It’s Time for the Supreme Court to Weigh in on Lower Courts’ Improper Use of Rules 56 and 36

Disclosure: Macedo, Goldberg and Dellaportas are counsel in the Petition for Certiorari discussed in this article.

On October 21, 2024, Island Intellectual Property LLC (Island) filed a Petition for Certiorari to the Supreme Court in Island Intellectual Property LLC v. TD Ameritrade, Inc. This case exemplifies two dangerous trends in patent cases.

First, district courts in patent cases are granting summary judgment while ignoring factual disputes and/or weighing evidentiary disputes against non-movants, thus depriving parties of their right to a jury trial under the Seventh Amendment.  Rather than police this inappropriate summary judgment procedure, the Federal Circuit, on appeal, has either ignored or encouraged a special patent case procedure in manner that in effect makes it so that Rule 56 seems not to apply like it would in other civil litigation.

Second, as proved to be the case in Island, the Federal Circuit is making matters worse by summarily affirming in single-word affirmances without any further guidance. The Federal Circuit’s now common practice of issuing one-word affirmances without providing a reasoned analysis under its Local Rule 36 is at odds with the overwhelming majority of appellate courts and is so overused that approximately one third of all patent appeals are now resolved with a single word.

The Island Petition thus presents the following two questions to the Supreme Court:

1. Do the Federal Rules of Civil Procedure apply to patent cases like any other federal case, including in particular FRCP 56 and its prescription against granting summary judgment when the nonmoving party presents evidence that raises material facts in dispute?
2. Is it proper for the Federal Circuit to use its own unique Local Rule 36 to affirm district court rulings with one-word decisions lacking explanation or analysis, when the grounds for affirmance are unclear in view of the arguments made on appeal?

The Petition

In Tolan v. Cotton, the U.S. Supreme Court observed, it is an “axiom” that, in ruling on a motion for summary judgment, “[t]he evidence of the nonmovant is to be believed, and all justifiable inferences are to be drawn in his favor.” 572 U.S. 650, 651 (2014) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, (1986)). “[A]t the summary judgment stage the judge’s function is not himself to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial.” Anderson, 477 U.S. at 249.

This axiom is so well recognized, one would expect the Supreme Court’s intervention should not be necessary to correct an error in the misapplication of a properly stated rule of law. However, as noted above, a disturbing trend has developed that requires the Supreme Court’s attention—the district courts and Federal Circuit are applying a different rule of law in patent cases, one that violates this axiom.

Lower courts have adopted a patent-specific practice in which judges substitute their own credibility determinations and unsubstantiated findings of fact, counter to well-stated pleadings in Rule 12 motions and non-movant’s evidence in Rule 56 motions. Like in Tolan, the Supreme Court’s exercise of supervisory authority is again required to confirm “the same common-law principles, methods of statutory interpretation, and procedural rules as other areas of civil litigation” also apply in patent cases. SCA Hygiene Prods. Aktiebolag v. First Quality Baby Prods., LLC, 580 U.S. 328, 340 (2017) (emphasis added).

In Island, the district court below ignored and misapprehended this well-established axiom. Petitioner, the non-movant, submitted evidence raising factual disputes over whether key elements of Claim 1 of the ‘286 patent were “well- understood, routine, [and] conventional” at the time of the invention. Mayo Collaborative Servs. v. Prometheus Labs., Inc., 566 U.S. 66, 73 (2012); see also Berkheimer v. HP Inc., 890 F.3d 1369 (Fed. Cir. 2018), cert denied, 140 S. Ct. 911 (Jan. 13, 2020) (No. 18-415).

The evidence presented, with all reasonable inferences drawn in favor of Petitioner, was more than sufficient for a reasonable jury to conclude that the claimed use of interest allocation procedures to provide, on a non-pro rata basis, interest to customers whose funds are held in aggregated accounts for an enhanced insured product, as required in Elements 1[F], [G] and [H] of the claim, was unconventional, non-routine and inventive at the time of the invention. Indeed, even Respondent’s expert had never seen it done prior to the patented invention.

Similarly, the evidence presented was more than sufficient for a jury to conclude that the use of aggregated accounts in the context of enhanced insurance products and deposit sweep products, and the particular database structure claimed, “comprising a respective balance of funds for each of … the respective client accounts … and information on funds held by each of … [the] clients … in the … aggregated deposit accounts” as required in Element 1[B], was also unconventional and non-routine at the time of the invention.

Yet, the district court neither credited the evidence of Petitioner nor drew “all reasonable inferences” in Petitioner’s favor regarding the disputed factual issue of whether these elements of the claims were “well-understood, routine, [and] conventional” at the time of the invention. Tolan, 572 U.S. at 660; Mayo, 566 U.S. at 73.

Rather than address this error, the Federal Circuit compounded the problem by affirming the clearly erroneous grant of summary judgment in a single word, using its own Local Rule 36. Despite Respondents offering alternative grounds for affirmance, the Federal Circuit’s single-word decision provided no explanation as to the court’s reasoning, leaving unknown the ultimate basis for the affirmance.

This is now typical at the Federal Circuit, with single-word affirmances used in roughly a third of all appeals. This is counter to the American appellate tradition and in stark contrast to the practice of most other appellate courts. See Charles R. Macedo et al., Justice is Not Silent: The Case Against One-Word Affirmances in the Federal Circuit, Patently-O, Sept. 22, 2024 (“Patently- O”).

The Patent-Specific Summary Judgment Standard Being Applied by Lower Courts Runs Afoul of Rule 56 and the Tolan Axiom

Patentability evaluations under 35 U.S.C. §§ 101, 102, and 103 are “factual determinations” both at the USPTO and in resolving an “invalidity defense in an infringement action.” Microsoft v. i4i L.P., 564 U.S. 91, 95-97, 100 (2011). This extends to the two steps of the Alice/Mayo framework, each of which includes a comparison of the claims to historical fact.

Step 1. At Alice/Mayo Step 1, courts “must first determine whether the claims at issue are directed to a patent-ineligible concept”. Alice Corp. v. CLS Bank Int’l, 573 U.S. 208, 218 (2014). In both Alice and Bilski, the Court determined “intermediated settlement” (Alice) and “hedging risk” (Bilski) were abstract since each was “a fundamental economic practice long prevalent in our system of commerce”. Id. at 218-19; Bilski v. Kappos, 561 U.S. 593, 609. 612 (2010). (emphasis added).

The Court did not make these patent-ineligible concept determinations in a vacuum. Instead, the Court relied on evidence: textbooks and articles which demonstrated the “long prevalent” and “building block” nature of the claimed invention. This is a question of historical fact that must be supported with evidence, as was done in Alice Corp. v. CLS Bank Int’l, 573 U.S. 208, 219 (2014)  and Bilski v. Kappos, 561 U.S. 593, 611 (2010).

Step 2. At Alice/Mayo Step 2, courts “must examine the elements of the claim to determine whether it contains an ‘inventive concept’ sufficient to ‘transform’ the claimed abstract idea into a patent- eligible application.” Alice, 573 U.S. at 221 (quoting Mayo, 566 U.S. at 72, 80). While “‘well-understood, routine, conventional activities’ previously known in the industry” are not enough to transform a claim, non-routine, unconventional or inventive elements are. Alice, 573 U.S. at 225 (quoting Mayo, 566 U.S. at 73).

Whether an invention is “conventional” or “unconventional” “is a question of fact,” as the full court of the Federal Circuit has recognized. Berkheimer v. HP, 890 F.3d at 1370 (Moore, J., concurring). This follows common sense—courts must rely on evidence, including the testimony of experts in the field, and an examination of the prior art, to understand how the state of the art has evolved over time and to determine what is conventional (and not) at a given point in time.

It is axiomatic that, in ruling on a motion for summary judgment, “[t]he evidence of the nonmovant is to be believed, and all justifiable inferences are to be drawn in his favor.” Tolan, 572 U.S. at 651 (quoting Anderson, 477 U.S. at 255). Accordingly, a court is limited in its ability to weigh disputed facts: “Credibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge.” Anderson, 477 U.S. at 255. Courts may not substitute their judgment for the factfinder’s.

As the Supreme Court has also long recognized, resolving an issue of fact (such as invalidity) requires resorting to “basic, primary or historical facts: facts ‘in the sense of a recital of external events and the credibility of the narrators.’” Thompson v. Keohane, 516 U.S. 99, 109-10 (1995) (quoting Townsend v. Sein, 372 U.S. 309 n.6 (1963) (quoting Browning v. Allen, 344 U.S. 443, 506 (1953)).

In Island, however, as in Tolan, the courts below deviated from the Supreme Court’s framework. Despite being presented with more than sufficient evidence to establish material factual disputes, the courts below either ignored or weighed the evidence against Petitioner as the non-moving party. This error embodies a gross misapprehension of the summary judgment standard and the applicability of the Tolan axiom to patent cases.

This case is not a “one-off.” Berkheimer, and the axioms of Tolan and Anderson, are too often forgotten in patent cases under the Federal Circuit’s supervision, with lower courts substituting their own judgment for time-dependent historical facts. As discussed in the Petition, courts also analogize cases to previous Federal Circuit decisions when determining that a patent involves ineligible subject matter, ignoring, inter alia, that the analysis must be conducted by looking at the specific time period of the invention.  See, e.g., USC IP P’ship, L.P. v. Meta Platforms, Inc., No. 2022-1397, 2023 U.S. App. LEXIS 22914, at *6 (Fed. Cir. Aug. 30, 2023); Savvy Dog Systems, LLC v. Pennsylvania Coin, LLC, No. 2023- 1073, 2024 U.S. App. LEXIS 6702 (Fed. Cir. Mar. 21, 2024); Broadband iTV, Inc. v. Amazon.com, 113 F.4th 1359, 1371 (Fed. Cir. 2024). This is wrong and must be rectified.

The Federal Circuit’s Use of Local Rule 36 Subverts U.S. Appellate Tradition and Requires the Supreme Court’s Supervision

On appeal, the Federal Circuit affirmed the district court’s decision in Island under Local Rule 36, providing no explanation except for citation to Local Rule 36. It has taken a similar tack in nearly one-third of its recent decisions. See Patently-O, supra.

This is problematic for many reasons.

At a fundamental level, explanations are needed to provide transparency and assurance to litigants that the court properly considered the arguments before it. See, e.g., Couveau v. Am. Airlines, Inc., 218 F.3d 1078, 1081 (9th Cir. 2000) (failing to provide reasoning behind a decision “increases the danger that litigants, whether they win or lose, will perceive the judicial process to be arbitrary and capricious”). Moreover, as former D.C. Circuit Chief Judge Wald has written, “[t]he discipline of writing even a few sentence or paragraphs explaining the basis for the judgment insures a level of thought and scrutiny by the court that a bare signal of affirmance, dismissal, or reversal does not.” Patricia M. Wald, The Problem with the Courts: Black-robed Bureaucracy, or Collegiality Under Challenge?, 42 Md. L. Rev. 766 (1983). And, as Justice Cardozo has explained, the long appellate tradition of explaining decisions plays the important role of “declaring justice between man and man, but of settling the law.” Benjamin N. Cardozo, Jurisdiction of the Court of Appeals (2d ed. 1909) § 6.

In marked contrast, commentators and litigants alike have explained that Local Rule 36 causes a litany of ills, including:

• creating distorted views of the law, see Paul R. Gugliuzza & Mark A. Lemley, Can a Court Change the Law by Saying Nothing?, 71 L. Rev. 765 (2018);
• undermining the appellate review process by biasing results towards affirmance, see Lucas Thrun, US Inventor Urges CAFC to Review Implementation of Rule 36;
• not providing substantial review but merely being a docket management tool, see Gene Quinn & Steve Brachmann, No End in Sight for Rule 36 Racket at Federal Circuit,; and
• functioning as an abdication of the Federal Circuit’s responsibility to develop patent law. See Peter Harter & Gene Quinn, Rule 36: Unprecedented Abuse at the Federal Circuit.

Former Federal Circuit Chief Judge Paul Michel has described it as “a dereliction of duty [for the Federal Circuit] not to explain their reasoning … in order to remain consistent with their mission to clarify the patent law.”

If the claims at issue in Island had not arisen under patent law, it is unlikely that they would have received the same abbreviated treatment. Although FRAP 36 does not preclude appellate courts from issuing judgements without opinions, the Federal Circuit’s sister circuits typically refrain from doing so.

Indeed, the volume at which the Federal Circuit issues one-word affirmances far exceeds its sister circuits. On average, over the past ten years, the Federal Circuit has issued one-word affirmances in approximately 35% of cases appealed from a district court or the USPTO. See Patently-O, supra. According to its website, as of September, it had issued Local Rule 36 judgments in nearly 30% of such cases.

In contrast, the Federal Circuit’s sister circuits either do not expressly authorize one-word affirmances or only rarely use them. The First, Second, Third, Fourth, Sixth, Seventh, Ninth, Eleventh, and DC Circuits do not have local rules authorizing judgments without opinions and do not issue one-word affirmances in practice. As of late September, of the three other circuits that permit one-word affirmances or judgments without opinion, this year, only the Fifth Circuit issued any, and in only two cases. Ordinarily, the Fifth Circuit’s practice is to provide at least a cursory explanation. See, e.g., Gilliard v. Limestone Cty. DA Office, No. 23-50378, 2024 U.S. App. LEXIS 2734, at *1 (5th Cir. Feb. 6, 2024) (“Appellant has not identified any reversible error in the district court’s dismissal of his claims.”).

What’s at Stake

The Supreme Court should address these issues, as otherwise, litigants in patent cases will continue to be deprived of their right to a jury and ability to address unfavorable decisions on appeal. Without intervention, district courts will continue to misapply FRCP 56, and the Federal Circuit will continue to issue one-word affirmances in cases that require more clarification.