Weekly IP Takeaways

Prepared by Cislo & Thomas LLP Attorney Mark D. Nielsen, Ph.D.

1. In a recent 2-1 panel opinion by the Federal Circuit that evoked a vigorous and important dissent from Judge Pauline Newman (who continues going strong as she approaches 93 years of age), the Federal Circuit axed a jury verdict of willful infringement in favor of Ericsson by finding the asserted patent invalid under Section 101. This opinion can easily be seen as problematic on at least two (2) levels, and this is what Judge Newman argued in her dissent: (1) reviewing a denial of summary judgment on the Section 101 issue, which was not argued at trial or in a post-trial motion, and (2) analyzing the Section 101 issue at an inappropriate level of abstraction. Basically, the asserted patent pertained to a system of security for smartphones that allows an end user to control the access apps may have to various features on the phone. The case was pending in the Eastern District of Texas and presided over for all purposes by Magistrate Judge Roy Payne. Judge Payne denied the defendants’ motion for summary judgment of invalidity under Section 101/Alice. The matter then went to trial, without the defense presenting a Section 101 defense or preserving the issue via a Rule 50 judgment as a matter of law. The jury found that the patent was willfully infringed, and awarded $75 million in damages, to which was added $25 million in enhanced damages and $10 million of pre-judgment interest. On appeal, the panel majority, first, held that it was entitled to review the denial of summary judgment because the denial of defendants’ summary judgment on the Section 101/Alice issue was “effectively” a grant of the motion in favor of Ericsson. In the alternative, the panel majority held it was always within its discretion to consider issues otherwise not preserved for appeal below. These are problematic conclusions from the panel majority because they vest far too much discretion in appellate courts to address issues not preserved for appeal, and they violate the typical rule that denials of summary judgment motions are not appealable. On the second concern, even assuming the panel majority had the authority to analyze the Section 101 issue, the panel majority analyzed the issue at what was, frankly, an absurd level of abstraction. It equated sophisticated computer technology in smartphones with “the abstract idea of controlling access to, or limiting permission to, resources,” (Slip Op. at 13) including, for example, “libraries (loaning materials only to card-holding members), office buildings (allowing certain employees entrance to only certain floors), or banks (offering or denying loans to applicants based on suitability and intended use).” Slip Op. at 15. The panel majority then went on to say that, “In each of these circumstances, as in the claims at issue, a request is made for access to a resource, that request is received and evaluated, and then the request is either granted or not. Slip Op. at 15. Not only is the analogy between library cards and the sophisticated technology in smartphones absurd, but it insults the good folks at Ericsson that invented the technology. The author trusts Ericsson will seek rehearing en banc, and, if denied, file a petition for certiorari. One takeaway here is a reminder to preserve issues, even denials of summary judgment, for appeal, and potentially cite this case, for the time being, to support appellate consideration of certain issues not properly preserved for appeal.

2. In another recent Federal Circuit opinion, the Court vacated a preliminary injunction issued by the Eastern District of Michigan against a patent owner that allegedly made public statements that the other party was infringing its patent, and also allegedly threatened the other party’s customers with litigation, and remanded the matter. In the ophthalmology space, a patent owner allegedly accused a former partner in a joint venture gone wrong, who allegedly started a new, competing venture, with patent infringement while at a trade show. The patent owner allegedly also threatened the former partner’s customers with litigation. In response, the former partner filed an action for declaratory relief of non-infringement and invalidity, along with unfair competition, seeking, among other things, a preliminary injunction to stop the accusations of infringement and threats to its customers. The Eastern District of Michigan issued the injunction. On appeal, the Federal Circuit, noting the serious of restricting speech, vacated the injunction based on a faulty, overly narrow claim construction by the district court, as well as a failure of the district court to conduct any bad faith analysis (i.e., that the accusations and threats were objectively baseless) or to make any determination that the accusations and threats were false and/or misleading. The Federal Circuit’s conclusion says it well: “Speech is not to be enjoined lightly. Here, there is not even a finding, let alone a finding supported by evidence and a correct view of the law, that the speech restrained was either false or misleading. The district court abused its discretion when it granted a preliminary injunction enjoining BlephEx from making allegations of patent infringement without a finding of bad faith and with no adequate basis to conclude that allegations of patent infringement would be false or misleading. It also abused its discretion in enjoining BlephEx from threatening Myco’s potential customers with litigation where there was not only no finding of bad faith but no evidence in the record that any such threats had even been made.” The takeaway here is that if one wants to enjoin threats of infringement as unfairly competitive, one must show such threats are in bad faith (objectively baseless) and/or false and misleading.

3. In yet another recent opinion out of the Federal Circuit, this time in a design patent case, the Federal Circuit reversed a grant of summary judgment of obviousness where there was a factual dispute as to whether a particular prior art reference could serve as the primary reference in a design patent obviousness analysis. For obviousness as it pertains to design patents, there must be a primary reference that is basically the same as the design depicted in the design patent. The question of whether a prior art reference and the patented design are basically the same is a question of fact. Here, the Federal Circuit found that the district court, in granting summary judgment of obviousness, impermissibly resolved a material factual dispute instead of sending it to a jury.