MVS Filewrapper® Blog: New and Useful - July 8, 2013

·         The Federal Circuit in Ultramercial, Inc. v. Hulu, LLC held that the district court erred in holding that the subject matter of U.S. Patent No. 7,346,545 ('545) is not a "process" within the language and meaning of 35 U.S.C. § 101.  The Federal Circuit reversed and remanded this case stating the claims were not abstract and were patent eligible.

The '545 patent claims a method for distribution of copyrighted products over the Internet where the consumer receive the product for free in exchange for viewing an advertisement, and the advertiser pays for the copyrighted content.  In other words, it is a method for monetizing and distributing copyrighted products over the Internet.

Ultramercial originally sued Hulu, LLC ("Hulu"), YouTube, LLC ("YouTube"), and WildTangent, Inc. ("WildTangent"), alleging infringement of the '545 patent.  Hulu and YouTube were later dismissed from the case.  WildTangent then moved to dismiss for failure to state a claim under Rule 12(b)(6).  The United States District Court for the Central District of California granted the dismissal holding that patent '545 did not claim patent-eligible subject matter.  The Federal Circuit had previously reversed the district court's holding and remanded the case, but that earlier decision was vacated by the United States Supreme Court. 

The district court’s grant of the motion to dismiss was based on its conclusion that there was no reasonable construction that would render the subject matter patent-eligible.  The Federal Circuit took issue with this approach, and explained that inquiries into patent-eligibility under § 101 would often involve factual questions, and that claim construction would often be necessary.   In this case, the Federal Circuit determined that the factual determinations were key to deciding eligibility, and that a construction most favorable to the patentee should be applied. 

In its analysis, the Federal Circuit reiterated that under the “abstract ideas” limitation to patent-eligibility of 35 U.S.C. § 101, a claim is not patent eligible only if, instead of claiming an application of an abstract idea, the claim is instead to the abstract idea itself.  A claim may be premised on an abstract idea and, indeed, the abstract idea may be of central importance to the invention—the question for patent eligibility is whether the claim contains limitations that meaningfully tie that abstract idea to an actual application of that idea through meaningful limitations.  In determining if the claim is abstract or not, the court must look at the claim as a whole and "cannot go hunting for abstractions by ignoring the concrete, palpable, tangible limitations of the invention the patentee actually claims."

The Federal Circuit looked to the Supreme Court for guidance on discerning whether or not a claim is an abstraction.  First, the Supreme court in Prometheus stated that a claim is not meaningfully limited if it merely describes an abstract idea or in essence simply adds the words "apply it."  Second, a claim is invalid if the subject matter preempts all practical uses of an abstract idea.  In other words, a claim is invalid if it covers every practical application of that abstract idea.  Finally, the Supreme Court in Prometheus stated "that a claim is not meaningfully limited if its purported limitations provided no real direction, cover all possible ways to achieve the provided result, or are overly-generalized."

With this guidance in mind, the Federal Court held that the claims of '545 were patent eligible and not invalid under § 101.  The court noted that by its terms, patent '545 invokes computers and applications of computer technology.  Even without claim construction, several of the steps require that the method be performed though computers, on the internet, and in a cyber-market environment.  Further, if the products are offered for sale on the internet, they must be restricted by complex computer programming as well.  Viewing the subject matter as a whole, the invention recites a process, it does not pre-empt all use of the abstract idea, the recited steps are not all pre- or post-solution steps, and the claim is not overly generalized.  The claims also do not involve a mathematical algorithm, a series of purely mental steps, or any similarly abstract idea.  Thus the claims of patent '545 were found to be patent-eligible.  

  

·         In Authors Guild v. Google Inc., the Second Circuit vacated a class certification by the United States District Court for the Southern District of New York, and remanded the case back for further consideration, without prejudice to any renewal of the motion for class certification.

The suit commenced in 2005 when The Authors Guild, an association of authors, and several individual authors sued Google alleging copyright infringement by Google Books.  Google Books would scan and index books and make short snippets of the books available for public viewing without payment to the authors.

Following a course of discovery and settlement agreements, both parties moved for an approval of an amended proposed class settlement agreement.  After the court refused the motion, the plaintiff moved to certify a proposed class of "[a]ll persons residing in the United States who hold a United States copyright interest in one or more books reproduced by Google."  The district court allowed the certification.  Google opposed the motion for class certification and appealed the District Court's grant of class certification to the Second Circuit.  In its appeal, Google stated they intended to raise a "fair use" defense, which might moot the litigation.  Google also raised the defense that the class representatives do not adequately protect the interests of the class as a whole.

The appellate court set aside Google's second defense and chose to just focus on the fair use argument, stating "the resolution of Google's fair use defense in the first instance will necessarily inform and perhaps moot our analysis of many class certification issues."  The court believed that Google's fair use defense should be fully resolved before questions regarding class certification are decided on.  The court vacated the District Court's decision to allow certification of the proposed class and remanded the case back for consideration of the fair use issues, without prejudice to any renewal of the motion for class certification.

·         In Fresenius USA v. Baxter Inter'l, the Federal Circuit decided whether the cancellation of the asserted claims by the United States Patent and Trademark Office ("PTO"), pursuant to the agency's statutory reexamination authority, must be given effect in pending infringement litigation.  The Federal Circuit held that it did, and dismissed the district court's decision and remanded with instructions to dismiss.

The case commenced when Fresenius USA and Fresenius Medical Care Holdings (collectively, "Fresenius") brought a declaratory judgment action against Baxter International and Baxter Healthcare Corporation (collectively "Baxter") alleging that claims of U.S. Patent No. 5, 247, 434 ('434) were invalid and not infringed.  Baxter counterclaimed for infringement.  The district court found in favor of Baxter that Fresenius infringed the claims and that the claims were not invalid.  The Federal Circuit affirmed the district court's ruling, but remanded to reconsider its injunction and post-verdict damages.

While the litigation was pending on remand to the District Court, the PTO completed a reexamination of the patent and determined that all asserted claims were invalid.  After the PTO made its determination, the district court entered judgment against Fresenius in the pending infringement proceeding.  On appeal, Fresenius argued that Baxter no longer had a cause of action because the PTO gave its ruling before the district court gave theirs.

The reexamination statute of 1928 authorized the PTO to reconsider patents of "doubtful" validity, and to cancel "defectively examined and therefore erroneously granted patents."  Looking at the language and legislative history, the court noted that reexamination is supposed to occur concurrently with litigation, and that cancellation of claims during reexamination would be binding on concurrent infringement litigation.  After looking at all applicable precedent, the court concluded that if the PTO confirms the original claim in identical form, a suit based on that claim may continue, but if the original claim is cancelled or amended to cure invalidity, the patentee's cause of action is extinguished and the suit would fail.

Baxter contends that this rule does not apply to the present case because their case was conclusively decided before PTO gave their decision.  The Federal Circuit disagreed. The court stated that their original decision was not sufficiently final as to immunize it from the PTO's decision.  The court's original decision left open many aspects that still needed to be decided upon by the lower court.  The court explained "it is well-established that where the scope of relief remains to be determined, there is no final judgment binding the parties or the court."  For the PTO's decision to have no effect, a final decree must have been given, leaving nothing further to be done except the execution of it.  Since the PTO invalidated the claims before the lower court decided the injunction and post-verdict damages issues, Baxter no longer had a cause of action and the suit would fail.

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