Case Studies

Case Note: Bilski and Its Progeny

In Bilski v. Kappos the Supreme Court addressed, inter alia, the patentability of business methods and other such process claims. Prior to the Supreme Court’s decision, the Court of Appeals for the Federal Circuit had determined that patentability of process claims should be determined under the “machine or transformation” test. If a patent was tied to a particular machine or apparatus, OR transformed a particular article into a different state or thing, then it was capable of being awarded a patent.

The Supreme Court declined to adopt this test as the sole test for patentability. Instead, the Supreme Court determined that the machine or transformation test would be one factor that impacted the determination of patentability, albeit an important factor. The Supreme Court refused to supply a new test for patentability, and reemphasized that 35 U.S.C. § 101 governs the standards for whether certain subject matter is patent-eligible. Thus, the Supreme Court reasoned that any subject matter may be patent-eligible if it satisfies the “new and useful” standard of §101 so long as the subject matter claimed is not an abstract idea.

While the Supreme Court’s ambivalence regarding the machine or transformation test served to obfuscate the standard for patentability for process claims, the Supreme Court did clarify the notion of an “abstract idea.” Notably, laws of nature, natural phenomena, and abstract ideas are not patentable. Claims that seek to claim one of the aforementioned principles are not patentable, however, claims which seek to foreclose others from using a particular application of a law of nature, natural phenomenon or abstract idea may be patentable.

Recently, the Federal Circuit has clarified the notion of an abstract idea in both Prometheus v. Mayo, 2008-1403 (Fed. Cir. Dec. 17, 2010) an RCT v. Microsoft, 2010-1037 (Fed. Cir. Dec. 8, 2010). In Prometheus, the Federal Circuit held that a method for administering and subsequently determining the level of toxicity caused by a drug, 6-MP was patent-eligible under §101. The court determined that this method was not claiming a natural phenomenon, but instead claiming a particular application of a natural phenomenon. Further, the Federal Circuit found that the claims at hand recite transformative “administering” and “determining” steps that satisfy the machine-or-transformation test, thus providing a an important clue that the method satisfies §101. Meanwhile, in RCT, the Federal Circuit refrained from applying the machine-or-transformation test, and instead found the methods for digital halftoning to be patent-eligible because they were “functional and palpable applications in the field of computer technology.” The court reasoned that an invention providing such a contribution to the field of computer technology could not be so abstract, as to be beyond the vast, but limited, scope of §101.

KSR v. Teleflex

In KSR v. Teleflex, the Supreme Court addressed the doctrine of non-obviousness that had been developed by the Federal Circuit via the use of a "teaching-suggestion-motivation" (TSM) test. The case involved a patent, held by Teleflex, which disclosed in one of its claims an adjustable automobile gas pedal with a drive-by-wire sensor mounted at the pedal's pivot point. KSR had previously developed an adjustable pedal with a mechanical linkage; however, when chosen by GM to supply adjustable pedals for trucks with computer-controlled throttles, KSR added a sensor to its design and Teleflex sued for infringement. The District Court granted Summary judgment and the Federal Circuit reversed, holding that the District Court did not apply the TSM test strictly enough, as the prior art referenced in the Teleflex patent did not precisely address the specific problem that the patent was to solve and would thus not motivate an inventor to look at those references.

The Supreme Court reversed, holding that the Federal Circuit addressed the question of obviousness in a "narrow, rigid manner," and that a person of ordinary skill in the relevant art would readily be able to grasp the concept of mounting a sensor on a fixed pivot point of an adjustable pedal. Therefore, the Supreme Court held, the patent was invalid due to obviousness.

The decision of the Supreme Court makes it much easier to invalidate patents based on obviousness, as one will now have to consider whether an invention was the product of innovation or simply a combination of the prior art. Since the PTO examines every patent application for obviousness, this decision will have an impact both on the litigation and prosecution aspects of patent law practice.

In re Seagate

In Seagate, the Federal Circuit established a new standard for willfulness and enhanced damages in infringement cases and clarified issues of attorney-client privilege and work product protection created by reliance on advice of counsel as a defense to willful infringement. The Court's decision addressed three issues:  under what conditions a court may award enhanced damages for willful infringement; the scope of the privilege waiver triggered by reliance on advice of counsel; and whether the waiver encompasses trial counsel's work product.

The Federal Circuit first overruled its 1983 decision in Underwater Devices and held that proof of willful infringement that permits enhanced damages requires at least a showing of objective recklessness. The court abandoned the "affirmative duty of due care" standard of  Underwater Devices, which permitted a finding of willful infringement in cases that were more akin to negligence rather than willfulness. The court established a new standard where, to establish willful infringement, one must "show by clear and convincing evidence that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent." If that condition is satisfied, the patentee must further establish that the "objectively-defined risk…was either known or so obvious that it should have been known to the accused infringer."

The Court also significantly restricted the scope of privilege waiver, holding that a party's assertion of the advice of counsel defense to willful infringement does not constitute waiver of attorney-client privilege for communications with trial counsel. Furthermore, relying on opinion counsel's work product does not waive work product immunity with respect to trial counsel. However, in the presence of chicanery, for example, waiver of privilege may be extended to trial counsel.

As willful infringement is alleged in a large majority of cases due to the possibility of treble damages, a significant narrowing of the standard will have broad ramifications in patent litigation. Furthermore, the elimination of most waivers of privilege for trial counsel will make reliance on advice of other counsel less perilous.

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