Supreme Court to decide several important IP cases in 2014

By: Brian Lefort Thursday January 23, 2014 0 comments Tags: Brian Lefort

By Brian Lefort

Brian Lefort blog photo
The Supreme Court will be deciding several potentially pivotal cases pertaining to intellectual property law in the coming months. Three of the cases relate to patents and one relates to copyrights.

Below are brief summaries of the intellectual property issues facing the Supreme Court this term that we'll be following:

The first of the patent cases is Alice v. CLS Bank (Docket 13-298). As discussed in my previous blog post, this case concerns the legal standard for determining patent-eligible subject matter in the field of computer-implemented inventions, such as software-driven methods to reduce risk in certain types of financial transactions.  Although the Court of Appeals for the Federal Circuit decided that the asserted claims were not patent-eligible subject matter, the justices were unable to agree upon an approach to determine the circumstances under which computer-implemented inventions are patent-eligible. CLS Bank Int'l v. Alice Corp. Pty. Ltd., 685 F.3d 1341, 1351 (Fed. Cir. 2013)(en banc). According to the party appealing the case to the Supreme Court, "the legal standards that govern whether computer implemented inventions are eligible for patent protection . . . remain entirely unclear and utterly panel dependent." The parties in this case will present their oral arguments to the Supreme Court on March 31. As one of the Federal Circuit justices noted, the Supreme Court's ruling may have a profound effect on hundreds of thousands of patents. This is particularly true for those patents that relate to business methods, financial systems, telecommunications and software, as well as to the electronics and software industries as a whole, regardless of whether the patent holder is a start-up or an established business.

The next two patent cases are Octane Fitness, LLC v. Icon Health & Fitness, Inc. (Docket No., 12-1184) and Highmark, Inc. v Allcare Health Management Systems, Inc. (Docket No., 12-1163).  Both of these cases deal with awarding attorney's fees. In the United States, each party generally pays its own attorney's fees. However, the Patent Act allows a court in "exceptional cases" to award reasonable attorney fees to the prevailing party.  35 U.S.C. § 285. The Federal Circuit has determined that a case is "exceptional" if it is both (1) objectively baseless and (2) brought in bad faith. The issue before the Supreme Court in Octane Fitness is whether this rigid two-part test raises the standard for defendants (aka accused infringers) but not for plaintiffs (patentees) to recoup their fees. Furthermore, if this is the case, does such an increased standard encourage patent plaintiffs to bring spurious patent cases and cause competitive harm or coerce unwarranted settlements from defendants? 

The district court ruled that Octane's product did not infringe ICON's patent for its elliptical exercise machine.  ICON Health & Fitness, Inc. v. Octane Fitness, LLC, CIV09-319ADM/SRN, 2010 WL 1839321 (D. Minn. May 5, 2010). Octane Fitness subsequently requested that the court award it its attorney fees and costs of over $1.3 million incurred in defending itself due to ICON's allegedly unreasonable and baseless positions asserted throughout the patent litigation.  The district court denied Octane Fitness its request for fees because ICON's allegations were neither objectively baseless nor brought in bad faith, and the Federal Circuit affirmed. ICON argues that the "exceptional case" standard set by the Federal Circuit has made it "near-impossible" for prevailing accused patent infringers to recoup attorney fees, and therefore "gutted" potential effect of the statute. As set forth in its petition for writ of certiorari, one of Octane Fitness' arguments is that the ruling in this patent case conflicts with the Supreme Court's precedent for determining exceptional cases under the Copyright Act. The Supreme Court's ruling in this case may clarify the exceptional case test and level the playing field for plaintiffs and defendants to recoup their fees incurred in baseless patent litigation.  Practically speaking, the ruling may deter bad behavior by both plaintiffs and defendants, particularly spurious patent litigation by non-practicing entities.

The Highmark case deals with whether the Federal Circuit must give deference to a lower district court's decision to award attorney's fees to the prevailing party. In Highmark, the district court held that Allcare's case was objectively baseless and brought in bad faith; the court therefore awarded fees to Highmark. The Federal Circuit reversed the district court's holding, failing to give deference to the district court's holding and deciding the issue anew. In its petition for certiorari, Highmark argues that the Federal Circuit's review standard for this issue conflicts with the highly deferential review standard adopted by the other regional circuits. The Supreme Court's ruling will hopefully help clarify the process for the Federal Circuit to follow when reviewing the award of attorney's fees in exceptional cases.

The issues facing the Supreme Court in both the Octane Fitness case and the Highmark case will be orally presented to them by the relevant parties on Feb. 26.

The fourth IP case to be decided by the Supreme Court is Petrella v. Metro-Goldwyn-Mayer (Docket No. 12-1315), which relates to copyrights. Oral argument for this case occurred on Jan. 21.  This cases deals with the statute of limitations for copyright infringement. The Copyright Act expressly prescribes a three-year statute of limitations for civil copyright claims.  17 U.S.C. § 507(b). The three-year period accrues separately for each act of infringement. The question before the Supreme Court is whether filing a lawsuit after three years of the first act of copyright infringement prohibits the copyright holder from recovering damages resulting from the continued infringement that occurred within the three years prior to the filing of the lawsuit. The case may not only apply to copyright litigation, but it may have implications for patent litigation since patent law includes a similar laches doctrine with a six-year statute of limitations.

Look for future blog posts as the Supreme Court decides these cases.
Brian Lefort

About the Author: Brian Lefort

Brian Lefort is a Boulder-based intellectual property attorney who specializes in helping innovative startup and emerging businesses identify and protect their valuable technology assets. Brian has more than 15 years of legal experience building and enforcing strategic patent and trademark portfolios for innovative products in the medical device, telecommunications, software and other high technology industries. He can be reached at [email protected] or 303-447-7723.