New US high court rulings could create problems for ‘patent trolls’

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The U.S. Supreme Court has handed down a pair of decisions that could make it more difficult to bring patent infringement claims in some circumstances, further hampering suits brought by so-called “patent trolls.”

But while the justices’ rulings in Limelight Networks, Inc. v. Akamai Technologies, Inc., No. 12-786, and Nautilus, Inc. v. Biosig Instruments, Inc., No. 13-369, clarified some patent principles, they are not the end of the story. Patent lawyers will be keeping a close watch on how the U.S. Circuit Court of Appeals for the Federal Circuit interprets the high court’s rulings to get a better idea of how those decisions will impact patent litigation.

“We haven’t heard the end of this yet,” said J. Michael Huget, a partner in the Ann Arbor, Mich., office of Honigman Miller Schwartz and Cohn LLP. “It’s clear the Supreme Court wants the Federal Circuit to address this.”

Cases remanded to Federal Circuit

In Limelight, the court held that a multi-step method patent has not been infringed if the performance of all of its steps is not attributable to a single actor.

The case stemmed from a lawsuit brought by Internet content delivery network company Akamai Technologies against competitor Limelight Networks alleging infringement on a patent for a method of quickly delivering large-sized files over its network. Limelight argued that it was not liable because did not carry out all the steps in Akamai’s method — some were left for customers to undertake. But a federal jury sided with Akamai and awarded $45 million.

After the Federal Circuit directed the district court to reconsider the verdict, it was reversed. More appeals followed, and the Federal Circuit ultimately found that Limelight had infringed by inducing and encouraging others to perform parts Akamai’s patented process.

The Supreme Court took up the case to decide whether liability for inducement of patent infringement can be found even where no direct infringement occurred. In a unanimous decision authored by Justice Samuel A. Alito Jr., the court held that it could not.

The court applied the single-actor liability rule established by the Federal Circuit’s decision in Muniauction Inc. v. Thomson Corp., which requires performance of all steps of a method patent be attributable to a single party for a finding of direct infringement. Since that did not happen in this case, the lower court’s ruling must be reversed, the court said.

But Alito noted that the justices did not address the wisdom of the Muniauction rule and instead only assumed that it was a correct interpretation.

“[T]he Federal Circuit will have the opportunity to revisit [Muniauction] if it so chooses,” he wrote.

In Nautilus, the court struck down a Federal Circuit rule that make it extremely difficult for a patent’s validity to be challenged on the basis of vagueness.

The case involved Biosig’s patent on a heart rate monitor used on exercise equipment which is activated with a user places his or her hand on a sensor-equipped handle. The patent claim used the term “spaced relationship” to describe the distance between nodes inside the handle.

Biosig sued Nautilus claiming infringement. Nautilus moved for summary judgment, claiming the term “spaced relationship” was too vague and therefore invalid under the requirement in §112 of the Patent Act that claims be particular and distinct. The motion was granted by the U.S. District Court.

The Federal Circuit reversed. Under the Federal Circuit’s standard, patent claims can be invalided as indefinite only when deemed “insolubly ambiguous,” meaning that “reasonable efforts at claim construction result in a definition that does not provide sufficient particularly and clarity to inform skilled artisans of the bounds of the claim.”

But in a unanimous ruling authored by Justice Ruth Bader Ginsburg, the Supreme Court adopted a less onerous standard for proving indefiniteness.

“In place of the ‘insolubly ambiguous’ standard, we hold that a patent is invalid for indefiniteness if its claims, read in light of the specification delineating the patent, and the prosecution history, fail to inform, with reasonable certainty, those skilled in the art about the scope of the invention.”

The court remanded the case to the Federal Circuit so that it could apply the new standard to the patent at issue.

Widespread effect

Method patent claims like the one at issue in Limelight are becoming increasingly common, and if the Federal Circuit takes up the Supreme Court’s suggestion and reconsiders Muniauction’s single-actor standard, some industries will be affected no matter which way the court rules.

If the court upholds the single-actor standard, it will be good news for software companies like Microsoft, one of many amici that filed briefs in the case. Those briefs expressed concern that under a different standard, companies could face infringement suits even if they were unaware of customer actions that could be seen as implementing certain steps in a competitor’s patent process.

But pharmaceutical companies could find it difficult to protect patents on drug delivery and treatment systems that must be partially carried out by patients or their caretakers, and would benefit from a ruling overruling Muniauction.

“If the consumer is taking the last step in a [patented] process, it could make a big difference” depending on how the Federal circuit rules, Huget said.

Ruben Rodrigues, an attorney in the Boston office of Foley & Lardner LLP, said the Supreme Court’s ruling returns the law to what it was for years before the Federal Circuit’s decision in the instant case.

“Before the en banc decision [in Limelight] it was pretty well accepted by practitioners that you could not induce infringement unless you had direct infringement under Muniauction,” Rodrigues said.

Rodrigues said he expects the Nautilus ruling to have a larger effect on patent litigation, because it has “certainly made it easier to invalidate a patent for indefiniteness.”

While the new standard articulated by the court “is not completely crystal clear,” he said, “I think we can expect to see in practice that invalidating patents will become easier.”

Lawyers also expect the decision to have an effect on patent trolls, who often buy old and vaguely worded patents, then file suit and try to extract settlements from alleged infringers.

“These companies don’t do anything but buy up patents by the thousands and try to enforce them,” said David Harlan, a partner at Armstrong Teasdale LLP in St. Louis. “So patent trolls are going to find themselves being less successful with ambiguous and overly-broad patent claims.”

He said the new standard gives attorneys and their clients more clarity.

“If you can stretch words [of a patent claim] to their breaking point, inventors and patent lawyers are left out at sea without a compass,” Harlan said. “You just don’t know what the boundaries of an invention are.”

The decisions come in a term where the justices have shown unusually high interest in patent cases. In April, the court gave federal judges a more flexible standard for awarding attorney fees to prevailing parties under §285 of the Patent Act in Highmark Inc. v. Allcare Health Management System, Inc. and Octane Fitness, LLC v. ICON Health & Fitness, Inc., which could help stem patent troll suits. A decision in Alice Corp. v. CLS Bank International, No. 13-298, which addresses the patentability of computer software programs that draw on non-computerized principles, is still pending. That case was argued in late March.