A few months ago, the US Supreme Court said it would take up a controversial and divided case regarding software patents. Now, the high court has agreed to take up two more patent cases—both of which could potentially overturn current rules that many in the tech sector see as too lenient for patent owners.
The first case involves a years-long battle between two competitors in the business of creating Content Delivery Networks, or CDNs: Akamai Technologies and Limelight Networks. CDNs are the Internet infrastructure that allows websites to quickly perform "load balancing" and quickly respond to high demand for their content.
The other case involves medical devices, not the Internet. That case, brought by Biosig Instruments against competitor Nautilus Inc., involves a patent that passed legal muster, even though it hinged on an undefined "spaced relationship" between two electrodes. That made it a poster-child for vague patents. Frequent patent defendants, including Google, Amazon, Newegg, JC Penney, NetApp, SAP America, and Limelight, all urged the Supreme Court to take the case.
“Divided infringement”
Akamai dominates the CDN market, controlling about 75 percent of it, according to Limelight's lawyers. In Akamai's telling, it's the beneficiary of breakthrough technology that originated with an MIT professor, who first came up with the idea of using "virtual hostnames" to direct users of a particular website to the right location within a CDN. That gave Akamai a set of features that no competitor had.
The company sued Limelight for patent infringement in 2006. There was one big problem, though—Limelight simply didn't perform all the steps in Akamai's patent. However, the judge allowed the case to go to a jury under a theory of "joint infringement," in which Limelight performed some steps of the patent, and its customers—the websites actually pushing out the content—did others.
That resulted in a $40 million infringement verdict against Limelight, but Limelight actually won the case on post-trial motions.
When the case was appealed to the US Court of Appeals for the Federal Circuit, though, a sharply divided "en banc" panel made a surprising and broad decision. In a 6-5 ruling, the top patent court found that Akamai didn't have to show that Limelight's customer actually infringed the patent directly; it merely had to show that Limelight "induced" its customer to infringe. Limelight would have to stand trial again.
That led to Limelight appealing to the Supreme Court. It also raised alarm bells among other patent defendants. The issue of "joint infringement" comes up frequently in tech and Internet cases, where a user or customer performs some steps of the patent. (The recent TQP v. Newegg trial is an example; Newegg was accused of executing some steps of the patent, while its customers performed others.)
"The Federal Circuit has created a new basis for patent-infringement liability that conflicts with this Court’s precedents and the Patent Act," wrote Limelight lawyers in their petition.
"Imposing on a business the additional obligation to speculate correctly about potential future uses by a third-party buyer or user is unreasonable and unfair," wrote lawyers representing HTC and two other high-tech companies in an amicus brief supporting Limelight.
Another brief supporting Limelight, by Google, Oracle, Red Hat, SAP, Cisco, and Xilinx, says that the already difficult cost structure of patent lawsuits is only going to get worse if the Akamai decision stands. With companies held responsible for the actions of third parties, already costly discovery could become a bottomless pit. The "expansive rule" could "impose liability on a company for supplying otherwise non-infringing products and service."
In December, the US Solicitor General weighed in, suggesting that the high court should take up the case—and saying that the Federal Circuit's interpretation was flat-out wrong.
That brief, combined with the fact that the case was taken at all, suggest it will be an uphill battle for Akamai. The fact that the Supreme Court is allowing the Federal Circuit test to be challenged suggests the justices are unhappy with it from the get-go.
Vague patents
The other patent case picked up on Friday, Nautilus Inc. v. Biosig Instruments, has some similar patent-law overtones. It's another case where a patent defendant believes the Federal Circuit created a too-easy standard, allowing a patent-holder to win. And again, prominent tech companies filed an amicus brief favoring the defendant's views.
Nautilus was sued by Biosig over a patent describing a heart rate monitor circuit design; Nautilus says the concepts at issue were described in another patent application that's 10 years older than the Biosig patent.
The Biosig inventor told the US Patent Office a patent should still be allowed, because he described something that the earlier application didn't: a design that involved a "spaced relationship" between the electrodes.
That phrase wasn't really defined in the patent, however. The district court judge who heard the case found that Biosig's attempts to define the term were all over the place. The competing definitions were internally inconsistent "gibberish," noted Nautilus lawyers. That rendered the patent indefinite and invalid in the judge's view.
On appeal, a panel of Federal Circuit judges ruled otherwise. Unless the patent was "insolubly ambiguous," it was the lower court judge's job to give definition to those unclear claims through the process of claim construction. The appeals court defined the claim and allowed the case to go forward.
That led Nautilus to appeal to the Supreme Court, arguing that the Federal Circuit had been using a too-loose test for "definiteness" for a long time. Under the current rule, "the definiteness of claim terms depends on whether those terms can be given any reasonable meaning,” noted Nautilus lawyers.
Several tech companies—including Limelight—filed an amicus brief agreeing with Nautilus that the Federal Circuit be held to tougher standards. An amicus brief written by Amazon, Google, Limelight, Newegg, and other companies agrees with Nautilus that the Supreme Court should take up the issue.
The Patent Office alone, bound by "institutional limitations" (patent examiners spend an average of 18 hours looking at each patent application), can't solve the problem of vague patents on its own, wrote the amicii. As a result, it's the courts' responsibility to require "distinct claiming" of subject matter, as mandated by the law. According to the amicii, that doesn't square with the Federal Circuit's current approach.
The Electronic Frontier Foundation and Public Knowledge, two nonprofits that are quite active in seeking to reform patent laws, also filed a brief suggesting the Supreme Court take up the Nautilus case. It asks the justices to imagine vague language like "spaced relationship" being used in a land dispute—what if a developer were trying to build a hotel near a highway, where “the western boundary is in a spaced relationship with the highway?" They write:
What can the developer do? “Spaced relationship” could mean a foot from the highway, or a yard, or a mile. The developer could guess at the meaning, but a wrong guess could render the entire investment in building the hotel a waste. Should the case be brought to court, different judges or juries could reasonably disagree on the meaning... The cards are stacked against the developer, a deadweight loss for the hotel business and for the economy at large.
A situation with regard to land would "never be tolerated," the groups note. "[B]ut for years the Federal Circuit has tolerated equally ambiguous descriptions of the metes and bounds of patents."
There's no case on deck this year that has the weight of other cases in recent years, like eBay v. MercExchange, that fundamentally changed the patent landscape. But these two cases, combined with the Alice Corp v. CLS Bank software case and another patent case involving attorneys' fees, mean the Supreme Court is paying serious attention to patent issues in 2014.Both of the cases granted last week will likely be argued by April and decided later in the year.
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