Investors were looking for answers in Friday's appellate court decision concerning the Vringo (VRNG) (I/P Engine) v. Google (NASDAQ:GOOG) (NASDAQ:GOOGL) et al patent infringement case. The appellate court, consisting of Justice Wallach, Mayer and Chen, reversed a lower court decision by a 2-1 margin, causing massive loss in Vringo common stock. Many were expecting a validation of the lower court's decision, at worst, and possibly the reintroduction of past infringement penalties prior to 2012. The case is well known, as Vringo filed a patent infringement lawsuit against Google, claiming that Google's AdWords system infringed Vringo's '420 and '664 patents. A jury agreed and ruled in favor of Vringo, with Federal Judge Raymond Jackson awarding Vringo 3.5% of 20.9% of Google's US Adwords revenues, in addition to more than $30 million in damages. Judge Jackson later enhanced the award to 6.5 % after Vringo demonstrated Google having met the conditions for such an action. Google appealed both decisions on the grounds that the '420 and '664 were obvious and therefore did not qualify as patentable.
Vringo v. Google is the next Alice v. CLS?
In their decision Justice Mayer and Wallach declared the Vringo patents invalid, invoking Obviousness and the recent Supreme Court decision concerning Alice v. CLS.
MAYER, Circuit Judge, concurring.
The Supreme Court in Alice Corporation v. CLS Bank
International, 573 U.S. __, 134 S. Ct. 2347, 2359 (2014),
for all intents and purposes, recited a "technological arts"
test for patent eligibility. Because the claims asserted by
I/P Engine, Inc. ("I/P Engine") disclose no new technology,
but instead simply recite the use of a generic computer to
implement a well-known and widely-practiced technique
for organizing information, they fall outside the ambit of
35 U.S.C. § 101. And if this determination had been made
in the first instance as directed by the Supreme Court,
unnecessary litigation, and nearly two weeks of trial and
imposition on citizen jurors could have been avoided.
In Alice, the Supreme Court concluded that the
concept of intermediated settlement was a patent ineligible
abstract idea. 134 S. Ct. at 2355-57. But whether the "concept" of intermediated settlement is an abstract idea is a wholly different question from whether the claimed invention provided a useful and innovative
application of that concept. Significantly, in determining
whether the asserted claims disclosed an inventive concept
sufficient to make the claimed abstract idea patent
eligible, the Court looked solely at the technology-asking
only whether the recited computer elements were "well understood,
routine, [and] conventional." Id. at 2359"- opinion 8/13/2014
In Alice v. CLS the Supreme Court failed to answer the question of what kind of software should be patentable. All software, as well as search engine patents, are based on taking an abstract idea and applying it with a computer.
"We hold that the claims at issue are drawn to the abstract idea of intermediated settlement, and that merely requiring generic computer implementation fails to transform that abstract idea into a patent-eligible invention," Supreme Court Justice Clarence Thomas wrote.
Justice Mayer and Wallach in Vringo decided that the idea of a search engine patent did not pass the "technological arts" patent test, therefore would not qualify as a patent. The ramifications of this opinion are staggering and must be addressed immediately. Companies like Google, Facebook (NASDAQ:FB), Yahoo (NASDAQ:YHOO) and many others base their complete business models on Search and related patented technology. The failure of the Supreme Court to clarify what, if anything, about software should be considered an "abstract idea" leaves all software based patents exposed, and by proxy the business models of our leading corporations. Today's decision on Vringo is just the beginning of "open season" on voiding all abstract software patents in future litigation. Moreover SCOTUS now has an obligation to correct or refine its interpretation of whether Computer Software is patentable. The USPTO has already begun to issue rejections of new software patents based on the Alice decision. Notably, Alice and Vringo (I/P Engine) patents both were declared valid in exhaustive USPTO reexaminations. An argument could be made that existing software patents no longer enjoy "Equal Protection" (14th Amendment to the US Constitution) at the federal level. This sets up an unavoidable conflict SCOTUS is obligated to address.
The Vringo decision was further complicated by the inference of Justice Wallach and Mayer contending that the patents were obvious, and thus would not qualify as patents. Key to this finding was their conclusion concerning Vringo incorporating a search query into the content filtering patent and what separated the patent from the prior art, namely was "retaining the query for use in filtering combined content and collaborative data". They contend this action as being entirely predictable and grounded in common sense. Justice Chen, with the benefit of 4 years experience as Solicitor for the USPTO, in his dissenting opinion took exception with the "sitting there" supported reference cited by the majority.
"Here, in support of its finding of a "strong prima facie
case of obviousness," the majority concludes that "retaining
the query for use in filtering combined content and
collaborative data was entirely predictable and grounded
in common sense." Majority Op. at 15, 19 (internal quotations
omitted).2 The use of the query is a matter of com-
2 The majority also takes issue with the jury's findings
on secondary considerations, noting that two of the
findings with respect to the '420 patent and the '664
patent "appear internally inconsistent." Majority Op. at
16. The majority generally characterizes the findings on
secondary considerations as a "mixed bag." Id. Even
assuming, however, that the jury's secondary consideration
findings are as muddled as the majority describes,
they are relevant only insofar as the majority is correct
that its invocation of "common sense" may support a
prima facie case of obviousness that must be overcome.
See Dow Chemical Co. v. Halliburton Oil Well Cementing
Co., 324 U.S. 320, 330 (1945) ("[Secondary] considerations
are relevant only in a close case where all other proof
leaves the question of invention in doubt.").
I/6 P ENGINE, INC. v. AOL INC.
common sense, the majority explains, "because the query
was readily available and closely correlated to the overall
relevance of search results." Id. at 14. In support of its
suggestion that one of skill in the art would find it obvious
to use the readily available query, the majority cites the
testimony of the Defendants' expert:
As [the Defendants' expert] explained, the query
would be just "sitting there" with the results of a
search, and it would have been obvious to one
skilled in the art to "keep around the query and
use that also for filtering."
Id. (citing J.A. 3173).
I find this testimony inadequate to support the majority's
conclusion. The expert's "sitting there" explanation
tells us nothing about whether one of skill in the art in
1998 would have been struck by common sense to modify
collaborative filtering systems so as to incorporate search
queries. All prior art references are "just sitting there" in
the metaphorical sense. What is needed-and what is
missing from the cited testimony-is some explanation of
why one would use the query as the asserted claims do."
In effect Judges Wallach and Mayer declared Obviousness of Vringo's '420 and '664 patent solely on Google's expert declaring a query is "just sitting there". Absolutely no reference, or mention, by the Google expert is included why a person skilled in the art would have added the search query to the content filtering. It appears the appellate majority was not concerned with the fundamental question "why?", but rather favored inconclusivity. Indeed if the Appellate Majority expects reasonable juries to adopt this principal in future deliberations, they can be assured of a full docket.
The next 14 days, the time limit for Vringo to file for En Banc review, could advance the decision and the timeline to ultimately ask for Supreme Court review. Quickly defined an En Banc session is where a case is heard before all the Judges of a court. In the case of Vringo v. Google the entire 17 judges that comprise the Federal Court of Appeals could be called upon for an En Banc hearing. However Public law 95-486 Sec 6 allows the Court to limit that number. This becomes material should a majority of the selected Judges agree to hear the case. In the recent Alice v. CLS case only ten judges were selected, and since that time Chief Judge Rader has retired, appointing Judge Sharon Post to Chief Judge. How those Judges voted on Alice may become extremely relevant to Vringo.
Chief Judge Randall Ray Rader - Affirmed Alice was patentable- Dissented in part
Circuit Judge Richard Linn- Affirmed Alice was patentable- Dissented in part
Circuit Judge Kimberly Ann Moore- Affirmed Alice was patentable- Dissented in part
Circuit Judge Kathleen M. O'Malley Affirmed Alice was patentable- Dissented in part
Circuit Judge Pauline Newman- Affirmed Alice was patentable- Dissented in part
Circuit Judge Evan Wallach- Dissented
Circuit Judge Alan David Lourie Dissented
Circuit Judge Timothy B. Dyk Dissented
Circuit Judge Sharon Prost Dissented (Now appointed Chief Judge)
Circuit Judge Jimmie B. Reyna Dissented
In the three member Appeal Judge Linn and O'Malley held for Alice with Judge Prost dissenting. Should Vringo be granted the En Banc more than likely Judge Raymond Chen, Judge Haldane Mayer and Judge Evan Wallach would be among those selected for the review. The possibility of a majority consensus here invites speculation that this court may be irrevocably lost in addressing what the Supreme Court avoided, is Computer Software patentable.
Conclusion; Vringo must Request an En Banc review
The En Banc process is typically reserved for precedent setting actions of great importance. Vringo's winning Federal District case was overturned for two separate and distinct reasons, Obviousness and the Supreme Courts "technological arts" test for patent eligibility. Literally hundreds of thousands of patent's are at risk based on the Supreme Court's prejudicial test and Judges across the Federal Circuit will begin to assess this "technology test" as a means to eliminate computer software patents. United States dominance in technology over past 50 years has not been by her ability to extract natural resources, but rather the Intellectual Property developed to advance ideas. Today our Nation fights wars with economic incentives. China, and Russia seek to eliminate that advantage by employing systematic theft of Intellectual property from our most successful companies. I was reminded recently, by a blogger, that one of our largest Corporations produces the majority of its goods in Mainland China. What made that company ours was the technology we owned. The Supreme Court has the power to eliminate hundreds of thousands of patents and give away our most valuable asset, Innovation. They must act now and send a message to all the lower courts that software patents are viable. Using Vringo to resolve this deficiency couldn't be a better choice.
Disclosure: The author is long VRNG, SITO, WDDD. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.
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