Lighting Ballast Control LLC v. Philips Electronics North America Corporation, Fed. Cir. Case 2012-1014 (2/21/2014)
In a 6-4 en banc decision, the Federal Circuit held that arguments and evidence presented by the appellants, the dissent, and many of the amici did not justify reversing the holding of Cybor Corp. v. FAS Techs., Inc., 138 F.3d 1448 (Fed. Cir. 1998) (en banc) that claim construction required a de novo standard of review. The majority opinion by Judge Newman, the longest sitting Federal Circuit judge, noted that the question before it was not simply whether to defer to district courts or instead to examine claim construction de novo. The question was whether there is “compelling justification” to depart from the doctrine of stare decisis, particularly when that precedent is an en banc Federal Circuit decision.
According to the majority, the purposes of consistency and stability that underlie stare decisis led to the formation of the Federal Circuit thirty years ago: The central purpose of the formation of the Court was to reduce the widespread lack of uniformity and uncertainty of legal doctrine that existed in the administration of patent law. That being said, departure from precedent may be appropriate when subsequent cases have undermined precedents’ doctrinal underpinnings, when the precedent has proved unworkable, or when a considerable body of new experience requires changing the law.
The Court looked for post-Cybor developments from the Supreme Court, from Congress, and from this Court that may have undermined the reasoning of Cybor. The majority found no decisions that undercut or limited Cybor or the Supreme Court’s Markman II decision (Markman v. Westview Instruments, Inc., 517 U.S. 370 (1996)). Nor did they find any legislative adjustment of the Cybor procedure, despite extensive patent-related legislative activity. According to the majority, no proponent of change has shown that de novo review of claim construction is unworkable, after fifteen years of experience of ready workability. Nor has anyone shown that Cybor has increased the burdens on the courts or litigants conducting claim construction. To the contrary, the majority stated that reversing Cybor or modifying it to introduce a fact/law distinction has a high potential to diminish workability and increase burdens by adding a new and uncertain inquiry, not only on appeal, but also in the district court. There is no agreement on a preferable new mechanism of appellate review of claim construction; nor is there any analysis of how deference would be applied to the diversity of old and new technologies and modes of claiming. Moreover, the majority expressed the concern that any alternative system would require the Circuit to spend an inordinate amount of effort deciding on the standard of review for particular issues instead of focusing on deciding the claim construction issues.
The opinion made reference to the increasingly frequent situation where the same patent is litigated in different forums against multiple defendants, then noted that disparate district court constructions unravel the “uniformity in the treatment of a given patent” that the Supreme Court sought to achieve in Markman II. Just as the decision in Markman II counted such consequences as negatives that its ruling overcame, they count as negatives in the stare decisis analysis. This potential of inconsistent decisions in different district courts is, according to Judge Lourie’s concurring opinion, more likely since the changes made by AIA that limit the number of defendants named in any one action. See 35 U.S.C. § 299(a).
In its discussion about the present system being “workable,” the majority explained how efficiencies are obtained because the Federal Circuit can clearly and finally decide claim construction early in a case such as when a case goes up on appeal after summary judgment or an injunction. But what they never mention is the more normal situation where the case goes all the way through a jury trial and then is reversed on claim construction, sending the case back for another complete trial. This undoubtedly weighed heavily on Judge O’Malley, as a former district court judge, who wrote the dissent.
The majority criticized the dissent’s argument that a substantial proportion of the legal community believes that Cybor was wrongly decided. Contrary to the dissent’s arguments, the leading technology companies of America, including Amazon, Intel, Cisco, Dell, EMC, Microsoft, Google, Hewlett-Packard, and Yahoo, urged retention of Cybor’s standard. However, the majority ignores that both the PTO and the ABA, as well as other organizations and patent scholars, wrote in favor of some form of deference.
A major thrust of the dissent is that Federal Rule 52(a)(6) requires deferential review of district court decisions, but the majority argued that this “is a simplistic disregard of the Markman II guidance that treating interpretive issues as purely legal will promote (though it will not guarantee) intrajurisdictional certainty.”
The dissent noted the high rate of Federal Circuit reversal and the concern that this raises with trial judges, litigants and academics. The majority conceded that while there was a high reversal rate in the early years of Cybor, as consistency evolved and experience grew, rates of appellate reversal for claim construction came to match the norm for other grounds. The majority opinion contends that every amicus brief that complains about high reversal rates relies on data that are seven to ten or more years old, while a recent study sees a significant drop in the claim construction reversal rate since 2005.
The Supreme Court will certainly look closely at taking the case. Not only was it a close vote, but it is a decision in which each side argued it was relying on Markman II, a clear sign that more guidance is needed. Moreover, the case was decided principally on the basis of stare decisis, not based on the majority’s strong belief that de novo review was better for the patent system. The Supreme Court would not have to be nearly as concerned about the Cybor precedent.
I will comment next week on the cases of Frans Nooren Afdichtingssystemen B.V. v. Stopaq Amcorr Inc., Fed. Cir. Case 2013-1200 (2/21/2014), and Ring & Pinion Service Inc. v. ARB Corporation LTD., Fed. Cir. Case 2013-1238 (2/19/2014).