Posts Tagged: "Rule 36"

Last week, Consumer 2.0, Inc. d/b/a Rently filed a combined petition for panel rehearing and rehearing en banc asking the U.S. Court of Appeals for the Federal Circuit (CAFC) to review its recent Rule 36 judgment affirming a decision of the United States District Court for the Eastern District of Virginia that Rently’s patent claims were ineligible. The district court found the claims, which were directed to “the use of lockboxes able to recognize time-limited codes and coordination of those codes with software to facilitate secure automated entry”, ineligible for patent protection under 35 U.S.C. § 101. Among other arguments, Rently noted that the case raised multiple issues that required en banc review, including whether unconventionality alone is sufficient to satisfy the inventive concept requirement under Section 101, whether the determination of unconventionality is one of law or fact, and whether a court is permitted to conduct a quasi-Section 103 analysis of obviousness without the protections against hindsight bias.

My company, Chestnut Hill Sound Inc. (ChillSound), has been victimized by a U.S. patent system that for nearly a decade has been in a sorry state. Changes wrought by the America Invents Act (AIA) in 2011 and other recent developments cost my company, its investors and inventors millions of dollars. These changes have allowed a large company to reap great profits at our expense. Even more unfortunately, our story is too typical of many other inventors and small companies. Small businesses are the backbone of our economy and need to be cultivated, as they are the most dynamic source of new jobs and competitive products and technologies. There have always been reports of large corporations stealing inventions from small businesses, but it used to be possible via the courts to vindicate the patent rights of owners and obtain ultimate redress.  The AIA—sold by the “efficient infringers” lobby as a measure to protect big business from the expense and nuisance of so-called “patent trolls”—has turned into a weapon of deep-pocketed big businesses that enables them to steal with impunity inventions from small businesses and independent inventors. The AIA brought with it the Patent Trial and Appeal Board (PTAB) and Inter Partes Review (IPRs), a post-grant adversarial proceeding at the United States Patent and Trademark Office (USPTO). As has been amply discussed here on IPWatchdog, the Court of Appeals for the Federal Circuit (CAFC) recently opined that the so-called Administrative Patent Judges (APJs) were unconstitutionally appointed from the beginning. Yet these unconstitutionally appointed APJs continue to kill patents, especially when the patent owner is a small company that has sued a large company for infringement, as was the case with ChillSound.

Chestnut Hill Sound, Inc. has filed a petition asking the U.S. Supreme Court to consider whether the Federal Circuit’s disparate practice with respect to issuing Rule 36 decisions for losing patent owner-appellants versus losing petitioner-appellants is constitutional. The petition includes statistics demonstrating that patent owner-appellants are three times more likely to receive a Rule 36 judgment than petitioner-appellants. Chestnut Hill’s petition cites statistics on the number of Rule 36 decisions being issued, which come from Larry Sandell’s article, What Statistical Analysis Reveals About Winning IPR Appeals, LAW 360 (August 8, 2019, 5: 22 PM). A footnote in the petition explains that the likelihood of patent owner-appellants receiving a Rule 36 affirmance is actually closer to 3.6 than 3. “Since a losing Patent Owner- Appellant has a 66% chance of receiving a Rule 36 opinion, and a losing Petitioner- Appellant has an 18% chance of receiving a Rule 36 opinion, a Patent Owner- Appellant is 3.6 times as likely to receive a one- word affirmation than a Petitioner- Appellant,” says the petition.

Next week, the Supreme Court will hear the first of six IP cases granted cert last term. On Monday, the Court will hear Peter v. NantKwest, in which the question presented is “Whether the phrase ‘[a]ll the expenses of the proceedings’ in 35 U.S.C. 145 encompasses the personnel expenses the USPTO incurs when its employees, including attorneys, defend the agency in Section 145 litigation.” The Court will heard other IP cases in November and December, while Google v. Oracle, Berkheimer v. HP, and Hikma v. Vanda await a decision on cert, and petitions in Straight Path IP Group, LLC v. Apple Inc., et al. and Athena Diagnostics v. Mayo Collaborative Services have the patent world holding its collective breath.

The Supreme Court has requested that Apple and Cisco file responses to Straight Path IP Group, LLC’s (SPIP’s) petition for certiorari in Straight Path IP Group, LLC v. Apple Inc., et al. The petition presents the following question: “Whether Rule 36(e) of the Federal Circuit’s Rules of Procedure violates the Fifth Amendment by authorizing panels of the Federal Circuit to affirm, with no explanation whatever, a District Court judgment resolving only issues of law.” SPIP filed its petition on August 23 and Apple and Cisco filed waivers of their right to respond on September 4 and 5, respectively. But on September 18, the Court requested that both companies file their responses by October 18.

Yesterday, the Federal Circuit once again breached a fundamental boundary of our American system of law. This particular transgression has occurred only a handful of times, but each is more ominous than the last. If this is allowed to stand, we can no longer be considered a democratic republic, but will have become a banana republic. What is rapidly becoming routine to the patent litigation industry will create shockwaves throughout the other 12 circuit courts, upend the rule of law, and damage our nation. In Chrimar Systems, Inc. v. Ale USA, Inc. FKA Alcatel-Lucent Enterprise USA, Inc. (Fed. Circ. Case No. 18-2420), the Federal Circuit allowed the Patent Trial and Appeal Board (PTAB) to overrule an Article III court and jury. That is, the Executive Branch of government directly and unequivocally has overruled the Judicial Branch, including a jury.

SPIP Litigation Group, LLC v. Apple, Inc. and Cisco Systems, Inc., No. 19-253., concerns four patents that have been the subject of decisions by the Patent Trial and Appeal Board (PTAB) and the Federal Circuit. More than 25 lawyers have participated in the litigation. The briefs and evidence in the trial court covered more than 2,500 pages. My client, on appeal from an adverse summary judgment, did not contend that the factual record failed to support that result. My client raised only two legal issues when it appealed to the Federal Circuit from the district court’s decision that the patents were not infringed. The appeal briefs covered 202 pages. Three Federal Circuit judges heard oral argument and issued their decision 12 days later. It read: “AFFIRMED. See Fed. Cir. R. 36.” Did the judges understand the technology any better than I do? No one can tell. Did my client deserve some explanation, even if exceedingly concise, from the judges? The petition I have now filed with the Supreme Court claims that the Federal Circuit judges deprived my client of a constitutional right by declaring, “You lose, but we won’t tell you why.”

This week in Other Barks & Bites: Chinese state political advisors suggest changes to the country’s copyright law, including stronger punitive measures for infringement; President Donald Trump bans Huawei telecommunications equipment from use on U.S. networks; Korean IP offices get ready to study inter-Korean IP cooperation; Huawei and Samsung reach a conclusion to their worldwide patent litigation; AbbVie okays a generic Humira treatment in 2023; Disney escapes Pirates of the Caribbean copyright suit unscathed; Guns N’ Roses files a trademark suit over a beer; Qualcomm enters into another worldwide patent license for 5G technology; and Procter & Gamble unveils its largest research and development center after $400 million upgrade to Ohio facility.

IPWatchdog has been closely following the growing trend of Rule 36 affirmances at the Federal Circuit. Perhaps one of the most widely publicized of these was the January 15 decision in VirnetX Inc. v. Cisco Systems, in which co-defendant Apple appealed a September 2016 jury verdict from the Eastern District of Texas awarding $302.4 million in damages to secure communications patent owner VirnetX. That verdict said that Apple had infringed two patents through its VPN On Demand and FaceTime services. While some might say a judgment that ultimately totaled more than $400 million after enhanced damages and interest warrants some kind of explanation, a look at the oral argument transcript suggests that this might be one where Rule 36 was actually appropriate—or, at least, expected. Nonetheless, “with $400 million at stake, the Federal Circuit at a minimum should have explained in a page or two why the decision below was so clearly correct, and Apple’s appeal was so clearly unnecessary,” said IPWatchdog’s Gene Quinn.

According to Federal Circuit Rules, a Rule 36 judgment can be entered without an opinion when it is determined by the panel that one of five conditions exist relating to the underlying decision being sufficient or exhibiting no error of law. In such cases, because a written opinion would not have precedential value, a judgment of affirmance without opinion is allowed.

The Federal Circuit use of Rule 36 has been well documented and extremely problematic. As of January 28, the Federal Circuit has issued 44 decisions in 2019. Of those 44 decisions, 24 have been Rule 36 judgments, which are simply one-word judgments that substantively say: “Affirmed.” Twenty of the decisions have been non-precedential decisions. So far in 2019, only 13 decisions of the Federal Circuit have been designated precedential. To do the math, this means 42.1% of the Court’s decisions have been Rule 36 judgments. More generally, combining Rule 36 and non-precedential opinions together, we see that 77.2% of the Court’s decisions are non-precedential, and only 22.8% are precedential.

Federal Circuit issued a Rule 36 summary judgment in Chart Trading Development, LLC v. Interactive Brokers LLC, affirming the invalidation of patent claims owned by Chart Trading in covered business method (CBM) proceedings instituted at the Patent Trial and Appeal Board (PTAB). In issuing the summary affirmance of the PTAB, the Federal Circuit panel of Circuit Judges Pauline Newman, S. Jay Plager and Kimberly Moore declined the opportunity to comment on Chart Trading’s arguments on the PTAB’s alleged due process violations by changing the construction of a key term in its final written decision… If the government can award a franchise and that franchise can be taken away in a manner that violates the APA, what is the point in seeking the government franchise in the first place? If the Court charged with making sure the agency that strips government franchises is following the rules is going to decide cases of such importance with only one word — Affirmed — one has to question whether a government franchise is at all a worthwhile pursuit.

During the week of October 8, 2018,  there were five cases involving patents that were decided without an opinion as a result of Rule 36 affirmances at the United States Court of Appeals for the Federal Circuit. Three of those cases were issued by panels including Chief Judge Sharon Prost. In two cases, the Federal Circuit upheld district court invalidations of asserted patents whereas another two affirmed rejections of applicants claims by the U.S. Patent and Trademark Office. The last case was a summary affirmance of a victory by German drugmaker Erfindergemeinschaft UroPep over Eli Lilly in the Eastern District of Texas.

Capella Photonics, Inc. has filed a petition for certiorari arguing that the Federal Circuit’s practice of issuing judgments without opinion pursuant to Federal Circuit Rule 36 in appeals from the Patent Trial and Appeal Board violates 35 U.S.C. § 144, which provides that the Federal Circuit “shall issue . . . its mandate and opinion” to the PTO in such appeals. 

Obviously, Judges cannot be experts on all things, but this apparent lack of understanding of something so fundamental to the case was a bit alarming for the patent owner. Surely, Judge Reyna would clear up his understanding of the difference between a web page and a web server after oral argument and realize that the arguments being made by the defendant were unnecessarily confusing, but also contradicted arguments previously made. Unfortunately, we will never know whether Judge Reyna continues to believe that a web page and a web server are the same thing, or whether the other Judges on the panel were equally confused, because the Federal Circuit issued a Rule 36 affirmance of the trial court’s decision