Biggest “patent troll” slapped down hard by appeals court

The most litigious "patent troll" in the US has lost a major case after the US Court of Appeals for the Federal Circuit found its patent was too abstract.

The ruling from last week is one of the first to apply new Supreme Court guidance about when ideas are too "abstract" to be patented. In the recent Alice v. CLS Bank case, the high court made clear that adding what amounts to fancy computer language to patents on basic ideas shouldn't hold up in court.

The patents in this case describe a type of "device profile" that allows digital images to be accurately displayed on different devices. US Patent No. 6,128,415 was originally filed by Polaroid in 1996. After a series of transfers, in 2012 the patent was sold to Digitech Image Technologies, a branch of Acacia Research Corporation, the largest publicly traded patent assertion company. A study on "patent trolls" by RPX found that Acacia Research Corporation was the most litigious troll of 2013, having filed 239 patent lawsuits last year.

Digitech quickly filed suit against dozens of companies that had a variety of connections to the digital imaging business, including Xerox, Toshiba, Fujifilm, Ricoh, Leica Camera, Overstock.com, and Newegg, alleging its patent was infringed. In 2013, a federal district court ruled that the Digitech/Acacia patent was invalid.

Now that defense win has been held up on appeal, and the 31 defendant companies won't have to pay anything to Acacia.

In the opinion (PDF), a three-judge panel found that the device profile described in the patent is a "collection of intangible color and spatial information," not a machine or manufactured object. "Data in its ethereal, non-physical form is simply information that does not fall under any of the categories of eligible subject matter under section 101," wrote Circuit Judge Jimmie Reyna on behalf of the panel.

The patent also contains a method claim, but it "recites a process of taking two data sets and combining them into a single data set," the judges noted. "Without additional limitations, a process that employs mathematical algorithms to manipulate existing information to generate additional information is not patent eligible," wrote the judges.

The language used seems like a fairly broad application of the new Section 101 law. If the logic is used by other appeals and district court judges, it suggests that the results from Alice v. CLS Bank could invalidate a wide range of software-based patents.

The results were hailed by several defendant companies involved in the case.

"As we have said before, we will not be bullied into settling abusive lawsuits by patent trolls," said Brian Ko, the general counsel for Electronics For Imaging. "We will continue to fight these kinds of meritless lawsuits in as many courts as is necessary to protect ourselves, our partners and our customers."

Newegg's Chief Legal Officer Lee Cheng struck his characteristic combative tone, suggesting that Acacia investors should look forward to more patent invalidations to come.

"Digitech’s patent, which had once been mentioned as a prospective significant revenue driver, has bitten the dust," said Cheng in a press release, which also touted his own company's "perfect 9-year track record after appeal in patent cases."