New Fed. Cir. Opinion Demonstrates That Patent Law Is Confusing

Part of the reason that patent trolls have so much success targeting small businesses is that patent law is arcane and filled with traps for the uninitiated. Obviously, patents themselves are hard to understand, but even the law itself can be confusing.

Yesterday, the Federal Circuit issued an opinion in the Microsoft and Motorola investigation at the International Trade Commission; the misleading reporting on that opinion illustrates my point.

If you read anything about the decision, you likely saw something like this (points to a cached version from yesterday, as the post was updated today):

This morning the United States Court of Appeals for the Federal Circuit agreed in part with Microsoft that the United States International Trade Commission (USITC, or just ITC) should have ordered an import ban against Motorola’s Android-based devices over more than just one patent. It affirmed the ITC ruling with respect to three patents (one of them was not infringed, while the Federal Circuit did not find that Microsoft established a domestic industry for the other two), but reversed in part and remanded the decision with respect to a fourth patent, U.S. Patent No. 5,664,113 [sic] on a “context sensitive menu system/menu behavior”.

As a result, the ITC will have to resume the investigation of Microsoft’s October 2010 complaint (its first lawsuit ever involving Android), and the outcome is reasonably likely be a broadening of the existing import ban. Motorola would then have to work around two patents instead of only one or U.S. customs officers will hold its shipments.

Let me explain why this is misleading.

Here’s what happened: Microsoft asserted 4 patents at the ITC against Motorola and lost on all of them. The ITC found that Motorola didn’t infringe any of them, and also found that Microsoft didn’t use three of them in a domestic industry (which is required at the ITC). Microsoft appealed those losses.

The Federal Circuit agreed with the ITC that Motorola didn’t infringe one patent and that Microsoft didn’t the “domestic industry” requirement (i.e., doesn’t make a substantial investment in the patented technology) for two other patents. (The court didn’t say anything about infringement on the patents for which Microsoft didn’t have a domestic industry.) On the last patent, Federal Circuit said that the ITC didn’t interpret the claims correctly and found that that patent was infringed. But, the Federal Circuit also said that Motorola’s modified design definitely did not infringe that last patent. In the end, the Federal Circuit sent the case back to the ITC to decide one final issue again.

Based on that description, it certainly looks like the investigation will be reopened and it’s not good for Motorola. But there’s more to this than you can get from the opinion.

The patent that the Federal Circuit said was infringed is U.S. Patent No. 5,664,133. Here’s the thing: the patent expires on December 13 of this year.

Why does that matter? Because an exclusion order can’t be enforced for an expired patent. And given the timing of this case, there’s no way the ITC can issue an exclusion order before the patent expires.

After the ITC issues an exclusion order, there is a 60-day review period before it takes effect. So the exclusion order would have to issue before October 14 to be meaningful at all.

You may remember that the ITC is currently closed due to the government shutdown. Even if the ITC opens for business on Monday, that’s only a week left to issue the order (which would only last at most a week anyway). And given that the Federal Circuit asked the ITC to redo part of its decision, there is no way that a new opinion will issue before October 14.

That means that even if the ITC does issue a new opinion, it will be too late. There will be no exclusion order against Motorola based on this case, because the only infringed patent will have expired. And even if it were possible to issue an exclusion order, Motorola has an approved design-around for the patent.

So although it looks from the text of the opinion like Motorola lost, Motorola actually came out ahead.

It’s not surprising that non-lawyers might misinterpret what happened in this case. It takes an experienced patent lawyer to be able to navigate this stuff. Which is a big reason why small businesses make such tempting targets for patent trolls – small businesses don’t usually have a patent lawyer on retainer.

And this is another reason why we need patent reform now!