Following closely on the heels of the United States Supreme Court decision in Alice Corporation Pty. Ltd. v. CLS Bank International, 573 U.S. ___ (2014) (CLS Bank), the United States Patent and Trademark Office (USPTO) has issued guidelines for the examination of patent applications claiming abstract ideas, particularly, as those implemented on computers. The guidelines went into effect yesterday, but are preliminary: the USPTO indicates that it will issue additional guidance after further consideration of the Court's decision and public feedback. 1
Today’s long-awaited decision by the United States Supreme Court in Alice Corporation Pty. Ltd. v. CLS Bank International, 573 U.S. ___ (2014) may have broad-reaching implications on patenting software. At issue in the case was whether claims to a computer-implemented system and method for mitigating “settlement risk” in financial transactions are eligible for patenting under 35 U.S.C. § 101. In a unanimous decision, the Court held that the claims were directed to an abstract idea and, although implemented on a computer, were not patentable.
Today the United States Supreme Court issued two opinions addressing patent law issues—Limelight Networks, Inc. v. Akamai Technologies, Inc. and Nautilus, Inc. v. Biosig Instruments, Inc. In both cases, the nation’s highest court unanimously reversed the Federal Circuit. In doing so, the Court simultaneously raised the bar for patentees with respect to patent infringement and lowered the bar for alleged infringers with respect to invalidity.
Active Inducement of Infringement
The Patent Act provides that “[w]hoever actively induces infringement of a patent shall be liable as an infringer.” 35 U.S.C. § 271(b). In Limelight Networks Inc. v. Akamai Technologies, Inc., Limelight was alleged to have actively induced infringement of a method patent by carrying out some steps of the claimed method and encouraging its customers to carry out the remaining steps. For purposes of this case, the Supreme Court assumed that infringement of all the method steps could not be attributable to a single party, either because Limelight had not actually performed the steps or because it did not direct or control others who performed them. Accordingly, the Supreme Court reversed the Federal Circuit and found that Limelight could not be liable for active inducement of infringement. In doing so, it reinstated the principle that liability for induced infringement must be predicated on direct infringement. The Court, however, made specific note that the Federal Circuit on remand will have the opportunity to revisit the question of direct infringement by Limelight under 35 U.S.C. § 271(a). For today, however, Limelight has escaped a finding of liability by dividing the performance of method steps between more than one party.
In addition to reversing the Federal Circuit’s holding concerning active inducement of infringement, the Court in Nautilus, Inc. v. Biosig Instruments, Inc. set forth a new test for patent definiteness. Patent claims can be found invalid for indefiniteness under 35 U.S.C. § 112. In Nautilus, Inc., the Court held 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.” This new standard replaces the Federal Circuit’s long-standing “insolubly ambiguous” test, which directed lower courts to invalidate claims only if they are not “amenable to construction,” meaning that claims should survive so long as a court could “ascribe some meaning” to them. In overturning that standard, the Supreme Court found that it “can leave courts and the patent bar at sea without a reliable compass.”
Because the Court remanded the case back to the Federal Circuit with the instruction to apply the new standard to the claims at issue, the application and breadth of the newly pronounced indefiniteness standard are uncertain. While the Court found that the old standard was too lenient toward ambiguous claims, it cautioned that “[s]ection 112 … entails a ‘delicate balance’” that “must take into account the inherent limitations of language,” and allow for “[s]ome modicum of uncertainty,” while also requiring claims to “be precise enough to afford clear notion of what is claimed.” The Court also pointed out the importance of viewing the claims from the point of view of a person skilled in the art, and that such an investigation “may turn on evaluations of expert testimony.” Thus, the new standard appeals to a rule of reason, and its application likely will involve an intense factual investigation. In addition, the Court restricted its holding to the 2006 version of the Patent Act, which was in effect prior to enactment of the America Invents Act in 2012. It will thus be left to future cases to determine whether the Supreme Court’s new standard will be applied to patents filed after September 16, 2012.
This advisory was prepared by James C. Hall and Heather B. Repicky, members of the IP Litigation practice group at Nutter McClennen & Fish LLP. For more information, please contact Jim, Heather, or your Nutter attorney at 617.439.2000.
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