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Flurry of Supreme Court decisions keeps IP bar busy

A flurry of patent and other intellectual property decisions from the U.S. Supreme Court is keeping one of New England’s most vibrant practice areas on its toes.

“It’s terrific,” said Brian T. Moriarty of Hamilton, Smith, Brook & Reynolds in Boston. “The Supreme Court this year and the last several years is recognizing how important IP is to our nation’s economy. They’re recognizing it deserves a high level of attention.”

The decisions have touched on a variety of topics, from cloud computing and fruit juice to the bounds of patentable subject matter. Lawyers say the high court’s recent IP opinions will benefit defendants in patent lawsuits and litigation attorneys in general, while consumers and technology innovators are presented with a mixed bag.

Lee T. Gesmer of Boston’s Gesmer Updegrove counts a total of 10 IP rulings from the Supreme Court in the past term, including six patent cases.

“This is very unusual to see this many in this short a period of time,” said Boston lawyer James H. Morris of Wolf, Greenfield & Sacks. “Everyone who thinks about computer software and computer-implemented methods and new computer technologies will need to reconsider their patenting strategies.”

‘ABC v. Aereo’

In one of the most recent IP decisions, the justices ruled 6-3 that TV-over-the-Internet startup Aereo — which is based in New York but has most of its staff, including general counsel Brenda M. Cotter, in Boston — was violating broadcaster copyrights.

Unlike traditional cable and satellite television providers, which pay licensing fees to re-transmit broadcasters’ programming to subscribers, Aereo devised a workaround business plan built upon every U.S. citizen’s right to use an antenna to capture and deliver over-the-air broadcast signals to his or her television for free.

It did that by assigning each of its paying subscribers an individual micro-antenna among thousands in an Aereo facility, and then made the broadcasts captured by that antenna — and requested DVR recordings of them — available to the subscriber over the Internet for streaming.

While Aereo’s lower court victory was upheld by the 2nd U.S. Circuit Court of Appeals, the Supreme Court majority was less impressed by the startup’s technology and determined that the service bore “overwhelming likeness to the cable companies targeted by the 1976 amendments” to the Copyright Act.

“Aereo’s equipment may serve a ‘viewer function;’ it may enhance the viewer’s ability to receive a broadcaster’s programs,” Justice Stephen G. Breyer wrote for the majority. “It may even emulate equipment a viewer could use at home. But the same was true of the equipment that was before the Court, and ultimately before Congress, in [the 1970s cases].”

Some lawyers believe the Supreme Court ruling was inevitable.

“It’s basic common sense,” said Moriarty, who thinks the decision, while potentially fatal to Aereo, will not have many broader implications. “The broadcast system pays a lot of money to broadcast an NFL game. You can’t just take it for free and give it away to others for a charge. The decision seems pretty obvious to me.”

Gesmer, however, said the majority has set a troublesome precedent by lumping Aereo in with cable providers without giving consideration to the technological difference between them, specifically Aereo’s “Rube Goldberg”-like system to ensure each subscriber was viewing feeds and recordings from his own antenna.

“[The court] did what a lot of people are calling an ‘it-looks-like-a-duck analysis,’” Gesmer said. “They didn’t want to look under the hood … to see if their analogy was appropriate. Aereo’s lawyers should get an enormous amount of credit for devising this system, which they figured would comply with the technical requirements of the Copyright Act.”

Gesmer said the majority essentially signaled that it did not care about “any of that stuff,” and other courts may start applying a “similarly non-rigorous approach.”

And that, he said, has implications for any lawyer with technology startup clients: The decision could deter investment in companies looking to supplant traditional television services, and business plans will be scrutinized to see whether they pass the “Aereo test.”

“If there are startups out there trying to figure out how they can technically engineer their way around the copyright system less expensively, they now have to worry about whether their technical analysis will succeed given the Supreme Court’s analysis in the Aereo case,” Gesmer said.

Patent cases

The Supreme Court’s most recent patent ruling, Alice Corp. v. CLS Bank International, continued this year’s trend of unanimous decisions narrowing the scope and enforceability of patents.

The opinion builds on the longstanding precedent that “abstract ideas” are not patentable.

Alice Corp. devised and patented a computer system to serve as a third-party intermediary to financial transactions to mitigate settlement risk. But the justices ruled that mediating settlement risk through a third party is an abstract idea and general business practice, “and that merely requiring generic computer implementation fails to transform that abstract idea into a patent-eligible invention.”

Geoff A. Cohen, a computer scientist at the litigation consultancy Elysium Digital in Boston, said the Supreme Court essentially found one cannot tack on the phrase “with a computer” to make an abstract idea patent eligible. Rather, the algorithms, structure and other features of the computer program must be spelled out to show how the abstract idea is being carried out in an inventive way.

Like the court’s other patent decisions this term, Alice Corp. is a boon to defendants facing allegations of patent infringement. In Nautilus v. Biosig, the justices rejected overly vague patents and set a much higher standard for specificity in claims.

“Every patent is just a little bit less valuable,” Cohen said. “Certainly what it does is it gives defendants more weapons. There are two more Supreme Court-blessed attacks on patent eligibility that didn’t exist before.”

Cohen said he now expects to see many motions filed asking the judge to find a patent ineligible because it is too indefinite or because it covers an abstract idea.

In Limelight v. Akamai, the justices ruled that a company cannot be held liable for encouraging patent infringement unless it performs every step in the patent, even if it directs a collection of entities to split up the steps to achieve the same result.

“The Supreme Court has given everybody a roadmap to avoid infringement claims,” Wolf Greenfield’s Morris said of the decision.

And in two other cases, Octane Fitness v. ICON Health and Fitness and Highmark v. Allcare Health Management Systems, a unanimous court made it easier for prevailing parties to obtain attorneys’ fees in patent cases.

“It seems like the justices have some interest in reigning in patents,” Cohen remarked. “You would infer based on the unanimous decisions that they think the scales are off-kilter and they’re trying to restore the balance.”

Still, Cohen said it would be unfair to label the high court “anti-patent.”

“Anti-bad patent” would be more accurate, he said, as the decisions mostly attack those that lack specificity or do not cover patentable subject matter.

“There’s a lot of high-tech companies around Massachusetts,” Moriarty noted. “One of the things this means is you need to have smarter lawyers writing your patents so that they are enforceable.”

‘POM Wonderful v. Coca-Cola’

In June, the Supreme Court ruled that pomegranate juice company POM Wonderful could proceed with a false advertising case against Coca-Cola under the Lanham Act, even though the lawsuit’s allegations were directed at product descriptions on food and beverage labels regulated by the federal Food, Drug and Cosmetic Act.

POM argued Coca-Cola’s Minute Maid division was misleading consumers and unfairly cashing in on POM’s efforts to market the benefits of pomegranate juice by selling a “pomegranate blueberry juice” that only contained trace amounts of those fruits and overwhelmingly consisted of apple and grape juices.

Coca-Cola had argued that the FDCA’s preemption clause barred POM’s suit, but the unanimous Supreme Court ruled that just because the FDCA has authority to regulate labels does not mean competitors cannot police each other’s claims under the Lanham Act.

“It is a very important decision because now technically you could be in compliance with the FDCA and still be sued for trademark infringement,” said Anderson J. Duff of Wolf Greenfield.

“I think that this sort of opens the door to a lot of potential trademark lawsuits in the very near future,” Duff added, calling the ruling a big win for consumers.

John C. Serio of Burns & Levinson in Boston said in addition to giving businesses a tool to keep their competitors honest, the case also provides a lessons for those businesses themselves — and their lawyers.

“Another takeaway is food and beverage producers need to make sure their labels are fair and not misleading because if they aren’t, it would create an avenue for your competitors to sue you,” Serio said. “I wouldn’t say ‘floodgates,’ but clearly you’ll see an uptick in Lanham Act actions based on the labeling of products, not only in the food area, but in the cosmetic area and the over-the-counter area.”

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