Intellectual Property Law News - Federal Circuit
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Over here at FindLaw's Federal Circuit blog, we're no fans of business method patents. Every chance we get, we write about, and celebrate, another Federal Circuit opinion using Alice v. CLS Bank to invalidate phony baloney "on a computer" method patents.

After a string of Alice success stories, in which the Federal Circuit struck patents for regular old, ordinary, analog things done on a computer, the court has upheld a business method patent because the problem the patent sought to solve actually was something unique to the Internet.

The "entire market value rule" (EMVR) is a way of limiting damages on patent infringement. It requires the prevailing party in a patent infringement case to base its damages only on the value of the infringing component in a device, not the value of the entire device itself.

Ericsson sued big-name makers of network technology like D-Link and Netgear, and computer manufacturers like Toshiba and Dell, claiming they made devices with 802.11n-compliant wireless chips and therefore needed a license.

Ericsson won at trial, but the real question on appeal is whether its damage award broke the EMVR.

Following Alice v. CLS Bank last term, all those "on a computer" business method patents were seriously called into question. We've seen new lawsuits spring up over invalidating old patents, and Alice get invoked in current litigation over "on a computer" patents.

One of the highest-profile cases was Ultramercial v. Hulu, also known as the WildTangent case for one of its other defendants. The short, short version is that Ultramercial owns a patent that purports to cover viewing free streaming videos online in exchange for watching a little advertising throughout -- basically, exactly what Hulu and YouTube do.

Halo Electronics makes electronic packages for use on printed circuit boards. It has three patents on this technology, filed in 1995. Pulse Electronics also makes electronic packages for use on printed circuit boards. Uh oh. Thankfully, though, Pulse only sells its products in Asia.

Or does it? After Pulse incorporated some of its electronics into equipment sold by Cisco in the United States, Halo sent Pulse a polite letter asking if Pulse would like to enter into a license agreement. A Pulse engineer determined that Halo's patents were not invalid. Pulse never consulted a lawyer and kept selling its products anyway.

Patents are supposed to be issued for new and novel things, not things that anybody could have come up with. A patent can be invalidated for "obviousness" if the thing that is to be patented is based on prior art and that thing would have been obvious to a person of ordinary skill in that field.

In the field of pharmaceuticals, a drug can be considered obvious if it's the made by adding something to an extant chemical -- something that anyone could have done and the result of which anyone would have expected. But what about after it's patented? That doesn't work, affirmed the Federal Circuit, in a divided opinion over a rehearing en banc in Bristol-Myers Squibb v. Teva Pharmaceuticals.

Ah, the Federal Circuit. It's like the spooky basement of the federal judiciary, that place where even seasoned appellate attorneys are afraid to go. "There might be ... patent litigation down there!" they exclaim.

And, in truth, since the last time we covered the Federal Circuit, there has been a bit of patent litigation. So here's a roundup of what's been going on in the Spooky Basement Circuit Court of Appeals.

The Federal Circuit is weird. It hears patent cases, of course, but it also hears a whole lot of other random federal appeals: Court of Federal Claims appeals, veterans' appeals, trademark appeals, Merit Systems Protection Board appeals, and of course, Little Tucker Act appeals. (Bonus points if you already knew that that was.)

So far this Term, two cases have been granted certiorari by the Supreme Court out of the Federal Circuit, one involving the termination of a Transportation and Safety Administration whistleblower and a second which involves patents -- two very different, yet very interesting cases.

SCA Hygiene Products (SCA) holds a patent on "adult incontinence products" -- that is, adult diapers. The company sued First Quality Baby Products for infringing on its patent for a disposable diaper that can be taken on and off like underwear -- think Pull-Ups, but for adults.

A Long Waiting Period

Back in 2003, SCA sent a letter to First Quality saying something along the lines of, "Hey, we think one of your products infringes on our patent." First Quality responded by saying, "Hey, actually, it looks like your diaper has the same construction as our diaper, which was patented before yours was. Looks like our patent invalidates yours. Go figure."

It's been a while since we covered the Federal Circuit, and they have busy little bees indeed, publishing 13 precedential opinions since September 9. Today, we bring you a patent infringement case involving Apple's FaceTime technology.

The U.S. District Court for the Eastern District of Texas -- every patent litigant's favorite venue -- determined that FaceTime infringed on several valid patents held by VirnetX, awarding it a total of $368 million. (VirnetX is considered a patent troll, reported Ars Technica back in June.)

VirnetX purchased patents that allow secure communication links between a computer and a target network address. Apple was alleged to have infringed on this patent through its FaceTime technology, which allows video calls over a secure connection. Part of the technology involves creating a secure VPN tunnel "on demand," something that the plaintiffs had already patented.

Those of us deeply nerded into patent litigation -- and let's face it, if you're reading this now, that's you -- were pleased and surprised when the U.S. Supreme Court decided Alice Corp v. CLS Bank International last term. With Alice, the Court said that taking an obvious, otherwise non-patentable idea and adding "on a computer" to the end of it doesn't suddenly make it patentable. In Alice, that was a calculation of risk in a financial transaction, something Justice Thomas said has been around forever.

Post-Alice, the nerds (you know, you and me) hoped and prayed that the decision signaled the end of "patent trolls" that claimed a right to inventions only because the person filing the patent did little more than take a universal concept and make software out of it. From the Federal Circuit, here comes the first post-Alice appeal to invoke Alice.