June 2, 2014

Emerging Trends: Supreme Court Continues to Narrow Patent Protection Scope

On June 2, the US Supreme Court issued two patent decisions in what has been an unusually IP-heavy (and particularly patent-heavy) term. Both decisions unanimously reversed the Federal Circuit, each with the potential to narrow the scope of patent protection.   

In this Emerging Trends feature, Kaye Scholer Intellectual Property Department Co-Chair and Partner Aaron Stiefel, along with Partners Ben Hsing and Bill Tanenbaum, Counsel Dina Hayes, and Associates Paul Margulies and Nicole Buck answered some questions about the impact of the high court’s most recent patent proclamations.

Limelight Networks, Inc. v. Akamai Technologies, Inc.

Q. Can you briefly summarize the Limelight v. Akamai decision?

In Limelight Networks, Inc. v. Akamai Technologies, Inc., the Supreme Court reversed an en banc decision of the Federal Circuit which had held that a party may be liable for inducing infringement under 35 U.S.C. § 271(b) if it carries out some steps of a patented method claim and encourages others to carry out the remaining steps of the patented method. Under the Federal Circuit’s standard, a party could be liable for inducing infringement, even in the absence of a direct infringer practicing the entire patented method. The Supreme Court rejected the Federal Circuit’s view, adhering instead to the principle that liability for inducement may arise only where direct infringement occurs. In somewhat harsh language, the Supreme Court stated: “The Federal Circuit fundamentally misunderstands what it means to infringe a method patent. A method patent claims a number of steps; under this Court’s case law, the patent is not infringed unless all the steps are carried out.”   

Q. What are your thoughts on the possible impact of Limelight v. Akamai?

The Supreme Court’s decision will have an impact where the nature of the method claims is such that the various steps are performed by multiple parties. In such instances, the patentee will have no claim for direct infringement and no claim for inducing infringement.

Q. Might any industries be particularly affected by this decision?

The Supreme Court’s decision may arguably pose some challenges to the pharmaceutical industry. Some method of treatment patents may require more than one entity to perform all of the claimed steps—for example, multiple doctors or doctors and pharmacists. Thus, for these patents, there may be no underlying direct infringement since no single entity would perform all of the claimed steps. The Supreme Court’s ruling is likely to make these method of treatment patents more difficult to enforce.

However, this battle is not over. The Supreme Court basically invited the Federal Circuit to revisit its Muniauction case, which had held that liability for direct infringement under section 271(a) requires performance of all steps of a method patent to be attributable to a single entity. The Supreme Court expressly declined to address the merits of the rule stated in Muniauction. On remand, the Federal Circuit could overrule the Muniauction case or rule that under certain circumstances direct infringement may not require performance of all the steps of the claimed method to be attributable to a single party.

Nautilus, Inc. v. Biosig Instruments, Inc.

Q. Can you briefly summarize the Nautilus v. Biosig decision?

In Nautilus, Inc. v. Biosig Instruments, Inc., the Supreme Court vacated a decision of the Federal Circuit which had upheld the validity of the patent under the Federal Circuit’s- standard for definiteness pursuant to 35 U.S.C. § 112, i.e., that the claim is “amenable to construction” and not “insolubly ambiguous.” Essentially adopting the standard proposed to the Court by the Dept. of Justice, the Court articulated a new and somewhat stricter definiteness requirement: “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.” 

Q. What are your thoughts on Nautilus’ possible impact?

While the Supreme Court’s decision in Nautilus v. Biosig is, in substance, not a drastic departure from the preceding body of law governing indefiniteness, the Court has certainly tightened up the definiteness test by going back to the language of the statute itself. The new standard may encourage accused infringers to challenge the definiteness of patents particularly because the definiteness standard, as previously articulated, was quite low.  

It is unclear, however, how many patents that were sufficiently definite under the Federal Circuit standard will fail under the new standard. As a practical matter, the revised standard may not result in many more patents being invalidated on indefiniteness grounds. The Supreme Court acknowledged that the “Federal Circuit’s fuller explications of the term ‘insolubly ambiguous’ . . . may come close to tracking the statutory prescription.” In other words, the new standard may not represent a  major substantive shift. However, the Supreme Court was troubled by the Federal Circuit’s terminology which, in the Court’s view, could “leave courts and the patent bar at sea without a reliable compass.”

Q. How does the Nautilus v. Biosig decision affect the software patent industry, specifically? 

By drawing the focus of the definiteness analysis back to how one of ordinary skill would understand the patent, the Nautilus v. Biosig decision requires drafters of software patents to be diligent in their complete and thorough patent application disclosures. Justice Ginsburg did an excellent job articulating the “tug” between the forces of precision and uncertainty which pull in different directions when encouraging innovation within the bounds of the patent laws.

Q. What are some of the most prominent impacts the decision will have on patent law, and the industries involved? 

The Nautilus v. Biosig decision is one that impacts all industries equally. It should be most relevant in challenges to patents that are being enforced a number of years past their issuance. At a time when technology changes so rapidly, the vulnerable patents are those where the intrinsic record as viewed by one of ordinary skill in the art cannot (with reasonable certainty) be understood to cover the newer technologies.

Q.  Will the ruling hamper enforcement efforts of vague and/or overly broad patents? If so, why? If not, why not? 

Given that the Nautilus decision raises the definiteness standard, the decision likely will result in more validity challenges on validity grounds.  It remains to be seen whether more patents will, in fact, be invalidated under the new standard.

Q. Will the ruling hamper patent trolls? If so, why? If not, why not? 

While opponents of patent trolls did urge the Court to tighten the definiteness standard, the Nautilus decision should not ultimately affect one type of industry or class of patent owners more than others. It does however demonstrate an attempt to reign in the Federal Circuit’s reading of patent law requirements back to the language of the statutory provisions, which may be a common thread between the newly issued (Limelight) and pending (CLS v. Alice) cases before the Supreme Court.  

Q. Any closing thoughts on the two decisions, issued on the same day, in a joint context?

Although Nautilus involves a standard applicable to all patents, the resulting change in the law may be more form than substance. Limelight involves a standard limited to method claims and inducement allegations, but the substantive impact of the Limelight decision is clear.

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