Alston & Bird LLP's weekly Federal Circuit Patent Case Summaries are published by Wolters Kluwer Law & Business as part of its Aspen Publishers product line. The following is a summary of the precedential patent-related opinions issued by the Court of Appeals for the Federal Circuit for the week ending on the date below.
Patent Case Summaries for the Week Ending July 13, 2012
Daniel Huynh and Michele Glessner prepared the summaries in this issue.
Case Summaries
Character of a Patent: Statutory Subject Matter
Patentable Invention: Utility: Patentable Subject Matter
CLS Bank International, et al. v. Alice Corp., No. 11-1301 (Fed. Cir. (D.D.C.) July 9, 2012). Opinion by Linn, joined by O’Malley. Dissenting opinion by Prost.
In reversing the district court’s decision on summary judgment that invalidated four patents, the Federal Circuit ruled that 35 U.S.C. § 101 does not preclude patents directed to computer-implemented methods, systems, or products unless it is “manifestly evident” that they cover an abstract idea.
Alice Corporation (“Alice”) owns several patents covering a computerized trading platform for exchanging obligations between two parties to eliminate “settlement risk.” Settlement risk is the risk that only one party will pay its obligation owed to the other party. The patents disclose using an intermediary to eliminate the risk by either (1) exchanging both parties’ obligations or (2) exchanging neither obligation. The intermediary ensures that each party can pay its obligations by managing “shadow accounts” for each party and monitoring each party’s debit and credit transactions to ensure each respective “shadow account” would have enough funds to pay the party’s obligations. In May 2007, CLS Bank International and CLS Services Ltd. (“CLS Bank”) filed a suit against Alice seeking, among other things, a declaratory judgment that the first three issued Alice patents are invalid. Subsequently, CLS Bank moved for summary judgment that the Alice patents are invalid under 35 U.S.C. § 101. The U.S. District Court for the District of Columbia denied the parties’ cross motions for summary judgment as to subject matter eligibility without prejudice to re-filing following the Supreme Court’s decision on certiorari in In re Bilski, 545 F.3d 943 (Fed. Cir. 2008). In May 2010, the fourth Alice patent was issued. Thereafter, Alice filed amended counterclaims asserting infringement of all claims of the new patent. The district court granted CLS Bank’s motion for summary judgment ruling that each of Alice’s patents is invalid for failure to claim patent eligible subject matter.
The Federal Circuit acknowledged that all inventions “at some level embody . . . abstract ideas.” In holding that the Alice patents cover patentable subject matter, the Federal Circuit held that, after considering the claims of a patent, if “the single most reasonable understanding is that a claim is directed to nothing more than a fundamental truth or disembodied concept, with no limitation in the claim attaching the idea to a specific application,” then it would be deemed inadequate under § 101. In applying this reasoning, the Federal Circuit looked at the underlying invention for patent eligibility purposes and focused less on the form of the claim as drafted. The majority recognized that the mere recitation of a computer cannot render an abstract idea patent eligible. To that end, the court further analyzed “whether the asserted claims are substantially directed to nothing more than a fundamental truth or disembodied concept without any limitation in the claims tying that idea to a specific application” by considering the scope and content of the claims. Although the computer implementation would satisfy the “machine” prong of the machine-or-transformation test, the Federal Circuit held that, unlike the Bilski line of cases, the recitation of “shadow accounts” by an intermediary was deemed an application of an abstract idea in a specific manner.
Judge Prost, in dissent, stated that to be patent eligible, § 101 requires an “inventive concept,” and the majority failed to inquire whether the asserted claims include the requisite “inventive concept.” Judge Prost cautioned that the majority departed from the Supreme Court’s mandate to apply a stricter subject matter standard.
http://www.cafc.uscourts.gov/images/stories/opinions-orders/11-1301.pdf
Character of a Patent: Attributes of Ownership: Employee Obligation to Assign
Preston v. Marathon Oil Co., et al., Nos. 11-1013, -1026 (Fed. Cir. (D. Wyo.) July 10, 2012). Opinion by O’Malley, joined by Bryson and Dyk.
In affirming the U.S. District Court for the District of Wyoming’s decision declaring that an inventor automatically assigned his rights to two patents to his employer, the Federal Circuit held that the inventor was obligated by his employment contract to assign rights to a patentable invention when he conceived of the invention before the start of employment, but reduced it to practice during his employment.
As part of his employment with a wholly owned subsidiary of Marathon Oil Company (“Marathon”), Yale Preston (“Preston”) signed an employment agreement that in relevant part defined intellectual property to mean “all inventions . . . made or conceived by EMPLOYEE during the term of employment with MARATHON which (1) relate to the present or reasonably anticipated business of the MARATHON GROUP, or (2) were made or created with the use of Confidential Information or any equipment, supplies, or facilities of the MARATHON GROUP.” Preston devised an improvement for extracting methane gas from water-saturated coal in a coal bed methane gas well using a baffle system. Eventually, Preston was in contact with Marathon engineers and created drawings of the baffle invention. Thereafter, Preston hired a company on Marathon’s behalf to manufacture the invention and participated in the installation of the baffle system. Preston contends that he conceived the baffle system invention prior to his employment with Marathon; however, Preston never physically constructed the invention until after he was employed by Marathon. Soon thereafter, Marathon began its internal patent process listing Preston as a co-inventor, and Preston filed a patent application for the baffle system two months after his employment with Marathon ended listing himself as the sole inventor.
Preston filed a complaint in the district court asserting counts for, among other things, patent infringement and a declaration that Preston is the sole inventor of the baffle system. Marathon counterclaimed for a declaration that Preston had agreed to assign his rights to the patent to Marathon. The district court ruled that Marathon acquired a shop right to the baffle system invention and that Preston was required to assign his interest to the baffle system patents to Marathon. On appeal, Preston challenged the district court’s summary judgment ruling as to Marathon’s shop right and the judgment as to ownership.
In affirming the district court’s ruling, the Federal Circuit held that the plain language of the contract indicated that any “invention” that is “made or conceived” by an employee of Marathon constitutes “Intellectual Property” under Preston’s employment contract. The Federal Circuit held that Preston must have made and conceived the invention prior to his employment with Marathon in order to avoid Marathon acquiring ownership of the patent. However, the Federal Circuit noted that the outcome is true based on the plain reading of the contract and not because patent law requires both conception and reduction to practice. Because, under the contract, assignment of the patents was automatic, the Federal Circuit vacated the district court’s judgment that Preston was in breach of his agreement for failure to assign his rights.
http://www.cafc.uscourts.gov/images/stories/opinions-orders/11-1013-1026.pdf
Patent Office Procedures: Interferences
Litigation Practice and Procedure: Jurisdiction: Generally
Loughlin, et al. v. Ling, et al., No. 11-1432 (Fed. Cir. (B.P.A.I.) July 11, 2012). Opinion by Lourie, joined by Rader and Moore.
The Federal Circuit affirmed the judgment of the Board of Patent Appeals and Interferences (“the Board”), canceling Claim 1 of U.S. Patent No. 7,434,426 (“the ’426 patent”) pursuant to a request for adverse judgment in light of the Board’s decision on the relationship between 35 U.S.C. § 135(b)(2) and 35 U.S.C. § 120. In so doing, the Federal Circuit held that the interfering claims of Renny Tse-Haw Ling and Chun-Sheng Wu (collectively “Ling”) were not barred by § 135(b)(2).
The appeal arises from an interference proceeding under 35 U.S.C. § 135(a) between the ’426 patent and Ling’s Application No. 11/671,404 (“the ’404 application”), both claiming a multiple function lock. On May 13, 2004, Robert Loughlin and John Loughlin (collectively “Loughlin”) filed a patent application that was published on November 18, 2004. The application issued as the ’426 patent on October 14, 2008. On February 5, 2007, Ling filed the ’404 application, which was granted priority under § 120 from a prior application filed on January 13, 2004. Subsequently, Ling sought to provoke an interference by copying claims from Loughlin’s application. Claim 31 in Ling’s application was identical to Claim 42 of Loughlin’s application, which eventually issued as Claim 1 of the ’426 patent. As a result, the U.S. Patent and Trademark Office declared an interference between Claim 1 of the ’426 patent and Claim 31 of Ling’s application. Loughlin asserted that Ling was barred by § 135(b)(2), which states that “[a] claim which is the same as, or for the same or substantially the same subject matter as, a claim of an application published under section 122(b) of this title may be made in an application filed after the application is published only if the claim is made before 1 year after the date on which the application is published.” Loughlin argued that Ling’s attempt to copy the claim was untimely since Ling’s ’404 application was actually filed more than one year after the publication date of the Loughlin application.
In affirming the Board’s judgment, the Federal Circuit first held that the Board’s decision on priority is a final, adverse judgment over which the Federal Circuit has jurisdiction. Next, the court held that the bar imposed by § 135(b)(2) does not apply to Ling’s application because § 120 is applicable when considering whether an application is filed after the date on which another application is published. The Federal Circuit reasoned that the Board correctly interpreted “an application filed” in § 135(b)(2) to include the possibility of claiming benefit under § 120 to an earlier effective filing date. Thus, Ling was not barred by § 135(b)(2) from copying the claims of the Loughlin application to invoke interference proceedings.
http://www.cafc.uscourts.gov/images/stories/opinions-orders/11-1432.pdf
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