Tag: CAFC

Everyone is confused by the current state of software patentability

I have read CLS v. Alice a half a dozen times. I have read the follow-up cases, including Ultramercial v. Hulu (holding software patentable, opinion by Judge Rader) and its counterpart Accenture v. Guidewire (holding software as unpatentably abstract, opinion by Judge Lourie).

Greg Aharonian of the Internet Patent News Service collected some quotes from the judges in CLS v. Alice.

the patent-eligibility test has proven quite difficult to apply
Judge Lourie

the current interpretation of 101 is causing a free fall in the patent system
Judge Moore

our court is irreconcilably fractured
Judge Moore

we have propounded at least three incompatible standards, devoid of consensus, serving simply to add to the unreliability and cost of the system of patents as an incentive for innovation
Judge Newman

the intervening commotion [since Diehr and other decisions] leaves us with little, if any, agreement amongst us even though the statute as not changed a syllable
Chief Judge Rader

[o]ur opinions spend page after page revisiting out cases and those of the Supreme Court, and still we continue to disagree vigorously over what is or is not patentable subject matter
Judge Plager

courts could avoid the swamp of verbiage that is 101 by exercising their inherent power to control the processes of litigation [by focusing on 102, 103 and 112]
Judge Plager

Based on this, and the opinions, I have come to two conclusions. First, the Court of Appeals for the Federal Circuit is just as confused as I am about software patent eligibility. Second,  the panel members you draw on the CAFC will determine whether a software patent will be upheld as valid or struck down as abstract. If you draw Judge Newman, Rader, Linn, and O’Malley, the software patent will live. If you draw Judge Dyk, Prost, and Reyna software is clearly abstract.

ITC Can Block Imports for Trade Secret Misappropriation Outside the United States

ITC can block imports for trade secret misappropriation outside the United States

In Tian Rui Group v. ITC, the Court of Appeals for the Federal Circuit ruled that the International Trade Commission (ITC) can prevent the importation of products made by a trade secret process misappropriated abroad, if the trade secret was developed in the United States.

In this case, Amsted (and American company) uses a trade secret process to make railway wheels. They license a different process to companies in China and elsewhere. Tian Rui hired former employees of Amsted, in China, to learn Amsted’s secret process. They made wheels, using the secret process, and shipped them to the U.S.

Amsted asked the ITC to block Tian Rui’s importation of the wheels produced by this trade secret method. The ITC issued an exclusion order, which was appealed to the CAFC.

The ITC relied on 19 U.S.C. § 1337(a)(1)(A) which provides the ITC authority over “Unfair methods of competition and unfair acts in the importation of articles . . . into the United States” if it will substantially injure and industry in the U.S. The ITC previously has used this section to bar products based on a variety of non-statutory unfair acts, including trade secret misappropriation. However, this was a case of first impression, with respect to actions taking place entirely outside the United States.

The CAFC, in a 2-1 decision (Bryson & Schall for the majority, Moore dissenting) ruled that while U.S. laws generally do not apply extraterritorially (e.g. outside the United States), the prevention of domestic injury from importation of products made using unfair methods justifies applying the statute to such acts.

The court further held that unfair competition bed actions are Federal, and thus ruled by federal law. Since the statute addresses importation, and provides a remedy in the ITC, federal rules should apply. By federalizing trade secret law, they could reach the conclusion, without expressly suggesting that U.S. trade secret law has extraterritorial reach. The court also noted that the statute does not require the use of the trade secret in the United States.

This ruling, which may yet be appealed, gives a powerful new weapon to U.S. companies, who face unfair competition from abroad. Since the law relied upon is not limited to trade secret misappropriation, the impact of the ruling may be quite broad.

If you believe that a product that is being imported by a competitor was produced using unfair acts, you may consider going to the ITC for a faster path to removing that competing product from the U.S. market. Keep in mind that the ITC judgment does not result in damages awards, but in exclusion orders.

Reviving the Non-Analogous Art Argument

In their first case since the Supreme Court’s KSR v. Teleflex (2007) decision, the Federal Circuit strongly re-affirmed the rule that obviousness cannot be based on references from non-analogous art in the precedential opinion of In re Arnold G. Klein.  Surprisingly, the opinion did not even mention KSR.

Continue reading “Reviving the Non-Analogous Art Argument”

Declaratory Judgment and the Supplier

A unanimous three judge panel of the Federal Circuit found in Arris Group v. British Telecommunications (decided May 19, 2011) that if a supplier’s customer is accused of infringement, there may be sufficient Article III case or controversy for a declaratory judgment action by the supplier, even if the supplier was never directly accused of infringement.

In this case, BT contacted a customer of Arris Group (Cable One), claiming they infringed a patent, and pointed to their use of Arris products specifically. There were a series of communications, discussing Cable One’s use or non-use of BT’s patents. Arris then filed for Declaratory Judgment.

The lower court found that Arris did not have standing, since there was no Article III case in controversy, because there was no adverse legal relationship, or reasonable apprehension of imminent suit.

The Federal Circuit reversed the lower court, and relied on MedImmune’s standard of “the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.” MedImmune, 549 U.S. at 127.

Arris’ argument that it had standing because it suffered an economic injury, because of the likelihood that its customer would stop using its product, was quickly discarded. The Federal Circuit noted that MedImmune affirmed that economic injury alone is not sufficient to confer standing, and that an “adverse legal interest” was still required.

However, the unanimous court then turned around and stated that while the economic injury of having a customer accused of infringement is insufficient, the risk of contributory infringement charges is enough to provide standing for a declaratory action.  The court also noted the numerous communications between BT and Arris, and the fact that Arris was “directly and substantially involved in BT’s infringement and licensing negotiations.”

If you are a company accusing someone of infringement, be aware of the risk of an implied assertion that the supplier is committing contributory infringement.  If your communications imply such contributory infringement, and you communicate directly with that supplier, you are quite likely opening yourself up to a declaratory judgment suit.

Patent Law in a Global World

Judge Rader expressed his opinions about foreign rules, and the flaws of the U.S. system in some detail. He suggested that the fundamental job of the courts is to “facilitate not frustrate marketplace.” He also strongly suggested that the U.S. must continue improving its ability to innovate, and protect innovation, and that includes the ability to enforce patent rights.

Chief Judge Randall Rader of the Court of Appeals for the Federal Circuit spoke at Santa Clara University School of law, discussing Patent Law in a Global World.  He addressed questions from Julie Stephenson, Assistant General Counsel at Synopsys, Colleen Chien, Assistant Professor at SCU Law, and Marta Beckwith, Director of IP Litigation at Cisco Systems.

Judge Rader expressed his opinions about foreign rules, and the flaws of the U.S. system in some detail.  He suggested that the fundamental job of the courts is to “facilitate not frustrate marketplace.”  He also strongly suggested that the U.S. must continue improving its ability to innovate, and protect innovation, and that includes the ability to enforce patent rights.

Continue reading “Patent Law in a Global World”