2021: Highlights From Patent Litigation Post in Patent Market Blog 2021: Highlights From Patent Litigation Patent litigation was front-and-center in 2021. Following the cessation of jury trials due to Covid-19, 2021 saw a (mostly) return to business-as-usual in patent law. The United States Supreme Court issued multiple important opinions in patent cases, creating new legal precedent in the process. Additionally, record damages were awarded at the district court level. United States Supreme Court & Circuit Court Judgments United States v. Arthrex, Inc., 594 U.S. ___(2021). The first half of 2021 saw the United States Supreme Court issue two opinions in the area of patent law. In United States v. Arthrex, Inc., 594 U.S. ___ (2021), the Court was asked by a patent owner (Arthrex et. al.) to order the U.S. Congress to revise the current inter partes review system (a new trial proceeding conducted by the PTAB to review the patentability of one or more claims in a patent pursuant to a limited ground under certain federal statutes, and only on the basis of prior art consisting of patents or printed publications). Arthrex, a manufacturer of medical devices, was the owner of a patent for a surgical device. Arthrex subsequently entered into a dispute with Smith & Nephew, Inc. And ArthroCare Corp., asserting both were infringing on Arthrex’s patent. The case was heard by the PTAB, which held Arthrex’s patent was invalid. Arthrex appealed to the Fifth Circuit Appellate Court, asserting the PTAB judges who decided the case were unconstitutionally appointed because the Appointments Clause of the United States Constitution, the section under which PTAB judges are appointed, required the judges to be appointed through the President and confirmed by the Senate. The Fifth Circuit agreed and vacated the PTAB ruling. Writing for the majority, Justice Roberts agreed with Arthrex, stating that the appointment of PTAB judges required Presidential nomination and Senate approval. However, the court stopped short of finding the entire proceedings were unconstitutional, noting that the Director of the USPTO was vested by Congress with the powers and duties of then PTO, and may review final PTAB decisions and issue decisions on behalf of the Board. Pundits have questioned the Court’s decision, noting that the Director of the USPTO is a political appointee, who now has the authority to dispose of vested property rights of patent holders who appeal PTAB decisions. Google LLC v. Oracle, America, Inc., 593 U.S. ___ (2021). For the first time in more than 25 years, the Supreme Court issued an opinion involving the fair use doctrine. In in Google LLC v. Oracle, the court certified two questions: (1) whether or not copyright protection extended to a software interface, and (2), if so, did Google’s use of a software interface to create a new computer program fall within the fair use doctrine? Oracle alleged Google infringed on portions of Java source code used in its Android smartphones that was copyrighted by Oracle. Google countered that the portions of the source code used were not copyrightable, and even if it were, the use of that code fell under the protection of the fair use doctrine. In a 6-2 decision, the Court sided with Google, concluding that the use of the code fell within the fair use doctrine. The majority opined that, “fair use can play an important role in determining the lawful scope of a computer program copyright, such as the copyright at issue here. It can help to distinguish among technologies. It can distinguish between expressive and functional features of computer code where those features are mixed. It can focus on the legitimate need to provide incentives to produce copy-righted material while examining the extent to which yet further protection creates unrelated or illegitimate harms in other markets or to the development of other products. In a word, it can carry out its basic purpose of providing a context-based check that can help to keep a copyright monopoly within its lawful bounds.” In reaching its decision, the Court explained that the nature of the code at issue was a “declaring code” as opposed to an “implementing code.” The difference being a declaring code relates to the programmer’s user interface, while an implementing code instructs the computer how to execute a task. As such, the declaring code was “inextricably bound” within a general system of computing tasks that no one could claim to be a proper subject of a copyright. The court also noted the purpose of Google’s use of the Java source code was to allow programmers to use commands with which they were already familiar. The Court believed this fact, coupled with the fact that Google only sourced .4% of the interface code, weighed in favor of fair use. Lastly, the Court found the market effect of Google’s use of the code to be negligible because Oracle does not build or operate a smartphone or smartphone platform, and the Android market was not a substitute for Java’s software. In reaching this conclusion, the Court reiterated the applicability of the fair use doctrine to the coding built into software development. Minerva Surgical, Inc. v. Hologic, et. al., 594 U.S. __ (2021). In another case before the U.S. Supreme Court, Minerva Surgical, Inc. v. Hologic, et. al., 594 U.S. __ , Hologic, Inc. sued Minerva Surgical, Inc. for infringement on two patents related to procedures and devices for endometrial ablation, a treatment for heavy menstrual bleeding. Both patents were issued to the inventor, Csaba Truckai, who assigned his interests to a company that was subsequently acquired by Hologic. Hologic is the current patent holder and licenses the patents throughout the United States. Truckai later founded a company, Minerva Surgical, Inc., and developed an Endometrial Ablation System (EAS), which later received FDA approval. Hologic sued Minerva, alleging the EAS infringed on its patents, but Minerva countered that the patents were invalid based on a lack of enablement, was not patentable due to prior art, and contained an inadequate written description of the patent. Hologic moved for summary judgment, arguing a patent seller (Truckai) could not attack the validity of the patent that Truckai, himself assigned to Hologic. The Supreme Court concluded a that a defendant-assignor (Truckai) can be barred from asserting the defense of invalidity only if the assignor’s claim of invalidity contradicts representations the assignor made when he assigned the patent. The Court’s decision was based on fairness; in essence, an inventor should not be able to argue the invalidity of a patent he previously warranted as valid during a prior assignment. Bot M8 LLC v. Sony Corp. of Am., 4 F.4th 1342 (Fed. Cir. 2021). In Bot M8 LLC v. Sony, the Federal Circuit addressed the pleading requirements for alleging patent infringement. At issue was Bot M8, LLC’s allegation of infringement by Sony of six patents related to gaming machines, including Sony’s popular PS4 system. During a pre-trial case management conference, the court directed Bot M8 to file an amended assertion specifying “every element of every claim” they believed had been infringed, or explain why it could not do so. Bot M8 filed a first amended complaint, and the court subsequently granted Sony’s motion to dismiss four of the disputed patents, finding the complaint failed to allege certain key elements related to those patents. In a mixed opinion, the Circuit Court reemphasized two important procedural rules: (1) there is no requirement for a patent holder to prove every element of their case at the pleading stage, and (2) a patent holder’s claims may be summarily dismissed if the facts contained within the pleading are inconsistent with the requirement of the claims. Instead, the question for the court to consider was whether the factual allegations in the complaint were sufficient to show a plausible claim for relief. VLSI v. Intel, Western District of Texas Inc. In Yu, the Federal Circuit tackled the issue of patent eligibility under section 101 of the Patent Act in a case involving a digital camera patent. The court found that a digital camera patent is invalid if it only claims abstract ideas regarding the enhancement of photos. The court’s ruling could seemingly expand the reach of Section 101 eligibility challenges into the realm of tangible inventions, as opposed to the more limited arena of software patents. Yu v. Apple Inc., 1 F.4th 1040 (Fed. Cir. 2021). On March 2, 2021, jurors in the Western District of Texas Federal Court awarded VLSI $2.18 billion for Intel’s infringement of two patents acquired by VLSI in 2019, both related to increasing the power and speed of computer processors. VLSI sued Intel, claiming nearly one billion microchips sold by Intel infringed on the patents held by VLSI. The jury agreed, awarding VLSI the considerable aforementioned damages. Following the verdict, Intel filed a motion to set aside the verdict, alleging several errors had occurred, including the way VLSI’s expert calculated the value of damages suffered by VSLI. Intel is likely to appeal the amount of damages, with most pundits believing the appellate court will ultimately vacate the amount. District Court: Damages Awarded by the Western District of Texas In addition to these precedential rulings, a jury returned one of the largest ever damages awards in a patent case. Final Thoughts Without a doubt, 2021 was a busy year in patent litigation. With new precedents to interpret, a new director at the PTO, and continued controversy surrounding the focus of patent cases in the Western District of Texas, there are a number of lingering issues to be resolved in 2022. In addition to these precedential rulings, a jury returned one of the largest ever damages awards in a patent case. The core team of patent consultants at Vitek IP, LLC have analyzed over 20,000 patents, while managing hundreds of buy-side and sell-side transactions for some of the world’s largest companies. Vitek’s founders have over five decades of experience in IP and tech, and have developed sophisticated patent sales and patent acquisitions strategies for some of the world’s largest companies. Vitek’s patent consultancy, brokerage group, and research organization provide clients exceptional guidance navigating the patent landscape. For more information, visit www.vitek-ip.com.