Antitrust v. patent

The extraordinary risk in antitrust cases has prompted courts to erect ever-higher hurdles to them. Extending a trend that began decades before, the Supreme Court used a sprawling antitrust case — Bell Atl. Corp. v. Twombly (2007) — to toughen the test for pleading a claim. It warned about the high costs of “false positives” and “interminable litigation” in a monopolization case, Verizon Communications, Inc. v. Trinko (2004). And it extended its dislike of big class actions to the antitrust arena in Comcast Corp. v. Behrend (2013).

Until about a decade ago, courts did not show similar skepticism about another kind of complex commercial dispute — patent infringement cases. Entire judicial districts, in fact, seemed to open their adjudicatory arms to them, acquiring expertise that permitted them to streamline and expedite resolutions on the merits.

But will patent cases become more like antitrust actions? Have they already?

A string of new decisions suggests a one-word answer.

Yes!

New rulings

Three of the four opinions originate from the Federal Circuit, which has exclusive jurisdiction to hear appeals from final orders that arise under patent law.

The first, Intellectual Ventures I LLC v. Capital One Bank (USA), N.A., No. 14-1506, slip op. at 7 (Fed. Cir. July 6, 2015), held under Alice Corp. v. CLS Bank Int’l, 134 S. Ct. 2347 (2014), that patents on “tracking financial transactions to determine whether they exceed a pre-set spending limit (i.e., budgeting)” and “customizing web page content as a function of navigation history and information known about the user” involved “abstract ideas” that did not qualify for patenting.

In In re Cuozzo Speed Technologies, LLC, No. 14-1301, slip op. at 5-10 (Fed. Cir. July 8, 2015), a different panel of the Federal Circuit concluded that it lacked jurisdiction to consider challenges to decisions by the U.S. Patent and Trademark Office (USPTO) to institute “inter partes review” of patents under the America Invents Act. The panel also approved the USPTO’s use of a test — the “broadest reasonable interpretation” (BRI) standard — that increases the likelihood of patent’s invalidation as obvious. Id. at 10-19. And the court affirmed an obviousness determination against the patent holder. (The full court denied en banc reconsideration by a 6-5 vote.)

The court in Versata Devel. Group, Inc. v. SAP Am., Inc., No. 14-1194, slip op. at 25-26 (Fed. Cir. July 8, 2015), ruled that it could second-guess decisions by the Patent Trial and Appeal Board (PTAB), a branch of the USPTO, to treat a patent as a “covered business method” patent and therefore eligible for possible invalidation. But it also held that the PTAB did not err in deeming the patent-in-suit a CBM, in giving it BRI treatment, and invalidating it as an “abstract idea” under Alice.

The last of the four decisions dealt with the “exclusive jurisdiction” matter I mentioned at the outset of this section. In Amity Rubberized Pen Co. v. Market Quest Group Inc., No. 13-55796 (9th Cir. July 13, 2015), the district court dismissed a patent infringement case not on any patent-law ground but because principles of res judicata precluded the patent holder from suing again. The Ninth Circuit held that it had no power to consider the appeal and that only the Federal Circuit could do that.

Patent as the new antitrust

What theme unites these four outcomes? Each made getting a patent infringement case to trial and a resolution on the merits harder and therefore riskier and more expensive. Intellectual Ventures, Cuozzo Speed, and Versata all resulted in invalidations of patents. Cuozzo Speed and Versata also adopted a construction test (BRI) that makes invalidation more likely. Cuozzo Speed also put IPR institution decisions beyond the reach of appellate review. And Amity Rubberized Pen points up the unique procedural complexity of patent infringement suits.

Looking ahead

The recent placement of obstacles in patent cases recalls similar developments in antitrust cases years before. What lessons can we learn about what happened in antitrust cases? Do they apply in the context of patent infringement actions?

I will present observations on those questions in the next post, on Monday, July 20.