Retailers Need A Rule They Can Count On

JURIST Guest Columnists Peter J. Brann, David Swetnam-Burland and Stacy O. Stitham of Brann & Isaacson discuss the patent eligibility of computer-implemented inventions...

The US Supreme Court's consideration of the patent eligibility of computer-implemented inventions in Alice Corporation Pty., Ltd. v. CLS Bank International, et al, has drawn commentary not only from the usual suspects (patent and intellectual property law organizations, software and technology vendors and tech companies), but from seemingly unlikely corners. In one such corner can be found a coalition of retailers and retail trade associations. What interest do businesses that sell clothes, electronics and other goods have in patents to computer-implemented inventions? The simple truth is that retailers with an online presence, rather than software or computer service providers, are the ones on the front lines of patent infringement lawsuits claiming infringement of computer-implemented patents by some facet or feature of retail websites they use in their efforts to sell products to the American consumer. These retailers have had enough of patent claims to nothing more than well-established sales techniques performed "on a computer" or "over the Internet."

Our firm recently filed an amicus brief on behalf of twenty-three retailers and retail trade associations, including the National Restaurant Association and Retail Litigation Center, Inc., seeking a clear rule of law that can be applied at the beginning of a lawsuit. That is, retailers want certainty on what the law is and a speedy method for resolving disputes over patents that should never have been issued. Whether or not a claimed invention is patentable under 35 USC § 101 should be a threshold issue that can be addressed in many, if not most, cases on a motion to dismiss at the start of the litigation. This not only follows as a straight line from the Supreme Court's recent patent decisions, but is necessary to fulfill the mandate of section 101, which, after all, is entitled "Inventions Patentable." Notwithstanding that, in our view, clear mandate, section 101 is often treated as the redheaded stepchild of patent law—and the US Court of Appeals for the Federal Circuit's muddled opinion in CLS Bank left the doctrine in an even worse state than it found it. If the underlying "invention" is abstract and so not eligible to be patented, then accused infringers should not have to undertake the expense of proving at summary judgment or trial that the patent is not infringed or is anticipated or obvious in light of some prior art. As noted in our amicus, that is like being forced by the DMV to pay for expensive repairs on a used car in order to obtain a new inspection sticker only to be told after the car passes inspection that the person who sold you the car never had title to it in the first place.

We argue that the threshold test emerging from CLS Bank should be that computer-implementation cannot create patentable subject matter. Just as a putative inventor cannot simply recite a law of nature and then add the instruction "apply the law," a putative inventor cannot simply recite an abstract or general idea and then add the instruction "apply it on a computer." Mayo Collaborative Services v. Prometheus Labs., Inc. (PDF).

Currently, there is not a single rule of law that can be applied either at the outset or the conclusion of litigation to address this issue. The splintered six opinions of the en banc federal circuit opinion spanning over 125 pages, none of which represents the opinion of a majority, means that no one can be certain what is patentable until they learn the makeup of their panel on appeal. Patent eligibility should not be based on the luck of the draw.

This lack of certainty has serious, real-world consequences, which are being imposed on American retailers. Computer-implemented patents are among the fastest growing category of patents, the patents most likely to be litigated and the patents least likely to be found valid and infringed if litigated to the bitter end. Further, they are more likely than others to be asserted against companies that merely use the accused software, such as retailers who sell goods over the Internet, and not the companies that wrote the accused source code. Because of the cost of litigating a patent case to judgment, in which non-infringement and invalidity will only be determined after defendants have expended enormous, usually unrecoverable, sums of money. Computer-implemented patents are also among the patents least likely to be litigated to a final judgment, particularly by companies that use, but did not create, the accused technology. So long as the plaintiff prices a settlement below the enormous costs of full-blown litigation, which is the norm in this arena, most defendants will opt for a cost-of-litigation settlement instead of litigating the patentability of even the gauziest of patents. Even if a panel of academics could agree on a definition of patentability, if it is not expressed in a clear legal rule that can be applied at the beginning of the litigation by a district court judge, that doctrine will remain academic for most defendants.

The argument before the Supreme Court in CLS Bank suggests that the justices are prepared to consider the perspectives of all amici—including retailers—as Justice Elena Kagan asked 
(PDF):

"Can I give you a hypothetical, Mr. Phillips, and you tell me how it's different or the same. Let's say, you know, 30 years ago somebody took a look around the world and said, a lot of people seem to order product by mail. They get the catalogues in the mail and then they send back their return forms. And let's say that one of the founders of the Internet said, wouldn't this be an amazing system, we could actually do this by computer, and they had patented that. Is that the same?"

After years of uncertainty and divergent opinions, the trial judges, parties and attorneys on the front lines of patent infringement litigation deserve a clear standard, whatever that might be, that can be applied and tested at the outset of any patent case. Not only would this fulfill the mandate that section 101 is a threshold test of eligibility, it would provide a practical solution to the real-world problem that the examination of a patent's validity is frequently delayed until after cost considerations make pursuing that challenge impractical and unsound. The American legal system should be invested in weeding out the worst patents at the earliest opportunity and the least cost to courts and litigants. The present system virtually ensures that the viability of such patents are rarely, if ever, tested and only then after the maximum expenditure of time and money. We hope the Supreme Court seizes the opportunity of CLS Bank to reverse this unfortunate trend.

Peter Brann is a litigation partner handling complex corporate and intellectual property matters. Brann is the former state solicitor for the state of Maine and was responsible for all civil appeals for the state of Maine. Brann graduated from the Boston University School of Law in 1981 where he won Best Speaker in the Homer Albers Moot Court Competition in 1980. Brann holds a Bachelor of Arts with honors in Philosophy from Bates College in 1977 and attended Oxford University from 1975 to 1976.

David Swetnam-Burland is a partner whose practice focuses on the representation of direct marketing and e-commerce companies, both large and small, in litigation. Swetnam-Burland graduated magna cum laude from the University of Michigan Law School in 2002. Swetnam-Burland holds a Bachelor of Arts with high honors in Philosophy and English from Wesleyan University and a Master of Arts in Philosophy from the University of Michigan.

Stacy O. Stitham is a partner whose practice includes civil litigation in state and federal courts and proceedings before administrative agencies on behalf of national corporations as well as local businesses and individuals, with particular emphasis on intellectual property litigation. Stitham graduated cum laude from Harvard Law School in 2005 where she was Senior Editor of the school's Environmental Law Review from 2004-2005. Stitham graduated magna cum laude with an Arts Bachelor from Harvard College in 2002.

Suggested citation: Peter Brann, David Swetnam-Burland and Stacy Stitham, Retailers Need A Rule They Can Bank On, JURIST - Professional Commentary, Apr. 11, 2014, http://jurist.org/hotline/2014/04/brann-swetnam-burland-stitham-patents.php.


This article was prepared for publication by Jason Kellam, an assistant editor with JURIST's professional commentary service. Please direct any questions or comments to him at professionalcommentary@jurist.org

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