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"Process" Must Do Stuff to Deserve a Patent, Federal Circuit Affirms

You can get a U.S. patent if you invent "any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof" if you meet "the conditions and requirements" of U.S. Code title 35. 35 U.S.C. § 101.

The first of the four things the statute lists -- a "process" -- sounds a little abstract, doesn't it? And we know that "laws of nature, physical phenomena, and abstract ideas" don't qualify for patenting, right? Diamond v. Chakrabarty, 447 U.S. 303, 309 (1980) (emphasis ours). So how do you tell if a patent that describes a "process" avoids the bar on patenting "abstract ideas"?

Easy. Does the patent talk about doing something? Making something? Using something? Something concrete, something real?

Okay, maybe not so easy.

A patent that teaches you how to get a tax break by selling a piece of real estate and then buying a second one doesn't count as a patentable "process", the Federal Circuit held in Frost Properties, Inc. v. Am. Master Lease LLC, No. 09-1242 (Fed. Cir. Feb. 27, 2012). The panel ruled that an "abstract concept cannot be transformed into patentable subject matter merely because of connections to the physical world". Id., slip op. 10 (citing Bilski v. Kappos, 130 S. Ct. 3218 (2010)) (emphasis ours). The patent has to disclose a "process" that can happen in a physical sense beyond what you can see with your mind's eye.

Listing the steps you need to take to use real estate deals to defer taxes describes an unpatentable abstract idea. So there.

If You Own Land in the Lone Star State, You Also Own the Water Down Below, Texas Supreme Court Rules

The rule of "capture" has meant for a long time in Texas that the oil and gas lying beneath your land belong to you. Now it also means you own the subterranean water. The Edwards Aquifer Authority v. Day, No. 08-0964 (Tex. Feb. 24, 2012).

The Court ruled, 9-0, that limiting landowners' right to use ground-water amounted to a "taking", for which the state owed compensation.

Justice Nathan Hecht wrote the opinion for the unanimous Court.

New Paper Explores Market for Patent Lawyers Who Try Cases

Blawgletter's firm handles lots of patent infringement cases on a contingent-fee or hybrid basis. And by hybrid we mean either a fraction of hourly plus a contingent percentage, a flat-fee plus a kicker, or an hourly or flat fee with some case-specific incentive to get exceptional results.

Now we see a scholar who has looked at the market for lawyers who take on clients under a contingent-fee deal. Although it remains in draft form, we commend it to your consideration. See David L. Schwartz, The Rise of Contingent Fee Representation in Patent Litigation.

Fifth Circuit Allows Common Fund Fee as Percent in Dell Case

The Fifth Circuit for a long time has seemed to insist on paying class counsel on a pure lodestar basis -- hours x hourly rates. It looked to have stuck itself to the old-style lodestar method under Johnson v. Ga. Highway Express, Inc., 488 F.2d 714 (5th Cir. 1974).

That contrasts with other circuits' belief in letting district courts have the option of basing fee awards in common fund cases on a percentage of the common fund instead of a strict lodestar method.

But the Fifth Circuit's seeming view largely went away this week.

In Union Asset Mgmt. Holding A.G. v. Dell Inc., No. 08-51163 (5th Cir. Feb. 7, 2012), the court upheld a $40 million class action settlement of claims that Dell inflated its share price by making false statements about revenues and other things. The panel ruled that the district court didn't abuse its discretion when it granted class counsel a $7.2 million fee, which came to 18 percent of the common fund. It said:

The objectors argue that the lodestar method is the only way to calculate attorneys’ fees in this Circuit. They understandably point to the following sentence from a 2008 case: “This circuit requires district courts to use the ‘lodestar method’ to ‘assess attorneys’ fees in class action suits.’” But that sentence overstates the case it quotes, which said that the Circuit “uses” the lodestar method rather than “requires” it, did not involve a traditional common fund, and implied that the percentage method might be proper in other circumstances. Moreover, the 2008 case, which was not a securities case, only addressed how to allocate a lump-sum attorneys’ fee award among the plaintiffs’ multiple attorneys rather than how to allocate a common fund between class counsel and the class itself, as here. The fact is that the Fifth Circuit has never reversed a district court's decision to use the percentage method, and none of our cases preclude its use.

Given the Fifth Circuit's stance on choice of method, the district court did not abuse its discretion by using the percentage method with a meticulous Johnson analysis. To be clear, we endorse the district courts' continued use of the percentage method cross checked with the Johnson factors. We join the majority of circuits in allowing our district courts the flexibility to choose between the percentage and lodestar methods in common fund cases, with their analyses under either approach informed by the Johnson considerations.

Id. at 13-14 (omitting footnotes).

Some may say the court limits the percentage method to cases under the Private Securities Litigation Reform Act, but the language doesn't support that view.

Same-Sex Marriage Ban Doesn't Relate to a Proper State Goal, Ninth Circuit Rules

The Golden State's Proposition 8 today failed the fourteenth amendment's "equal protection" test because, a 2-1 panel of the Ninth Circuit held:

[T]he People of California may not, consistent with the Federal Constitution, add to their state constitution a provision that has no more practical effect than to strip gays and lesbians of their right to use the official designation that the State and society give to committed relationships, thereby adversely affecting the status and dignity of the members of a disfavored class.

Perry v. Brown, No. 10-16696, slip op. at 80 (9th Cir. Feb. 7, 2012).

Circuit Judge Stephen Reinhardt wrote the majority opinion, which Circuit Judge Michael Daly Hawkins joined.

Circuit Judge N. Randy Smith dissented on the question of whether taking away the right to marry from same-sex couples furthers a proper purpose of the state. Judge Smith focused on "a responsible procreation theory" and "an optimal parenting theory".

The ruling affirmed the district court's judgment striking down Proposition 8 as unconstitutional. The lower court also held that the referendum violated due process under the fourteenth amendment.

Limits of Language, Patent-Wise

Your patent claims a device that "attach[es]" to a "flexible" thingy.

Does "attach" require that the device touch only the outside of the thingy? Or can it also attach to the thingy's innards? And must the thingy flex "easily" or just enough to seem, well, flexible?

The district court ruled that the attachment element of the patent claim called for the thingy to connect only to the outside of the device, making the Sony game controller non-infringing. The court also ruled that a game-player's inability to bend the Sony controller "with ease" also supported the ruling against the inventor.

The Federal Circuit reversed. It held that the term "attached" could mean not only connection to an external surface but also touching a purely internal plane. The panel also ruled that "flexible" might include things we humans might find hard to bend. Thorner v. Sony Computer Entertainment Am. LLC, No. 11-0114 (Fed. Cir. Feb. 1, 2012).

The case well captures the rule that the normal meaning of words in patent claims almost always determines their scope. The rule doesn't apply only if (1) the patent itself explicitly redefines the words to mean something different (e.g., "black shall mean white") or explicitly disavows the normal meaning to U.S. Patent and Trademark Office.