Alice: The Death of Software-Related Patents?

In June 2014, the Supreme Court issued its opinion in Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 134 S. Ct. 2347 (2014) (available here). At issue was whether the patents-in-suit—which disclosed a computer-implemented scheme for mitigating “settlement risk” (the risk that only one party to a transaction will pay what it owes)—were patent eligible under 35 U.S.C. § 101 or whether they were instead “drawn to a patent-ineligible abstract idea.” The Supreme Court held that “the claims at issue are drawn to the abstract idea of intermediated settlement, and that merely requiring generic computer implementation fails to transform that abstract idea into a patent-eligible invention.” As I note below, Alice has led to the demise of numerous patents, and is fundamentally changing patent infringement litigation.

More specifically, since Alice, of the 76 decisions dealing with Alice challenges, 57 have invalidated patents; only 16 have upheld them on the merits (3 additional decisions rejected Alice challenges for procedural reasons). Excluding the procedural decisions, that is a 78% win rate for defendants challenging patents under Alice in court. (Of course, numerous patents have also fallen victim to Alice challenges before the Patent Trial and Appeal Board.)

In Alice, a representative claim of the patents-in-suit was as follows:

A method of exchanging obligations as between parties, each party holding a credit record and a debit record with an exchange institution, the credit records and debit records for exchange of predetermined obligations, the method comprising the steps of:

(a) creating a shadow credit record and a shadow debit record for each stakeholder party to be held independently by a supervisory institution from the exchange institutions;

(b) obtaining from each exchange institution a start-of-day balance for each shadow credit record and shadow debit record;

(c) for every transaction resulting in an exchange obligation, the supervisory institution adjusting each respective party’s shadow credit record or shadow debit record, allowing only these transactions that do not result in the value of the shadow debit record being less than the value of the shadow credit record at any time, each said adjustment taking place in chronological order, and

(d) at the end-of-day, the supervisory institution instructing on[e] of the exchange institutions to exchange credits or debits to the credit record and debit record of the respective parties in accordance with the adjustments of the said permitted transactions, the credits and debits being irrevocable, time invariant obligations placed on the exchange institutions.

As described by the Supreme Court: “In sum, the patents in suit claim (1) the foregoing method for exchanging obligations (the method claims), (2) a computer system configured to carry out the method for exchanging obligations (the system claims), and (3) a computer-readable medium containing program code for performing the method of exchanging obligations (the media claims). All of the claims are implemented using a computer; the system and media claims expressly recite a computer, and the parties have stipulated that the method claims require a computer as well.”

Section 101 reads: “Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.” 35 U.S.C. § 101. However, the Supreme Court has held that Section 101 excludes laws of nature, natural phenomena, and abstract ideas—these are not patentable.

The Supreme Court has developed a two-step test to determine whether an invention is an unpatentable abstract idea:

First, we determine whether the claims at issue are directed to one of those patent-ineligible concepts. If so, we then ask, “[w]hat else is there in the claims before us?” To answer that question, we consider the elements of each claim both individually and “as an ordered combination” to determine whether the additional elements “transform the nature of the claim” into a patent-eligible application. We have described step two of this analysis as a search for an “‘inventive concept’”—i.e., an element or combination of elements that is “sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the [ineligible concept] itself.”

In Alice, the Supreme Court held that the claims at issue were directed to a patent-ineligible concept:

Petitioner’s claims involve a method of exchanging financial obligations between two parties using a third-party intermediary to mitigate settlement risk. The intermediary creates and updates “shadow” records to reflect the value of each party’s actual accounts held at “exchange institutions,” thereby permitting only those transactions for which the parties have sufficient resources. At the end of each day, the intermediary issues irrevocable instructions to the exchange institutions to carry out the permitted transactions.

On their face, the claims before us are drawn to the concept of intermediated settlement, i.e., the use of a third party to mitigate settlement risk. . . .[T]he concept of intermediated settlement is “‘a fundamental economic practice long prevalent in our system of commerce.’” The use of a third-party intermediary (or “clearing house”) is also a building block of the modern economy. Thus, intermediated settlement, like hedging, is an “abstract idea” beyond the scope of § 101.

(citations omitted).

The Court then analyzed Step 2 of the inquiry, concluding that “the method claims, which merely require generic computer implementation, fail to transform that abstract idea into a patent-eligible invention”:

At [] step two, we must examine the elements of the claim to determine whether it contains an inventive concept sufficient to transform the claimed abstract idea into a patent-eligible application. A claim that recites an abstract idea must include additional features to ensure that the [claim] is more than a drafting effort designed to monopolize the [abstract idea]. [T]ransformation into a patent-eligible application requires more than simply stat[ing] the [abstract idea] while adding the words “apply it.” . . .

The introduction of a computer into the claims does not alter the analysis at [] step two. . . . [T]he mere recitation of a generic computer cannot transform a patent-ineligible abstract idea into a patent-eligible invention. Nor is limiting the use of an abstract idea to a particular technological environment. Stating an abstract idea while adding the words “apply it with a computer” simply combines those two steps, with the same deficient result. Thus, if a patent’s recitation of a computer amounts to a mere instruction to “implemen[t]” an abstract idea “on . . . a computer,” that addition cannot impart patent eligibility. This conclusion accords with the pre-emption concern that undergirds our § 101 jurisprudence. Given the ubiquity of computers, wholly generic computer implementation is not generally the sort of “additional featur[e]” that provides any “practical assurance that the process is more than a drafting effort designed to monopolize the [abstract idea] itself.” . . .

[T]he relevant question is whether the claims here do more than simply instruct the practitioner to implement the abstract idea of intermediated settlement on a generic computer. They do not. . . .

The method claims do not, for example, purport to improve the functioning of the computer itself. Nor do they effect an improvement in any other technology or technical field. Instead, the claims at issue amount to “nothing significantly more” than an instruction to apply the abstract idea of intermediated settlement using some unspecified, generic computer. Under our precedents, that is not “enough” to transform an abstract idea into a patent-eligible invention.

(citations and quotations omitted).

All of the claims at issue were accordingly invalid, even those that claimed a system and computer-readable medium:

Petitioner’s claims to a computer system and a computer-readable medium fail for substantially the same reasons. Petitioner conceded below that its media claims rise or fall with its method claims. As to its system claims, petitioner emphasizes that those claims recite “specific hardware” configured to perform “specific computerized functions.” But what petitioner characterizes as specific hardware—a “data processing system” with a “communications controller” and “data storage unit,” for example—is purely functional and generic. Nearly every computer will include a “communications controller” and “data storage unit” capable of performing the basic calculation, storage, and transmission functions required by the method claims. As a result, none of the hardware recited by the system claims “offers a meaningful limitation beyond generally linking ‘the use of the [method] to a particular technological environment,’ that is, implementation via computers.”

Put another way, the system claims are no different from the method claims in substance. The method claims recite the abstract idea implemented on a generic computer; the system claims recite a handful of generic computer components configured to implement the same idea. This Court has long “warn[ed] . . . against” interpreting § 101 “in ways that make patent eligibility depend simply on the draftsman’s art.” Holding that the system claims are patent eligible would have exactly that result.

Because petitioner’s system and media claims add nothing of substance to the underlying abstract idea, we hold that they too are patent ineligible under § 101.

(citations and quotations omitted).

Alice, despite not categorically precluding software patents, has spawned numerous lower court decisions invalidating patents. As of today, Alice has been cited 109 times by lower courts. I reviewed each of these cases, and classify the various cases by buckets below (e.g., invalidating patent on a Section 101 challenge on the pleadings, at summary judgment, etc.). But first I note two procedural issues. First, whether a burden of proof applies to a Section 101 challenge is unclear. See, e.g., Intellectual Ventures I LLC v. Symantec Corp., CV 10-1067-LPS, 2015 WL 1843528, at *5 (D. Del. Apr. 22, 2015); Messaging Gateway Solutions, LLC v. Amdocs, Inc., CV 14-732-RGA, 2015 WL 1744343, at *3 (D. Del. Apr. 15, 2015). Second, it is now well established that a court may invalidate a patent under Section 101 on the pleadings without first construing the claim terms. See, e.g., Wireless Media Innovations, LLC v. Maher Terminals, LLC, CIV.A. 14-7004, 2015 WL 1810378, at *4 (D.N.J. Apr. 20, 2015); Shortridge v. Found. Constr. Payroll Serv., LLC, 14-CV-04850-JCS, 2015 WL 1739256, at *6 (N.D. Cal. Apr. 14, 2015); OpenTV, Inc. v. Apple, Inc., 14-CV-01622-HSG, 2015 WL 1535328, at *2 (N.D. Cal. Apr. 6, 2015).

Federal Circuit Section 101 Decisions Post-Alice: One Patent Upheld, The Rest Rejected

The Federal Circuit, post-Alice, has only upheld the validity of one patent; the remaining patents subject to an Alice challenge were ruled invalid. See Content Extraction & Transmission LLC v. Wells Fargo Bank, Nat. Ass’n, 776 F.3d 1343, 1348 (Fed. Cir. 2014) (invalidating patent under Alice); In re BRCA1- & BRCA2-Based Hereditary Cancer Test Patent Litig., 774 F.3d 755, 757 (Fed. Cir. 2014) (claims directed to ineligible subject matter); DDR Holdings, LLC v. Hotels.com, L.P., 773 F.3d 1245, 1255 (Fed. Cir. 2014) (patent not invalid under Section 101); Ultramercial, Inc. v. Hulu, LLC, 772 F.3d 709, 712 (Fed. Cir. 2014) (invalidating patent); buySAFE, Inc. v. Google, Inc., 765 F.3d 1350, 1351 (Fed. Cir. 2014) (invalidating patent); Planet Bingo, LLC v. VKGS LLC, 576 Fed. App’x 1005, 1006 (Fed. Cir. 2014) (invalidating patents); Digitech Image Technologies, LLC v. Electronics for Imaging, Inc., 758 F.3d 1344, 1347 (Fed. Cir. 2014) (invalidating patents); DietGoal Innovations LLC v. Bravo Media LLC, 2014-1631, 2015 WL 1542817, at *1 (Fed. Cir. Apr. 8, 2015) (summarily affirming invalidity finding).

Numerous District Court Cases Have Invalidated Patents Under Alice at the Pleadings Stage

Twenty-eight district court decisions have invalidated patents under Alice at the pleading stage (either on a motion to dismiss for failure to state a claim or a motion for judgment on the pleadings). They are as follows: Wireless Media Innovations, LLC v. Maher Terminals, LLC, CIV.A. 14-7004, 2015 WL 1810378, at *1 (D.N.J. Apr. 20, 2015); Shortridge v. Found. Constr. Payroll Serv., LLC, 14-CV-04850-JCS, 2015 WL 1739256, at *1 (N.D. Cal. Apr. 14, 2015); OpenTV, Inc. v. Apple, Inc., 14-CV-01622-HSG, 2015 WL 1535328, at *8 (N.D. Cal. Apr. 6, 2015); Advanced Auctions LLC v. eBay Inc., 13CV1612 BEN JLB, 2015 WL 1415265, at *6 (S.D. Cal. Mar. 27, 2015); Tuxis Technologies, LLC v. Amazon.com, Inc., CV 13-1771-RGA, 2015 WL 1387815, at *5 (D. Del. Mar. 25, 2015); Priceplay.com, Inc., v. AOL Advertising, Inc., CIV. 14-92-RGA, 2015 WL 1246781, at *1 (D. Del. Mar. 18, 2015); Clear with Computers, LLC v. Altec Industries, Inc., CV-6:14-79, 2015 WL 993392, at *1 (E.D. Tex. Mar. 3, 2015); Essociate, Inc. v. Clickbooth.com, LLC, SACV 13-01886-JVS, 2015 WL 1428919, at *1 (C.D. Cal. Feb. 11, 2015); In re TLI Comm. Patent Litig., No. 1:14-md-2534, 2015 WL 627858, at *1 (E.D. Va. Feb. 6, 2015); Vehicle Intelligence & Safety LLC v. Mercedes-Benz USA, LLC, 13-CV-4417, 2015 WL 394273, at *1 (N.D. Ill. Jan. 29, 2015); Money Suite Co. v. 21st Century Ins. & Fin. Services, Inc., CV 13-1747-GMS, 2015 WL 436160, at *1 (D. Del. Jan. 27, 2015); CertusView Tech., LLC v. S&N Locating Services, LLC, 2:13-cv-346, 2015 WL 269427, at *1 (E.D. Va. Jan. 21, 2015); Open Text S.A. v. Box, Inc., 13-CV-04910-JD, 2015 WL 269036, at *1 (N.D. Cal. Jan. 20, 2015); Morales v. Square, Inc., No. 5:13-CV-1092-DAE, 2014 WL 7396568, at *9 (W.D. Tex. Dec. 30, 2014); Morsa v. Facebook, Inc., SACV 14-161-JLS JPRX, 2014 WL 7641155, at *1 (C.D. Cal. Dec. 23, 2014); MyMedicalRecords, Inc. v. Walgreen Co., 2:13-CV-00631-ODW SH, 2014 WL 7339201, at *1 (C.D. Cal. Dec. 23, 2014); Genetic Technologies Ltd. v. Bristol-Myers Squibb Co., CV 12-394-LPS, 2014 WL 5507637 (D. Del. Oct. 30, 2014); Wolf v. Capstone Photography, Inc., 2:13-CV-09573, 2014 WL 7639820, at *1 (C.D. Cal. Oct. 28, 2014); Amdocs (Israel) Ltd. v. Openet Telecom, Inc., 1:10CV910 LMB/TRJ, 2014 WL 5430956, at *1 (E.D. Va. Oct. 24, 2014); Cogent Med., Inc. v. Elsevier Inc., C-13-4479-RMW, 2014 WL 4966326, at *1 (N.D. Cal. Sept. 30, 2014); McRO, Inc. v. Atlus U.S.A., SACV 13-1870-GW FFMX, 2014 WL 4772196, at *13 (C.D. Cal. Sept. 22, 2014); Open Text S.A. v. Alfresco Software Ltd, 13-CV-04843-JD, 2014 WL 4684429, at *1 (N.D. Cal. Sept. 19, 2014); Eclipse IP LLC v. McKinley Equip. Corp., SACV 14-742-GW AJWX, 2014 WL 4407592, at *12 (C.D. Cal. Sept. 4, 2014); Genetic Technologies Ltd. v. Lab. Corp. of America Holdings, CV 12-1736-LPS-CJB, 2014 WL 4379587, at *1 (D. Del. Sept. 3, 2014); Loyalty Conversion Sys. Corp. v. Am. Airlines, Inc., 2:13-CV-655, 2014 WL 4364848, at *1 (E.D. Tex. Sept. 3, 2014); Tuxis Technologies, LLC v. Amazon.com, Inc., CV 13-1771-RGA, 2014 WL 4382446, at *1 (D. Del. Sept. 3, 2014); Intellectual Ventures I LLC v. Symantec Corp., CV 10-1067-LPS, 2015 WL 1843528, at *1 (D. Del. Apr. 22, 2015) (two patents invalidated, one patent not invalidated); Intellectual Ventures I LLC v. Manufacturers & Traders Trust Co., CV 13-1274-SLR, 2014 WL 7215193, at *9 (D. Del. Dec. 18, 2014) (two patents invalid, one patent directed to patent eligible subject matter).

Numerous District Court Cases Have Invalidated Patents Under Alice on Summary Judgment

Twenty-two district court decisions have invalidated patents under Alice on summary judgment. They are as follows: Genetic Veterinary Sciences, Inc. v. Canine EIC Genetics, LLC, CIV. 14-1598 JRT/JJK, 2015 WL 1505669, at *1 (D. Minn. Mar. 31, 2015); Celsis In Vitro, Inc. v. CellzDirect, Inc., 10 C 4053, 2015 WL 1523818, at *1 (N.D. Ill. Mar. 13, 2015); Tenon & Groove, LLC v. Plusgrade S.E.C., CV 12-1118-GMS-SRF, 2015 WL 1133213, at *1 (D. Del. Mar. 11, 2015); Hewlett Packard Co. v. ServiceNow, Inc., 14-CV-00570-BLF, 2015 WL 1133244, at *1 (N.D. Cal. Mar. 10, 2015); Enpat, Inc. v. Tenrox Inc., 6:13-CV-948-ORL-31, 2015 WL 541673, at *5 (M.D. Fla. Feb. 10, 2015); Synopsys, Inc. v. Mentor Graphics Corp., C 12-6467 MMC, 2015 WL 269116, at *1 (N.D. Cal. Jan. 20, 2015); E. Coast Sheet Metal Fabricating Corp. v. Autodesk, Inc., 12-CV-517-LM, 2015 WL 226084, at *10 (D.N.H. Jan. 15, 2015); Mortgage Grader, Inc. v. Costco Wholesale Corp., 2015 WL 778125, at *1 (C.D. Cal. Jan. 12, 2015); Tenon & Groove, LLC v. Plusgrade S.E.C., 2015 WL 82531, at *1 (D. Del. Jan. 6, 2015); Bascom Research, LLC v. LinkedIn, Inc., 12-CV-06293-SI, 2015 WL 149480, at *1 (N.D. Cal. Jan. 5, 2015); KomBea Corp. v. Noguar L.C., 2:13-CV-957 TS, 2014 WL 7359049, at *1 (D. Utah Dec. 23, 2014); Cloud Satchel, LLC v. Amazon.com, Inc., CV 13-941-SLR, 2014 WL 7227942, at *1 (D. Del. Dec. 18, 2014); IpLearn, LLC v. K12 Inc., CV 11-1026-RGA, 2014 WL 7206380, at *1 (D. Del. Dec. 17, 2014); Joao Bock Transaction Sys., LLC v. Jack Henry & Associates, Inc., CV 12-1138-SLR, 2014 WL 7149400, at *9 (D. Del. Dec. 15, 2014); Enfish, LLC v. Microsoft Corp., 2:12-CV-07360-MRP, 2014 WL 5661456, at *1 (C.D. Cal. Nov. 3, 2014); Every Penny Counts, Inc. v. Wells Fargo Bank, N.A., 8:11-CV-2826-T-23TBM, 2014 WL 4540319, at *6 (M.D. Fla. Sept. 11, 2014); Walker Digital, LLC v. Google, Inc., CV 11-318-LPS, 2014 WL 4365245, at *1 (D. Del. Sept. 3, 2014); CMG Fin. Services, Inc. v. Pac. Trust Bank, F.S.B., CV 11-10344 PSG MRWX, 2014 WL 4922349 (C.D. Cal. Aug. 29, 2014); Comcast IP Holdings I, LLC v. Sprint Communications Co. L.P., CV 12-205-RGA, 2014 WL 3542055, at *6 (D. Del. July 16, 2014); DietGoal Innovations LLC v. Bravo Media LLC, 13 CIV. 8391 PAE, 2014 WL 3582914 (S.D.N.Y. July 8, 2014); Intellectual Ventures I, LLC v. Motorola Mobility LLC, CV 11-908-SLR, 2015 WL 846532 (D. Del. Feb. 24, 2015) (one patent invalid, the other found to be patent eligible); OpenTV, Inc. v. Netflix Inc., 14-CV-01525-RS, 2014 WL 7185921, at *1 (N.D. Cal. Dec. 16, 2014) (invalidating two patents on summary judgment, and denying summary judgment of invalidity with respect to a third patent).

Some District Courts Decisions Have Rejected Alice Challenges

Fifteen district court decisions have rejected Alice challenges on the merits; another three decisions have rejected Alice challenge for procedural reasons (e.g., finding that the Alice motion was premature). These decisions include: Mobile-Plan-It LLC v. Facebook Inc., 14-CV-01709-RS, 2015 WL 1801425, at *4 (N.D. Cal. Apr. 20, 2015) (denying motion for judgment on the pleadings); Messaging Gateway Solutions, LLC v. Amdocs, Inc., CV 14-732-RGA, 2015 WL 1744343, at *1 (D. Del. Apr. 15, 2015) (granting plaintiff’s motion for judgment on the pleadings of validity); Certified Measurement, LLC v. CenterPoint Energy Houston Elec. LLC, 2:14-CV-627-RSP, 2015 WL 1432324, at *2 (E.D. Tex. Mar. 30, 2015) (finding that claim construction would be necessary to resolve defendant’s Section 101 challenge); Modern Telecom Sys. LLC v. Earthlink, Inc., SA CV 14-0347-DOC, 2015 WL 1239992, at *1 (C.D. Cal. Mar. 17, 2015) (on motion to dismiss, defendants failed to meet their burden to demonstrate patents-in-suit were patent ineligible); Trading Technologies Int’l, Inc. v. CQG, Inc., 05-CV-4811, 2015 WL 774655, at *1 (N.D. Ill. Feb. 24, 2015) (patents-in-suit were not directed to abstract ideas); Smartflash LLC v. Apple Inc., 6:13CV447-JRG-KNM, 2015 WL 661174, at *1 (E.D. Tex. Feb. 13, 2015) (patents-in-suit were patent eligible); StoneEagle Services, Inc. v. Pay-Plus Solutions, Inc., 8:13-CV-2240-T-33MAP, 2015 WL 518852, at *1 (M.D. Fla. Feb. 9, 2015) (denying motion for judgment on the pleadings as premature); Fairfield Indus., Inc. v. Wireless Seismic, Inc., 4:14-CV-2972, 2014 WL 7342525, at *5 (S.D. Tex. Dec. 23, 2014) (claims at issue were patentable because they included inventive concepts); Ameranth, Inc. v. Genesis Gaming Solutions, Inc., SACV 11-00189 AG, 2014 WL 7012391, at *6 (C.D. Cal. Nov. 12, 2014) (rejecting Section 101 challenge at summary judgment stage); California Inst. of Tech. v. Hughes Communications Inc., 2:13-CV-07245-MRP, 2014 WL 5661290, at *1 (C.D. Cal. Nov. 3, 2014) (finding asserted claims to be patentable and rejecting defendants’ summary judgment motion); Card Verification Solutions, LLC v. Citigroup Inc., 13 C 6339, 2014 WL 4922524, at *1 (N.D. Ill. Sept. 29, 2014) (rejecting Section 101 challenge on a motion to dismiss); Helios Software, LLC v. SpectorSoft Corp., CV 12-081-LPS, 2014 WL 4796111, at *17 (D. Del. Sept. 18, 2014) (finding asserted claims patentable); AutoForm Eng’g GMBH v. Eng’g Tech. Associates, Inc., 10-14141, 2014 WL 4385855, at *4 (E.D. Mich. Sept. 5, 2014) (rejecting Section 101 challenge); Data Distribution Technologies, LLC v. BRER Affiliates, Inc., CIV. 12-4878 JBS/KMW, 2014 WL 4162765, at *1 (D.N.J. Aug. 19, 2014) (denying motion to dismiss premised on Section 101 defense without prejudice to defense being asserted at later when more complete record would be available); Intellectual Ventures I, LLC v. Motorola Mobility LLC, CV 11-908-SLR, 2015 WL 846532 (D. Del. Feb. 24, 2015) (one patent invalid, the other found to be patent eligible); OpenTV, Inc. v. Netflix Inc., 14-CV-01525-RS, 2014 WL 7185921, at *1 (N.D. Cal. Dec. 16, 2014) (invalidating two patents on summary judgment, and denying summary judgment of invalidity with respect to a third patent); Intellectual Ventures I LLC v. Symantec Corp., CV 10-1067-LPS, 2015 WL 1843528, at *1 (D. Del. Apr. 22, 2015) (two patents invalidated, one patent not invalidated); Intellectual Ventures I LLC v. Manufacturers & Traders Trust Co., CV 13-1274-SLR, 2014 WL 7215193, at *9 (D. Del. Dec. 18, 2014) (two patents invalid, one patent directed to patent eligible subject matter).

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Recent Supreme Court Decisions of Note

Here are four relatively recent Supreme Court decisions of note to federal court and IP practitioners:

  • American Broadcasting Cos. v. Aereo: the Supreme Court held that Aereo infringes copyright owners’ exclusive right “to perform the copyrighted work publicly” by “by selling [Aereo’s] subscribers a technologically complex service that allows them to watch television programs over the Internet at about the same time as the programs are broadcast over the air.” (Decision available here.)
  • B&B Hardware v. Hargis Industries: the Supreme Court held that the district court should have applied issue preclusion to the Trademark Trial and Appeal Board’s (“TTAB”) decision that a mark was confusingly similar to another mark: “[C]onsistent with principles of law that apply ininnumerable contexts, we hold that a court should give preclusive effect to TTAB decisions if the ordinary elements of issue preclusion are met.” (Decision available here.)
  • POM Wonderful v. Coca-Cola: the Supreme Court held that the federal Food, Drug, and Cosmetic Act does not preempt a false advertising claim under the Lanham Act: “Competitors, in their own interest, may bring Lanham Act claims like POM’s that challenge food and beverage labels that are regulated by the FDCA.” (Decision available here.)
  • Johnson v. City of Shelby: the Supreme Court summarily reversed the Fifth Circuit’s dismissal of a case where the plaintiffs failed to invoke 42 U.S.C. § 1983 in their complaint. (Decision available here.) Rule 8 does “not countenance dismissal of a complaint for imperfect statement of the legal theory supporting the claim asserted.” “In particular, no heightened pleading rule requires plaintiffs seeking damages for violations of constitutional rights to invoke §1983 expressly in order to state a claim.” Perhaps most importantly, the Supreme Court stated that “[o]ur decisions in Bell Atlantic Corp. v. Twombly, 550 U. S. 544 (2007), and Ashcroft v. Iqbal, 556 U. S. 662 (2009), are not in point, for they concern the factual allegations a complaint must contain to survive a motion to dismiss. A plaintiff, they instruct, must plead facts sufficient to show that her claim has substantive plausibility. Petitioners’ complaint was not deficient in that regard.” (emphasis in original).
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New Northern District of Texas Patent Lawsuits

Over the last several weeks, there have been many new patent suits filed in the Northern District of Texas, including:

  • Leftsnrights v. Adiply: plaintiff asserts that defendant infringes United States Patent Nos. 8,832,559 and 8,881,033, titled “Consent Distribution System and Method and Computer Network System” and “Method for Efficient Information Transfer,” respectively. (Complaint available here.)
  • BSN SPORTS v. Bensussen: plaintiff asserts that defendant is infringing U.S. Patent No. 6,308,381, through the sale of products, including buckles. (CCRG represents the plaintiff). (Complaint available here.)
  • Medecision v. My Health: plaintiff seeks a declaratory judgment of non-infringement of U.S. Patent No. 6,612,985, titled “Method and System for Monitoring and Treating a Patient.” (Complaint available here.)
  • T-Rex Property v. RMG Networks: plaintiff sued defendant asserting infringement of U.S. Patent Nos. RE39,470, entitled “Digital Information System,” 6,430,603, entitled “System for Direct Placement of Commercial Advertising, Public Service Announcements and Other Content on Electronic Billboard Displays,” and 7,382,334, entitled “Digital Information System.” (Complaint available here.)
  • New World v. Ford: plaintiffs seek a declaratory judgment of non-infringement, invalidity, and unenforceability with respect to U.S. Design Patent D489,299 and U.S. Design Patent D501,685. (Complaint available here.)
  • Mannatech v. RBC Life Sciences: plaintiff sued defendants asserting infringement of U.S. Patent Nos. 7,157,431 and 7,202,220, both entitled “Compositions of Plant Carbohydrates as Dietary Supplements.” (Complaint available here.)
  • Avioniqs v. Rockwell Collins: plaintiff sued defendant for alleged infringement of U.S. Patent No. 7,688,214, titled “Weather Warning System and Method.” (Complaint available here.)
  • Hardware Resources v. Residential Essentials: plaintiff alleges that defendant infringes United States Patent Nos. D612,703 and D598,269 through the sale of certain knobs, handles, and pulls. (Complaint available here.)
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Judge O’Connor’s Recent Summit 6 Decisions

Over the last several months, Judge O’Connor has issued at least three opinions in the Summit 6 case. First, a 58 page claim construction opinion (available here) construing claim terms. Second, a decision granting in part and denying in part Summit 6’s motions to amend preliminary infringement contentions (available here), which discusses when infringement contentions may be amended. Third, the Court issued a decision (available here) granting defendants’ motion to amend preliminary invalidity contentions to add certain prior art references.

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Judge Kinkeade Severs and Stays Patent Infringement Claims Against Retailer Defendant

On March 18, 2015, Judge Kinkeade issued an Order (available here) in Richmond v. Forever Gifts. Defendants requested that the Court sever and stay Plaintiff’s claims against Walgreen (the retailer of the accused product) pending final resolution of Plaintiff’s claims against Forever Gifts (the manufacturer of the allegedly infringing product). Judge Kinkeade granted Defendants’ request, writing:

Assuming without deciding that the joinder requirements of § 299(a) have been met, the Court nevertheless concludes that severance of Plaintiff’s claims against Walgreens is proper. In this case, Forever Gifts is the designer and manufacturer of the allegedly infringing product. Walgreens is the retailer of the allegedly infringing product. Courts have held that patent infringement claims against a retailer, like Walgreens, are peripheral to the claims against a manufacturer. These type of “second-hand entities” had no involvement in and no essential knowledge about the alleged infringement, which begins at the design and manufacture phases.

Forever Gifts, the “upstream defendant” in this same stream of commerce patent case, is the real party in interest. It is Plaintiff’s claims against Forever Gifts, as the designer and manufacturer, that is “more likely to restore contested property rights nationwide than securing an injunction” against Walgreens, the retailer and “downstream defendant.”

Furthermore, Forever Gifts has agreed to defend and indemnify Walgreens which courts have held establishes Forever Gifts as the “real party in interest” and Walgreens, the indemnified defendant, as peripheral. Therefore, the Court concludes Plaintiff’s claims against Walgreens are peripheral to its claims against Forever Gifts. . . .

Plaintiff’s claims against Walgreens are peripheral to his claims against Forever Gifts, and those claims against Walgreens are likely to be resolved by the disposition of Plaintiff’s claims against Forever Gifts. Therefore, based on fairness, judicial economy and efficiency, the Court finds that severing the claims against Walgreens is appropriate. The Court also finds the claims against Walgreens should be stayed pending final resolution of Plaintiff’s claims against Forever Gifts.

(citations omitted).

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Judge Lynn Stays Merits Discovery Pending Resolution of Motion to Dismiss for Lack of Personal Jurisdiction and Improper Venue

In Heat On-The-Fly v. Enervco, Judge Lynn entered an Order (available here) staying merits discovery pending the Court’s resolution of defendant’s motion to dismiss for lack of personal jurisdiction and improper venue:

In light of the fact that the Court will promptly schedule a hearing on Enservco’s Motion to Dismiss for Lack of Personal Jurisdiction and Improper Venue [Docket #32] and Heat Waves’s Motion to Transfer Venue [Docket #24], the Motion to Stay is GRANTED. An Order setting the hearing date on the pending motions will follow.

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Judge Kinkeade Denies Motion for Preliminary Injunction In Patent Case

In Mannatech v. Wellness Quest, the plaintiff sued defendants asserting infringement of two patents. The plaintiff then moved for a preliminary injunction and expedited discovery. Judge Kinkeade issued an Order (available here) rejecting the plaintiff’s requests. The Court premised its decision on the lack of irreparable harm:

Mannatech’s asserted irreparable harm is the loss of profits that may be going to Wellness Quest instead of Mannatech, because Wellness Quest has allegedly infringed Mannatech’s patents by producing and selling New Eden. Wellness Quest and McDaniel contend that because Mannatech has known about New Eden for several years but has not sued them until now, they cannot claim imminent irreparable harm. They further assert that any damages Mannatech has incurred can be quantified by and satisfied with a money judgment. Although Mannatech asserts that Defendants may not have the financial wherewithal to satisfy a money judgment, it provides no evidence of same beyond the fact that Wellness Quest appears to sell only two products. Moreover, as Defendants have pointed out, Mannatech will have the opportunity to seek a permanent injunction if it is ultimately successful on the merits of its patent infringement claims. The court agrees that Mannatech has not demonstrated a substantial threat of irreparable harm that cannot be undone through monetary remedies. Dennis Melancon, Inc. v. City of New Orleans, 703 F.3d 262, 279 (5th Cir. 2012), cert. denied, 133 S. Ct. 2396 (2013); Interox Am. v. PPG Indus., Inc., 736 F.2d 194, 202 (5th Cir. 1984).

Because the party seeking preliminary injunctive relief must persuade the court on all four factors, the court need not address the remaining three factors.

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“Close Call” In Terms of Infringement and Validity Precludes Willfulness Claim In Patent Case

On March 9, 2015, Judge Lynn issued an Order (available here) in Melchior v. Hilite International. The Court found that a “close call” in terms of infringement/invalidity issues precluded the plaintiff’s willfulness claim:

Specifically, the Court found Plaintiff did not meet the objective prong of willful infringement because the issues of infringement and invalidity were, in the Court’s view, a “close call.” See AFT Trust v. J&L Fiber Services, Inc., 674 F.3d 1365, 1377-78 (Fed. Cir. 2012) (affirming the district court’s grant of summary judgment of no objective recklessness based on the patent’s language, compelling non-infringement and invalidity arguments, and the PTO’s rejection of the reissue application); DePuy Spine, Inc. v. Medtronic Sofamor Danek, Inc., 567 F.3d 1314, 1337 (Fed. Cir. 2009) (affirming the district court’s finding of no willful infringement on the objective prong because the issue of infringement was a “close one”).

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Judge Kinkeade Tosses Patent Infringement Case Due to Lack of Standing

Judge Kinkeade issued an order in Optimal Golf v. Altex Corp. (available here) finding that the plaintiffs lacked standing when the case was filed. The Court was not happy, writing:

This is now the second case involving the same patent and same Plaintiff where the Court found Optimal had no standing to bring this suit. The procedural history of this case paints the picture that Optimal, along with the other Plaintiffs GPS and OGSI, hastily filed this second suit before determining who would be the proper plaintiff(s) to prosecute it. The Plaintiffs in both cases appear to have given no thought to actual ownership of the ‘093 Patent until years into litigation. This has been incredibly frustrating to the Court, and surely to the parties defending these suits. Two cases now have been dismissed for jurisdictional issues related solely to standing and it has been a waste of judicial resources, as well as those of the Defendants. The Court warns that any future jurisdictional defects involving standing related to this patent and these plaintiffs will likely result in sanctions.

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Judge Kinkeade Transfers Patent Case to Western District of Texas

On March 9, 2015, Judge Kinkeade entered an Order (available here) in Smith’s Consumer Products v. Fortune Products transferring the case from the Northern District of Texas to the Western District of Texas. Plaintiff was a Delaware corporation with its principal place of business in Arkansas and no employees in Texas. Defendant was a Texas corporation with its principal place of business in the Western District of Texas.

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