1. 1 1 1 AIPLA Firm Logo American Intellectual Property Law Association PENDING U.S. SUPREME COURT CASES JPAA Meeting Tokyo, Japan Joseph A. Calvaruso Orrick, Herrington & Sutcliffe LLP April 9, 2014

2. 2 2 2 AIPLA Firm Logo The Cases Alice Corp. v. CLS Bank Int’l, No. 13-298 –Patentability of computer implemented inventions Limelight Networks, Inc. v. Akamai Techs., Inc., No. 12-786 –Standard for induced and divided patent infringement Nautilus, Inc. v. Biosig Instruments, Inc., No. 13-369 –Standard for finding a patent invalid due to indefiniteness Octane Fitness, LLC v. ICON Health & Fitness, Inc., No. 12-1184 –Test for attorney fees pursuant 35 U.S.C. 285 Highmark Inc. v. Allcare Management Sys., Inc., No. 12-1163 –Deference due to a district court’s award of attorney fees

3. 3 3 3 AIPLA Firm Logo Alice Corp. v. CLS Bank Int’l Three types of patent claims at issue: Method: No hardware or computer based limitations, but the parties agreed the method claims require a computer including a processor and memory for implementation Computer Readable Medium: Program code for causing computer to send a transaction and perform specified processing System: Data processing system; data storage unit; computer configured to receive a transaction electronically, adjust records, and generate instructions

4. 4 4 4 AIPLA Firm Logo Alice Corp. v. CLS Bank Int’l The Federal Circuit (en banc) found all the claims not patentable “Upon consideration en banc, a majority of the court affirms the district court’s holding that the asserted method and computer- readable media claims are not directed to eligible subject matter under 35 U.S.C. 101.” “An equally divided court affirms the district court’s holding that the asserted system claims are not directed to eligible subject matter.” “[N]othing said today beyond our judgment has the weight of precedent.”

5. 5 5 5 AIPLA Firm Logo Alice Corp. v. CLS Bank Int’l General Framework for Section 101 Analysis Does the claim fits one of the four statutory classes – process, machine, manufacture or composition of matter? Is the claim directed to one of the three judicially created exceptions to patentability – law of nature, natural phenomenon, abstract idea?

6. 6 6 6 AIPLA Firm Logo Alice Corp. v. CLS Bank Int’l Judge Lourie’s “Significantly More Test” Identify and define the abstract idea. Remove the abstract idea from the claim and determine whether the rest of the claim adds one or more additional substantive limitations that add “significantly more” to the basic abstract idea, thus narrowing, confining or otherwise tying down the claim so that it does not cover the abstract idea itself.

7. 7 7 7 AIPLA Firm Logo Alice Corp. v. CLS Bank Int’l Judge Lourie’s “Significantly More Test” (cont’d) Human contributions that are merely tangential, routine, well understood or conventional cannot confer patentability. Insignificant post-solution activity is not enough. Bare field of use limitations cannot confer patent eligibility.

8. 8 8 8 AIPLA Firm Logo Alice Corp. v. CLS Bank Int’l Judge Rader’s “Meaningful Limitations” Test Identify and define the abstract idea. Considering the claim as a whole, determine whether the claim is tied to a computer in such a way that the computer plays a meaningful role in the performance of the claimed invention and the claim does not preempt virtually all uses of the underlying abstract idea.

9. 9 9 9 AIPLA Firm Logo Alice Corp. v. CLS Bank Int’l Question presented: “Whether claims to computer-implemented inventions – including claims to systems and machines, processes, and items of manufacture – are directed to patent-eligible subject matter within the meaning of 35 U.S.C. 101 as interpreted by this Court.” Argument date: March 31, 2014

10. 10 10 AIPLA Firm Logo Limelight Networks, Inc. v. Akamai Techs., Inc. Divided infringement law: Direct infringement generally requires that a single entity perform all the steps of a method claim. Where divided infringement exists, courts will find liability for direct infringement where one party controls or directs each step of the patented process, i.e., an agency relationship or a contractual obligation to perform the steps exists.

11. 11 11 AIPLA Firm Logo Limelight Networks, Inc. v. Akamai Techs., Inc. Induced infringement law: “Whoever actively induces infringement of a patent shall be liable as an infringer.” 35 U.S.C. 271(b) Induced infringement requires an underlying act of direct infringement. The Federal Circuit previously held that for a party to be liable for induced infringement, some other entity must be liable for direct infringement, i.e., a single entity (or together with its agent) must perform all the steps of a method claim. BMC Resources, Inc. v. Paymentech, L.P., 498 F.3d 1373 (Fed. Cir. 2007)

12. 12 12 AIPLA Firm Logo Limelight Networks, Inc. v. Akamai Techs., Inc. The Federal Circuit (en banc) overruled BMC Resources All the steps of a claimed method must be performed to find induced infringement, but it is not necessary to prove that all steps were performed by single entity. A party that performs some steps of a patented process and actively induces another to commit the remaining steps may be liable for inducement of infringement under Section 271(b), even though no party in that scenario would be liable for direct infringement under Section 271(a).

13. 13 13 AIPLA Firm Logo Limelight Networks, Inc. v. Akamai Techs., Inc. Question presented: “Whether the Federal Circuit erred in holding that a defendant may be held liable for inducing patent infringement under 35 U.S.C. § 271(b) even though no one has committed direct infringement under § 271(a).” Argument date: April 30, 2014

14. 14 14 AIPLA Firm Logo Nautilus, Inc. v. Biosig Instruments, Inc., Statutory requirement: “The specification shall conclude with one or more claims particularly pointing out and distinctly claiming the subject matter which the inventor or a joint inventor regards as the invention.” 35 U.S.C. 112(b) Claim term at issue: “A heart rate monitor… comprising:... a first live electrode and a first common electrode mounted on [a handle] in spaced relationship with each other...” District court construed “spaced relationship” as: “there is a defined relationship between the live electrode and the common electrode…”

15. 15 15 AIPLA Firm Logo Nautilus, Inc. v. Biosig Instruments, Inc., The Federal Circuit reversed and found Biosig’s claim to be definite “A claim is indefinite only when it is ‘not amenable to construction’ or ‘insolubly ambiguous.’” Multiple reasonable constructions do not render a claim indefinite The specification and claims provide inherent parameters sufficient for a skilled artisan to understand the bounds of “spaced relationship”: The space cannot be so small such that the electrodes merge The distance cannot be greater than the width of the user’s hands Functional language in the claim related to signal requirements further informs the spacing

16. 16 16 AIPLA Firm Logo Nautilus, Inc. v. Biosig Instruments, Inc., Questions presented: “Does the Federal Circuit’s acceptance of ambiguous patent claims with multiple reasonable interpretations – so long as the ambiguity is not ‘insoluble’ by a court – defeat the statutory requirement of particular and distinct patent claiming?” “Does the presumption of validity dilute the requirement of particular and distinct patent claiming?” Argument date: April 28, 2014

17. 17 17 AIPLA Firm Logo Octane Fitness, LLC v. ICON Health & Fitness, Inc. Attorney fees in exceptional patent cases: “The court in exceptional circumstances may award reasonable attorney fees to the prevailing party.” 35 U.S.C. 285 Absent litigation misconduct or inequitable conduct before the USPTO, a losing patentee may only be sanctioned if: (1) the litigation is brought in subjective bad faith, and (2) the litigation is objectively baseless. Brooks Furniture Mfg., Inc. v. Dutailier Int’l, Inc., 393 F.3d 1378 (Fed. Cir. 2005)

18. 18 18 AIPLA Firm Logo Octane Fitness, LLC v. ICON Health & Fitness, Inc. The District Court denied Octane’s request for fees Not subjectively in bad faith: E-mails implying competitive advantage through litigation is not evidence of bad faith Not objectively baseless: Icon’s proposed constructions were not frivolous because they were not necessarily precluded by the broad language of the claim or the disclosures in the specification Court accepted Icon’s representations that it performed an adequate pre-suit investigation (despite no discovery having been produced)

19. 19 19 AIPLA Firm Logo Octane Fitness, LLC v. ICON Health & Fitness, Inc. Federal Circuit affirmed “We have reviewed the record and conclude the court did not err in denying Octane’s motion to find the case exceptional.” “We see no reason to revisit the settled standard for exceptionality.”

20. 20 20 AIPLA Firm Logo Octane Fitness, LLC v. ICON Health & Fitness, Inc. Question presented: “Does the Federal Circuit’s promulgation of a rigid and exclusive two- part test for determining whether a case is ‘exceptional’ under 35 U.S.C. §285 improperly appropriate a district court’s discretionary authority to award attorney fees to prevailing accused infringers in contravention of statutory intent and this Court’s precedent, thereby raising the standard for accused infringers (but not patentees) to recoup fees and encouraging patent plaintiffs to bring spurious patent cases to cause competitive harm or coerce unwarranted settlements from defendants.” Argument date: February 26, 2014

21. 21 21 AIPLA Firm Logo Highmark Inc. v. Allcare Management Sys., Inc. The Federal Circuit held that the following standards of review applies to exceptional case determinations: Subjective bad faith prong Factual question District court’s determination is entitled to deference Reviewed for clear error Objectively baseless prong Question of law based on mixed questions of fact and law No deference to the district court’s determination Reviewed de novo

22. 22 22 AIPLA Firm Logo Highmark Inc. v. Allcare Management Sys., Inc. In reversing the district court’s exceptional case award, the Federal Circuit: Reviewed de novo the objectively baseless finding Found that Allcare’s proposed claim construction had support in the specification and thus was not objectively baseless Did not reach the subjective bad faith prong

23. 23 23 AIPLA Firm Logo Highmark Inc. v. Allcare Management Sys., Inc. Question presented: “Whether a district court’s exceptional-case finding under 35 U.S.C. 285, based on its judgment that a suit is objectively baseless, is entitled to deference.” Argument date: February 26, 2014 (same day as Octane)

24. 24 24 AIPLA Firm Logo Thanks for your attention! Questions? Joseph A. Calvaruso Partner Orrick, Herrington & Sutcliffe LLP 51 West 52 nd Street New York, N.Y. 10019 (212) 506-5140 (914) 414-5174 jcalvaruso@orrick.com Joseph A. Calvaruso