of the issue in an infringement suit under the doctrine of issue preclusion/collateral estoppel.
Finally, a petition for certiorari is pending in Herb Reed Enterprises, LLC v. Florida Entertainment Mgmt., Inc., 736 F.3d 1239 (9th Cir. 2013), which addresses whether there is a presumption of irreparable harm upon finding a likelihood of success on the merits in a trademark case. The International Trademark Association has filed an amicus brief arguing that a presumption of irreparable harm should arise in Lanham Act cases, as distinguished from patent cases.