A Rebalancing Act: Early Patent Litigation Strategies in Light of Recent Federal Circuit Cases ACC Litigation Committee Meeting

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1 ACC Litigation Committee Meeting Demarron Berkley Patent Litigation Counsel Jim Knox Vice President, Intellectual Property Matt Hult Senior Litigation Patent Counsel Mackenzie Martin Partner Dallas July 28, 2016 Palo Alto July 29, 2016 San Francisco 1 I COMPANY NAME PRESENTER NAME

2 2 RECENT TRENDS

3 PATENT LAWSUIT FILINGS IN 2015 CLOSE TO HISTORIC HIGH Source: Lex Machina, 2015 Patent Litigation Year in Review. 3

4 PATENT LAWSUITS FILED IN 2015 BY DISTRICT Source: Lex Machina, 2015 Patent Litigation Year in Review. 4

5 NEW CASES IN D. DEL. AND E.D. TEX. BY YEAR AND PLAINTIFF CLASSIFICATION 5 Source: Lex Machina, 2015 Patent Litigation Year in Review.

6 DISTRICT COURT PATENT DETERMINATION STATISTICS Source: Docket Navigator, 2015 Patent Litigation Year in Review. 6

7 PATENT FILINGS , BY QUARTER 7 Source: Lex Machina

8 8 WHAT EXPLAINS THE 2016 DIP?

9 POTENTIAL REASONS FOR THE 2016 DIP Supreme Court Alice Corp. v. CLS Bank Int l case and aftermath United States Patent and Trademark Office proceedings invalidating patents Raised pleading standards for patent cases (elimination of Form 18) Natural ebb and flow? 9

10 IN THE WORDS OF ONE OF THE COUNTRY S MOST PROLIFIC PATENT LITIGATION PLAINTIFFS: Craig Tadlock of Tadlock Law Firm, which has represented numerous prolific non-practicing entities ( NPEs ) was recently interviewed by Law360: Commented that recent decisions finding patents invalid under Alice plainly have an impact on plaintiff patent holders Indicated that the reduction could be tied to the raised pleading standards for patent cases Said that the lower number of suits in Q1 of 2016 was largely part of the natural ebb and flow of things 10 Source: Law360, EDekka Cools Off EDTX Patent Hotbed As Suits Drop 47%, April 6, 2016

11 11 IMPACT OF ALICE

12 ALICE PRIMER Alice Corp. v. CLS Bank International, 134 S. Ct (2014), was a June 2014 decision of the United States Supreme Court about patentable subject matter Alice patents declared invalid as being directed to abstract idea of using an intermediary to facilitate simultaneous exchange of financial obligations between parties to minimize risk Alice spelled out a two-part test: (1) determine whether the claims are directed to a patent-ineligible concept (i.e., laws of nature, natural phenomena, or abstract ideas); and 12 (2) determine whether the claim s elements, considered both individually and as an ordered combination, transform the nature of the claims into a patent-eligible application

13 IMPACT OF ALICE IN THE DISTRICT COURTS THROUGH Source: Docket Navigator, 2015 Patent Litigation Year in Review.

14 WHY IS ALICE SUCH A GAME-CHANGER IN DEFENDING PATENT ACTIONS? 14 Source: Docket Navigator, 2015 Patent Litigation Year in Review.

15 RECENT CASE DEVELOPMENTS Enfish, LLC v. Microsoft Corporation, 2016 U.S. App. LEXIS 8699 (Fed. Cir. 2016) Applied the first step in the Alice inquiry and asked: whether the focus of the claims is on the specific asserted improvement in computer capabilities... or, instead, on a process that qualifies as an abstract idea for which computers are invoked merely as a tool Claims in Enfish pertained to software for a self-referential database which allowed the computer to search for data faster and to more efficiently store data Claims were patentable under Alice because they were directed to improving a computer s capabilities, not simply to abstract ideas 15

16 RECENT CASE DEVELOPMENTS BASCOM Global Internet Servs. v. AT&T Mobility LLC, 2016 U.S. App. LEXIS (Fed. Cir. June 27, 2016) Applied the first step in Alice and found that the claims were directed to an abstract idea Applied the second step in Alice: Agreed with the district court that the limitations of the claims, taken individually, recite generic computer, network and Internet components, none of which is inventive by itself Disagreed with the district court s analysis of the ordered combination of limitations 16

17 RECENT CASE DEVELOPMENTS BASCOM Global Internet Servs. v. AT&T Mobility LLC, 2016 U.S. App. LEXIS (Fed. Cir. June 27, 2016) Second step analysis continued: As is the case here, an inventive concept can be found in the non-conventional and non-generic arrangement of known, conventional pieces. The inventive concept described and claimed in the '606 patent is the installation of a filtering tool at a specific location, remote from the end-users, with customizable filtering features specific to each end user. This design gives the filtering tool both the benefits of a filter on a local computer and the benefits of a filter on the ISP server. 17

18 RECENT CASE DEVELOPMENTS How are patent plaintiffs applying Enfish and Bascom? These cases give plaintiffs tools to fight both steps of the Alice case Expect to see an increase in filings Requests for reconsideration being filed in cases involving successful Alice motions 18

19 19 IMPACT OF USPTO PROCEEDINGS

20 NEW PTAB PETITIONS ( ) Source: Docket Navigator 20

21 NEW PTAB PETITIONS BY TECH CODE Source: Docket Navigator 21

22 INSTITUTION OUTCOMES TOTAL (thru 2015) Source: Docket Navigator 22

23 PTAB PATENT DETERMINATIONS FINAL WRITTEN DECISIONS ( ) Source: Docket Navigator 23

24 PTAB PATENT DETERMINATIONS BY MONTH Source: Docket Navigator 24

25 INSTITUTION OUTCOMES SUCCESS RATES 66% Success rates of all PTAB claims since AIA was enacted 68.9% Claims challenged under 35 U.S.C % Claims challenged under 35 U.S.C % Claims challenged under 35 U.S.C % Claims challenged under 35 U.S.C

26 TOP PTAB PETITIONERS (2015) Source: Docket Navigator 26

27 TOP PATENT OWNERS IN PTAB PROCEEDINGS (2015) Source: Docket Navigator 27

28 WHY ARE USPTO PROCEEDINGS SUCH A GAME- CHANGER IN DEFENDING PATENT ACTIONS? 28 Source: Docket Navigator, 2015 Patent Litigation Year in Review.

29 WHY ARE USPTO PROCEEDINGS SUCH A GAME- CHANGER IN DEFENDING PATENT ACTIONS? District Court PTAB Fact finder Juries Skilled patent judge Cost $$$$ $$ Burden of proof Claim construction Clear and convincing evidence (75-80%) Ordinary and customary meaning Grounds Unlimited Limited Discovery Extensive Limited Estoppel Common law Statutory Preponderance of the evidence (50.1%) Broadest reasonable construction 29

30 RECENT CASE DEVELOPMENTS Cuozzo Speed Technologies v. Lee (June 20, 2016) This case was the Court s first decision dealing with the relatively new USPTO patent trials. The Court determined (1) that the PTAB s institution decisions are not judicially reviewable; and (2) that the USPTO had authority to apply the broadest reasonable interpretation ( BRI ) standard for claim construction in PTAB patent trials Environment at the USPTO remains petitioner-friendly 30

31 RECENT CASE DEVELOPMENTS Intelligent Bio-Systems, Inc. v. Illumina Cambridge Ltd. (Fed. Cir. May 9, 2016) Appeal from IPR Affirmed PTAB s finding that petitioner failed to satisfy its burden of demonstrating obviousness Case is interesting for both procedural and substantive reasons: Procedural PTAB declined to consider petitioner s reply brief and expert declaration Substantive Federal Circuit clarified that a petitioner must establish both (1) a motivation to combine the references to achieve the claimed invention; and (2) that a POSITA would have a reasonable expectation of success of combining the references to achieve the claimed invention 31

32 RECENT CASE DEVELOPMENTS Shinn Fu v. The Tire Hanger Corp. (PTAB April 22, 2016) IPR Granted opposed motion to amend claims Patent owner did not use an expert declaration with its motion to amend, relying instead on express disclosures in the prior art and challenged patent Amendment did not enlarge the scope of the claims Amendment did not lack written description support 32

33 RECENT CASE DEVELOPMENTS Shinn Fu v. The Tire Hanger Corp. (PTAB April 22, 2016) No requirement for a patent owner to analyze expressly every individual reference cited during prosecution A patent owner can group references together in its analysis Patent owner complied with its duty of candor in grouping several references PTAB was persuaded by patent owner s arguments that the prior art did not recognize the relevant purpose of the claimed invention 33

34 PTAB PATENT DETERMINATIONS FINAL WRITTEN DECISIONS ( ) Source: Docket Navigator 34

35 IMPACT OF RAISED PLEADING STANDARD 35

36 IMPACT OF RAISED PLEADING STANDARD December 1, 2015 amendments to the Federal Rules of Civil Procedure abrogated Rule 84, which provided Form 18 as the Complaint for Patent Infringement in the Appendix of Forms Resulted in an important change in the pleading standard for patent cases Flood of cases filed before December 2015 Fewer cases filed in Q1 of 2016 while plaintiffs wait and see 36

37 ACC Litigation Committee Meeting Demarron Berkley Patent Litigation Counsel Jim Knox Vice President, Intellectual Property Matt Hult Senior Litigation Patent Counsel Mackenzie Martin Partner Dallas July 28, 2016 Palo Alto July 29, 2016 San Francisco 37 I COMPANY NAME PRESENTER NAME