Biliski involved a patent claim for hedging the risk of price fluctuations in the economy.  The patent examiner rejected the patent application, explaining it “‘is not implemented on a specific apparatus and merely manipulates [an] abstract idea and solves a purely mathematical problem without any limitation to a practical application, therefore, the invention is not directed to the technological arts.”

The examiner’s rejection was affirmed by the Board of Patent Appeals and by the Federal Circuit Court.  However, in its en banc decision (that produced 5 separate opinions), the Federal Circuit took the additional step of declaring that a method was only patent eligible if: (1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a differentstate or thing.  This test is known as the “machine-or-transformation test.”

Because the vast majority of software applications are designed only for a “general purpose” computing machine, the question remained after the Federal Circuit’s Biliski opinion as to whether software patents were patentable at all.

The US Supreme Court affirmed the examiner’s rejection of this particular patent application, but rejected the “machine-or-transformation” test imposed by the Federal Circuit and, in its final opinion of the October, 2009 term, restored a degree of normalcy to patent practice in the United States.

The signature of this Supreme Court in the past 12 years of patent decisions has been to end the various “bright-line” tests for patentability established by the Federal Circuit Court of Appeals, in favor of “functional” tests that can only be determined in a courtroom, after input from expert witnesses on both sides of the patentability test.

This approach to patent law was continued in Biliski v. Kappos.  The majority opinion, authored by Justice Kennedy, used traditional rules of statutory construction to reach its opinion that the “machine-or-transformation” test was just one method for determining patentability of a business method patent–not the only method.

The majority reasoned that 35 U. S. C. §273(b)(1), in an infringement action, creates a prior-use defense against “a method in [a] patent;”  ipso facto §273 implies a broad definition of the statutory term “method.”  The Court explained:

For purposes of this defense alone, “method” is defined as “a method of doing or conducting business.” In other words, by allowing this defense the statute itself acknowledges that there may be business method patents. Section 273’s definition of “method,” to be sure, cannot change the meaning of a prior-enacted statute. But what §273 does is clarify the understanding that a business method is simply one kind of “method” that is, at least in some circumstances, eligible for patenting under §101.

The majority opinion reasoned that if business methods are not patentable in any circumstances, §273 would be rendered meaningless.  “This would violate the canon against interpreting any statutory provision in a manner that would render another provision superfluous.”

Thus, rather than adopting categorical rules that “might have wide-ranging and unforeseen impacts,” the Court resolved Biliski narrowly: (1) on the basis of standard statutory construction, and (2) on the basis of previous decisions (Parker v. Flook and Diamond v. Diehr) which show that petitioners’ claims are not patentable processes because they are attempts to patent abstract ideas.

In a separate opinion concurring in the result, Justice Stevens (in his last written opinion on the Court) rejected the majority’s approach to statutory construction in patent cases.  A long-time opponent of software patents, Justice Stevens argued that:

[T]he Court at points appears to reject the well-settled proposition that the term“process” in §101 is not a “‘process’ in the ordinary sense of the word,” Flook, 437 U. S., at 588. Instead, the Court posits that the word “process” must be understood in light of its “ordinary, contemporary, common meaning.”  Although this is a fine approach to statutory interpretation in general, it is a deeply flawed approach to a statute that relies on complex terms of art developed against a particular historical background. [Emphasis added.]

While there are many possibile interpretations of the Court’s opinion, I believe this focus is possibly the most instrucive to clients and counsel anticipating patent litigation: the Court will continue to decide patent cases according to standard rules of construction, while ignoring (for the most part) the complex terms of art developed against a particular historical background. Indeed, this has been the pattern of Court decisions for at least the past 12 years. See, The End of Bright-Line Tests in Patent Litigation.

General commercial litigation typically involves the standard rules of statutory construction applied by the US Supreme Court in Biliski.  However, historicially patent litigators have generally dealt with more constrained, concrete and predicatible rules of construction–more in keeping with the predicability desired by scientists and mathmeticians involved in the world of patenting. 

If there is an overriding lesson to take away from Biliski, I believe it is this: bright-line tests in patent litigation no longer exist (for the foreseeable future).  Going forward, patent litigation will require nuanced argument, with expert interpretation, similar to practice in general commercial litigation.  This will exponentially increase the cost burden associated with patent litigation.

The majority opinion was authored by Justice Anthony Kennedy; joined (except for sec. II) by Justice Scalia, and by the remainder of the conservative wing of the Court: Justice Thomas, Chief Justice Roberts and Justice Alito.   The makeup of this majority reflects the statutory-construction basis for the decision.

Mr. Justice Stevens’ concurring opinion was joined by the liberal wing of the Court: Justice Sotomayor, Justice Ginsberg and Justice Breyer.

The Federal Circuit Court explained:

“Anticipation” [under 35 USC §102] is a patent defense that must be based on a single prior art reference.  For a claim to be anticipated, each claim element must be disclosed, either expressly or inherently, in a single prior art reference, and the claimed arrangement or combination of those elements must also be disclosed, either expressly or inherently, in that same prior art reference.

“Obviousness” [under 35 USC §103] is a patent defense that may be based on multiple prior art references. Determining obviousness requires considering whether two or more pieces of prior art could be combined, or a single piece of prior art could be modified, to produce the claimed invention. This analysis typically invokes the familiar teaching-suggestion-motivation (“TSM”) test, asking whether a person having ordinary skill in the art would have found some teaching, suggestion, or motivation to combine or modify the prior art references.

“Anticipation” requires only one step to prove, if a single prior art reference is available.  If a single document teaches all elements of a patent, in the same arrangement, the single prior art reference can invalidate the target patent. (Subject to a clear and convincing evidence standard for issued patents).

“Obviousness” requires two steps to prove.  Even though multiple patents can be used as prior art references, there must also be a “teaching” that suggests a “motivation” to combine the prior art references into a single new invention (the “TSM” test).  The “suggestion” to combine can be provided by the references themselves, through another document, or via affidavit or declaration testimony of a person of ordinary skill in the art of the invention.

In its landmark decision on patent obviousness, KSR International Co. v. Teleflex, Inc., the US Supreme Court emphasized that motivation may be present even if a combination just was obvious to try:

“[c]ommon sense teaches . . . that familiar items may have obvious uses beyond their primary purposes, and in many cases a person of ordinary skill will be able to fit the teachings of multiple patents together like pieces of a puzzle.”

Thus, [w]hen there is a design need or market pressure to solve a problem and there are a finite number of identified, predictable solutions, a person of ordinary skill has good reason to pursue the known options within his or her technical grasp. If this leads to the anticipated success, it is likely the product not of innovation but of ordinary skill and common sense. In that instance the fact that a combination was obvious to try might show that it was obvious under [35 U.S.C.] § 103.

In one of the two cases referenced above, Comaper v. Best Buy, a jury found that the main independent claims for a computer fan housing were not obvious; but the dependent claims were obvious.  On post-trial motions, counsel argued it was logically impossible for independent claims to be non-obvious while the claims upon which they depend to be obvious. 

The district court rejected these arguments under an analysis that seemed (to the Federal Circuit) to require a single prior art teaching in order to find obviousness.  Pointing out the district court’s legal and logic flaws, the Federal Circuit explained that the “single prior art” teaching governs anticipation, not obviousness.  The Federal Circuit then went on to find that the claimed invention was obvious as a matter of law once multiple available prior art references were considered from the vantage point of one of ordinary skill in the art.

In the other case referenced above, Theronese v. Beckton, the district court instructed the jury that “anticipation” could be found if a single reference taught one skilled in the art that “all of the claimed elements could have been arranged as in the claimed invention.”

The Federal Circuit Court rejected this instruction, again because of an inherent logical flaw: it was logically possible that individual claim elements “could have been arranged” in a way that is not itself described or depicted in the anticipatory reference.

The Federal Circuit Court explained:

Inherency may not be established by probabilities or possibilities. The mere fact that a certain thing may result from a given set of circumstances is not sufficient.

For a claim to be anticipated, each claim element must be disclosed, either expressly or inherently, in a single prior art reference, and the claimed arrangement or combination of those elements must also be disclosed, either expressly or inherently, in that same prior art reference.

The defenses of “anticipation” and “obviousness” are related, but different.  And as the Federal Circuit Court’s opinions imply, a periodic refresher in the set theory analysis can also be useful to patent litigation practitioners.

See the related article: The End of Bright-Line Tests in Patent Litigation.

But what does it mean to “actively induce” infringement? 

Inducement requires a showing of specific intent to encourage another’s infringement. The Federal Circuit is now developing the definition of “intent” required for active inducement, one case at a time.

In a 2006 case, DSU Med. Corp. v. JMS Corp., The Federal Circuit ruled:

The plaintiff must show that the alleged infringer knew or should have known that his actions would induce actual infringements. This requirement necessarily includes the requirement that he or she knew of the patent.

In other words, it is not enough to just induce the act of direct infringement. Without knowledge of the patent itself, a person cannot induce infringement for the purposes of §271(b). 

But an important unresolved question remained after under DSU Med Corp.: must “knowledge” of the patent be “actual” knowledge, or will “constructive” knowledge suffice?

The Federal Circuit addressed this question in a recent (Feb. 2010) case, SEB v. Montgomery Ward., finding “constructive knowledge” for the purpose of inducing infringement where a person deliberately disregards a known risk that a patent exists. 

The Court ruled: ”[A] claim for inducement is viable even where the patentee has not produced direct evidence that the accused infringer actually knew of the patent-in-suit.”

In the SEB case, the record showed no direct evidence that the defendant had actual knowledge of the patent.  However, the record showed the defendant copied a new-and-improved rice cooker by having it designed and built in Hong Kong, and then imported to the United States.  The defendant also hired an attorney to conduct a right-to-use study, but did not tell him that it had based its new rice cooker on the product sold by the plaintiff. 

The Federal Circuit found this conduct a deliberate disregard of the known risk that plaintiff had a patent.

Following the rationale of other courts, the Federal Circuit explained that:

“[S]pecific intent” in the civil context is not so narrow as to allow an accused wrongdoer to actively disregard a known risk that an element of the offense exists. See Crawford-El v. Britton, 951 F.2d 1314, 1318 (D.C. Cir. 1991) (equating specific intent and deliberate indifference); Boim v. Holy Land Found. for Relief & Dev., 549 F.3d 685, 693 (7th Cir. 2008) (equating intentional misconduct with knowledge and deliberate indifference).

The Federal Circuit further explained that “a failure to inform one’s counsel of copying would be highly suggestive of deliberate indifference in most circumstances.”

The Court closed its opinion with a dictum to be addressed in the future:

Our opinion does not purport to establish the outer limits of the type of knowledge needed for inducement. For instance, a patentee may perhaps only need to show constructive knowledge with persuasive evidence of disregard for clear patent markings, similar to the constructive notice requirement in § 287(a).

Apparently, the Federal Circuit intends to further develop the “intent” requirement for inducing infringement in future cases, as proper fact patterns are presented.

Prevailing counsel in SEB SA v. T-Fal Corp. was Norman H. Zivin

The Federal Circuit panel included: Judge Randall R. Radar, Judge William C. Bryson and Judge Richard Linn.

The Southern District of New York judge in the case below was Judge Steven C. Robinson.

All five patents referred to a common specification. The specification makes clear that fax messages are sent and received over a switched telephone network using fax protocol. At the Markman hearing, the district court limited the patents to communications routed over a switched telephone network.

The defendant has a later-generation fax technology that relies on IP protocol instead of fax protocol. The defendant’s system converts messages into formats other than fax protocol before storing or forwarding the messages and then transmits the messages to their intended destinations via SMTP, HTTP, or HTTPS protocol over the Internet.

Based on this difference in protocols, the district court entered summary judgment of non-infringement.

Catch Curve argued on appeal the patent claims are not limited to a specific protocol. According to Catch Curve, a fax message refers to the “image data” that is transmitted by a fax machine, independent from the transmission protocol used. This argument, however, ignores the specification, which specifies that fax messages are sent and received over a switched telephone network using fax protocol.

In patent claim construction, the metes and bounds of claims are restricted to the embodiments (practical examples) of the invention set out by the inventor in the specification.

The claims are always read in the context of the specification, and may not exceed the embodiments set forth in the specification by the inventor.

In the instant case, because the specification was first filed in 1988, a reference to “existing fax terminal machines” pertains to technology as it existed at that time. Nothing in the specification suggests that the fax messages of the invention are converted to a different format and transmitted to the recipient over a medium other than a switched telephone network.

This non-precedential opinion highlights the practical difficulty of reading pre-Internet patent claims onto Internet-based systems. The case also reinforces Federal Circuit teaching that the patent specification is always highly relevant to claim construction analysis. Usually, it is dispositive; it is the single best guide to the meaning of a disputed term.

For a general discussion of claim construction rules see, The Basics of Patent Claim Construction.

Prevailing counsel in the case was John C. Carey, Miami.

The Federal Circuit panel included Judge Pauline Newman, Judge William C. Bryson, and Judge Timothy B. Dyk. The Federal Circuit opinion is non-precedential.

The trial judge was Dean D. Pregerson, Central District of California.

Needless to say, this new Patent Damages Handbook is required reading for all patent litigation attorneys.  A free copy of the Handbook can be downloaded from Gray on Claims, here.

Highlights of the 34-page handbook are outlined below under the following headings:

• Types of Damages
  
• Initial Estimate of Damages and Rule 26 Disclosures
• Limits on Depositions
• Possibility of Bifurcated Trial
• Protective Orders
  
• Confidential Information
  
• Limits on Depositions
• Document Production
• SJ Motions on Damages
  
• Daubert Motions
  
• Verdict Forms at Trial

Types of Damages

Compensatory patent infringement damages attempt to assess the difference between the patentee’s pecuniary condition after the infringement, and what his condition would have been if the infringement had not occurred. The question to be asked in determining such damages is: “had the Infringer not infringed, what would [the] Patent Holder have made?”

Compensatory patent damages traditionally fall into three categories: lost profits; established royalty, and reasonable royalty.

Lost profits normally are profits that would have been made by the patentee “but for” the infringement.

Established royalty can be shown when the patentee has consistently licensed others to engage in conduct comparable to the defendant’s at a uniform, established royalty rate.

Reasonable royalty damages can be calculated by determining what a willing licensee in the place of the infringer reasonably would have paid and what a willing licensor in the place of the patentee reasonably would have accepted for the grant of a license, had such a license been negotiated just before the infringement began, with both parties assuming the patent was valid, enforceable and infringed.

Initial Estimate of Damages and Rule 26 Disclosures

Any lack of specificity in the complaint may well be overcome by the requirement of Rule 26 that the patent owner voluntarily provide damages information and documents as part of its initial disclosures. Any initial damages calculations that are provided reasonably may be considered preliminary or approximate. At the same time, courts should not accept skeletal initial damages disclosures uncritically.

Meaningful compliance with the initial damages disclosure requirements can be essential to the efficient management of the litigation, and courts overseeing damages disclosures should be mindful of the role these disclosures may play in the early resolution of the litigation.

Failure to provide good faith damages disclosures and at least “high level” damages discovery at the outset of the litigation may hinder settlement discussions, delay settlement, and result in unnecessary expenditure of time, money and judicial resources.

Phasing Discovery

To minimize burden and improve efficiency, courts should consider, as part of the initial case assessment and scheduling, whether the interests of justice would be served by phasing damages discovery. For example, after the mandatory Rule 26 damages disclosures and the above-described initial “top level” damages disclosures from both parties, the court may choose to stay some or all damages discovery until after the court’s ruling on claim construction.

Possibility of Bifurcated Trial

Some courts opt to bifurcate patent infringement cases into liability and damages phases for both discovery and trial. Rule 42 gives courts wide discretion to separate issues or claims at trial “[f]or convenience, to avoid prejudice, or to expedite and economize . . . .” Damages can be tried by a different jury after all issues of liability have been finally resolved, both at trial and on appeal.

Under this approach, the court can streamline the case and reduce the burden on judicial resources by trying damages only when (and if) it becomes necessary to do so.

Early Protective Orders

It is important that a protective order be in place early in the case: Most patent litigants will not produce documents without one, and there is no reason to allow this issue to cause any delay in conducting discovery.

Confidential Information

One of the most common areas of dispute in protective orders is who will be allowed access to the confidential information and whether a two-tier protective order is necessary or appropriate. One approach is to have a single-tier protective order that provides only a single level of “confidential” protection that allows designated materials to be disclosed to both in-house and outside counsel.

In many cases, one or both of the parties believe the information to be disclosed is so highly confidential and competitively sensitive as to merit an extra level, or “second tier,” of confidentiality protection. Such additional protection is often necessary where employees or in-house counsel for the receiving party are involved in competitive decision making, “e.g., patent strategy, licensing negotiations, sales and marketing, and research and development in
[the] relevant product market.”

Limits on Depositions

Absent agreement by the parties, courts should permit deviations from the ten-deposition limit only with a cogent and particularized explanation of what specific additional depositions are necessary – and why – and a showing that the additional depositions genuinely are necessary and will not be redundant. Vague references to the complexity of the case or to large amounts at stake should not be sufficient. One approach that is gaining favor is that of limiting the number of deposition hours to be allowed to each party. This may be the preferred approach in highly complex cases, as many different witnesses may need to be deposed. Limiting the number of deposition hours forces counsel to plan carefully for each deposition and to use their time wisely. The result is often more efficient discovery than would be achieved by simply limiting the number of deponents.

Rule 30(b) (6) depositions often are useful in patent infringement cases. Courts should guard against “runaway 30(b) (6) depositions,” however, and ensure that they are not used to evade the limits on the number of depositions. One effective approach is for the initial scheduling order to provide that “each day of [Rule] 30(b) (6) deposition counts as a separate deposition for purposes of the per-side deposition limit.

Document Production

Courts should be particularly cautious about granting requests for production of “all documents” relating to a particular issue, especially when dealing with electronically stored information, unless it is clear that such production is reasonably calculated to lead to the discovery of better or more probative evidence on that issue, and is not propounded for the purpose of increasing cost, disrupting the litigation, or otherwise harassing the party from whom discovery is sought. Courts also should ensure that Rule 34 requests for production are not abused and should take steps to facilitate effective, cost-efficient document production. The need for judicial control and oversight is particularly acute when addressing requests directed to electronically stored information

The parties’ discovery plan also should address the format for document production, particularly as it relates to electronically stored documents. Courts should consider the potential cost and time savings that may result by allowing (or requiring) production of financial or other damages-related data in a format that permits ready manipulation for purposes of damages analyses.

SJ Motions on Damages

It is often appropriate for the court to consider summary judgment motions relating to damages at the same time as – but separate from – Daubert challenges to the experts’ opinions. Delaying resolution of summary judgment motions until the eve of trial is inefficient for both the parties and the court. It is best to resolve summary judgment motions well in advance of the final pretrial conference (indeed, well in advance of the meetings of counsel that typically precede the final pretrial conference), so that the court and the parties can prepare their pretrial submissions and prepare for trial knowing precisely what issues must be tried.

There are damages-related issues that may not depend on expert testimony, and it is often best to resolve such issues as early as possible since they, too, can affect a damages expert’s analysis. Where it is possible to do so, addressing such issues before the exchange of expert reports can yield significant efficiencies and cost savings.

Daubert Motions

Critical to managing a patent trial is the court’s ability to control expert testimony. No issue in a patent trial cries out for strict application of the gatekeeping tools of Federal Rule of Evidence 702 and the Supreme Court’s Daubert decision more than damages.

Challenges to expert testimony on patent damages usually focus on the qualifications of the expert to opine on the issues and the reliability of the expert’s analysis of those issues.

The reliability analysis focuses on the expert’s analysis itself, that is, whether the analysis is conclusory or misapplies an accepted methodology. This issue arises most often in connection with the determination of a reasonable royalty, which is usually based on a multi-factored framework for identifying the royalty to which the parties would have agreed had they conducted a negotiation when the infringement first began, knowing that the patent was valid and infringed, and willing to enter into a license agreement.

Verdict Forms at Trial

Although the law does not require a trial court to use a special verdict in patent cases it is advisable for the court to do so. The Supreme Court has noted, “in cases that reach the jury, a special verdict and/or interrogatories on each claim element could be very useful in facilitating review, uniformity, and possibly post-verdict judgments as a matter of law.”

Summary

The above excerpts are only a few highlights from the new Patent Damages Handbook for use by federal district court judges. Obviously, practitioners and judges need to familiarize themselves with this Handbook at a detailed level.

In this most recent case, the Schindler Elevator invention was a “smart” elevator that can recognize a specific user when he or she enters the building; then automatically sends an elevator car for the user; then takes the user a specific floor.

 The terms at issue on appeal were “information transmitter” and “information device.”  These were the parts of the invention that recognized an elevator user when he or she entered the building and transmitted the relevant information to the elevator.  The district court construed these terms to mean a system that would work “without requiring any sort of personal action by the passenger.”  By this definition, the patent only covered automatic elevators that did not so much as require the user to lift a finger to be recognized.

 On appeal, the Federal Circuit found this definition to be too narrow, and struck the words “without requiring any sort of personal action by the passenger” from the definition of the terms “information transmitter and “information device,” holding the district court had not interpreted the patent properly.

 A claim term is generally given its “ordinary and customary meaning,” which is “the meaning that the term would have to a person of ordinary skill in the art in question at the time of the invention.” Phillips v. AWH Corp.  To arrive at the “ordinary and customary meaning” of a patent claim term, the court evaluates (a) the words of the claim, (b) the patent specification, (c) the prosecution history, and (d) extrinsic evidence concerning relevant scientific principles, the meaning of technical terms, and the state of the art.

Words of the Claim

 The place to start in claim construction is the words of the claim.   The patent claim sets out the “metes and bounds” of the intellectual property description–the claimed invention.  Since the ultimate objective of claim construction is to ascertain the limits of the claimed invention, the words used in the claims themselves are of greatest importance.

•  Are the words of a claim specifically defined in the patent?  If so, this definition is usually accepted by the court.
• Do the claim words have a clearly-understood meaning to one of ordinary skill in the art? 
• What is the context in which the words are used in the particular claim sentence and in the overall claim paragraphs?  Does the context make common sense and consistent with the overall purpose of the patented invention?
•  How are the words used in other claims of the patent, and elsewhere throughout the patent?  Again, consistency is the key.  If the patent lawyer defined a word one way in the patent, it will mean the same thing throughout the patent.

 In the Schindler Elevator case, the Federal Circuit read the patent to allow the possibility of a transmitter “carried by an elevator user.” Carrying a transmitter is thus a type of “personal action” expressly allowed by the claims. The Federal Circuit reasoned that since the patent does not require the transmitter to be carried in any particular way, it was logically foreseeable that the user might raise his or her hand to activate the elevator.  Therefore, limiting the scope of the patent to an invention not requiring “any sort of personal action by the passenger” was too narrow.

 Patent Specification

 The patent specification is the part of the patent that shows various examples of how the invention can be enabled, or put into practice. 

The specification is a “reality check” on the intent of the inventor, limiting claims that extend beyond the examples (enablements) set out in the specification.  Therefore, the patent specification is always highly relevant to the claim construction analysis. Usually, it is dispositive; it is the single best guide to the meaning of a disputed term.

Turning again to the Schindler Elevator analysis, the Federal Court pointed out that he phrase “personal action” is used only once in the Schindler Elevator specification, in the following sentence:

The advantages achieved by the invention reside in the fact that the desired journey destination is communicated automatically to the elevator control by (1) the information transmitters carried by the elevator users or by (2) the recognition of features of the elevator users without any personal action being required by the passenger.

 Because the Schindler Elevator specification allowed for an information transmitter actually carried by the elevator user, the Federal Circuit reasoned that an information transmitter requiring no personal action was only one optional use of the device.  Therefore, logically, limiting the scope of the patent to an invention not requiring “any sort of personal action by the passenger” was too narrow.

 Prosecution History

Prosecution history is the entire patent file holding the communications back and forth between the inventor and the patent office during the patenting process.  Thus, if the inventor willingly narrowed the scope of his or her patent claim in order to get the patent approved by the patent office, this information will be contained in the file history (sometimes called the “file wrapper”).   

The purpose of consulting the prosecution history in construing a claim is to exclude any interpretation that was disclaimed during prosecution, thereby making the claim scope narrower than it would otherwise be.  Phillips at 1317.

 The doctrine of prosecution disclaimer attaches where an applicant, whether by amendment or by argument, “unequivocally disavowed a certain meaning to obtain his patent.”  An argument made to an examiner constitutes a disclaimer only if it is “clear and unmistakable.”

Turning back again to the Schindler Elevator case, the district court found statements in the prosecution history which describe the invention as operating “automatically, contactlessly, and independently of the orientation of the information transmitter.” The district court read these statements as unambiguously disavowing the use of a passenger’s hands for any and all purposes. The Federal Circuit Court disagreed. As in the specification, those terms modify actions that take place only after the passenger has brought the transmitter within range of the recognition device.  Therefore there was no “clear and unmistakable” disclaimer.

The Federal Circuit Court therefore modified the district court’s construction of “information transmitter” and “recognition device” by striking the phrase “without requiring any sort of personal action by the passenger” from each construction.

Extrinsic Evidence

Extrinsic evidence of the meaning of claim terms in a patent is found in things like dictionaries and professional treatises.  This is called “extrinsic” evidence because it is found “outside” the content of the patent itself.  Because extrinsic evidence is outside the content of the patent, it is the least reliable source of information as to a patent’s meaning, and is sometimes ignored by the parties in claim construction analysis.

Indeed, in the Schindler Elevator case, extrinsic evidence was not admitted by the parties at the Markman claim construction hearing, so the Federal Circuit did not address the extrinsic evidence factor of claim construction.   

Summary

Claim construction can be a daunting process, but the Federal Circuit Court of Appeals strives in case after case to re-visit the straightforward logic of its claim construction rules—rules that can be learned by anyone.

Such a ruling would overturn a broad scope of process patenting that has been recognized since the Federal Circuit’s ruling in the seminal business-methods patenting case, State Street Bank & Trust Co. v. Signature Financial Group (Fed.Cir.1998). Such a ruling would also call into question the validity of many internet and software patents, virtually none of which is tied to a specific physical machine. The key question to be answered by the Supreme Court is, of course, whether a physical machine (needed to support a methods-based patent) can also include a general-purpose computer.

The signature of this Supreme Court in the past 12 years of patent decisions has been to end the various “bright-line” tests for patentability established by the Federal Circuit Court of Appeals, in favor of “functional” tests that can only be determined in a courtroom, after input from expert witnesses on both sides of the patentability test. This, of course, is a particularly expensive and risky exercise. The presumption of validity and various bright-line tests had allowed small companies to litigate a patent with fewer hurdles to patentability. But the practical effect of these recent US Supreme Court cases has been to tip the scales of justice away from small-company patentees who depended on “bright-line” patentability tests, and in favor of big company defendants who depend on numerous hurdles to patentability in defending patent cases.

This tendency away from bright-line tests was most recently highlighted in the US Supreme Court’s 2007 ruling in KSR v. Teleflex. Under pre-KSR law, a patent was presumed valid unless written prior art existed that explicitly taught an element of the patent. KSR changed that test by ruling that (a) even implicit knowledge possessed by one of ordinary skill in the art could make an element of the patent “obvious” and (b) that obviousness would be found if the element was “obvious to try” to a person of ordinary skill in the art. In effect, the US Supreme Court erased an important bright-line test for patent validity that had been controlling Federal Circuit law for 23 years.

With this significant shift in analysis away from a “bright line” test to a “functional” test, many, if not most, software patents have been put at risk, even though few commentators have been willing to acknowledge that fact publicly. Because software patents normally cover incremental increases in the knowledge in any particular area, it is usually easy for defendants to argue that a particular software patent was obvious to others of ordinary skill, and that a particular subroutine would be “obvious to try.”

In at least five other major patent cases decided by the Supreme Court since 1997, an overriding theme has been to narrow the scope of patentable inventions and eliminate various bright-line tests by the Federal Circuit in one area or another of patent law:

• Medimmune v. Genentech, 127 S.Ct. 764 (2007) eliminated the bright-line test for protection against a declaratory judgment action by a prospective patent licensee;
• eBay, Inc. v. Mercexchange, LLC., 126 S.Ct. 1837 (2006) stopped the practice of granting an automatic permanent injunction after a successful trial verdict;
• Festo Corp. v. Shoketsu Kinzoku Kogyo Kabushiki Co., 535 US 722 (2002) narrowed patentability by ruling that prosecution history estoppel arises from any amendment that narrows the patent claims;
• Pfaff v. Wells Electronics, Inc,, 525 US 55 (1998) narrowed patentability by construing the “on-sale bar” to patentability to be measured from the first commercial offer for sale of an inventive product, even where the invention has not yet been reduced to practice; and
• Warner-Jenkinson Company, Inc. v. Hilton Davis Chemical Co., 520 US 17 (1997) eliminated a bright-line test in evaluating prosecution history estoppel.

The net effect of these US Supreme Court rulings has been to place so many hurdles in the way of small-company patentees that litigation against large-company patent violators is impractical in all but the most clear-cut cases. The Court’s ruling in Bilski v. Tappos may well provide another high hurdle to most small-company patent litigation if software and internet patents are subjected to yet an additional murky legal test for patentability.