By Dennis Crouch
Soverain v. Newegg (on petition for writ of certiorari)
After a trial on the merits, Judge Davis (E.D.Tex.) found that the accused infringer (Newegg) had presented insufficient evidence of obviousness and refused to let that issue go to the jury. Instead, the judge awarded a directed verdict for the patentee (Soverain) that the asserted claims were not invalid as obvious. The jury went on to find Newegg liable for infringement and awarded $2.5 million in damages and also found the patent not anticipated. Following trial, the district court denied Newegg's motion for new trial on obviousness grounds. On appeal, the Federal Circuit took the almost unprecedented stance of reversing the non-obviousness decision. One reason for the rarity of a full-reversal (rather than vacatur) is largely explained by the substantial factual foundation that serves as the basis of an obviousness decision. In its opinion, the Federal Circuit couched its discussion in terms of questions of law – following the Supreme Court's lead from KSR International Co., v. Teleflex, Inc., 550 U.S. 398 (2007). In that case, the Supreme Court was able to make the legal conclusion that the asserted claims were obvious because the factual underpinnings of obviousness were seemingly not in material dispute.
In its petition for writ of certiorari, Soverain focuses on the Seventh Amendment right to a jury trial and argues that the Federal Circuit's approach effectively and improperly redefines obviousness as a pure question of law.
Whether the Federal Circuit's effective redefinition of obviousness as a pure question of law, allowing it to resolve disputed factual questions in the first instance on appeal, violates the Seventh Amendment and this Court's precedent.
Here, Sovarain points to a number of factual issues that the Federal Circuit identified as questions of law, including assessing credibility of the witnesses, resolving conflict between witness testimony resolving the teaching of prior art references.
The Seventh Amendment provides that:
In Suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved...
The Seventh Amendment "preserve[s]" the "common law" right to jury trial and, as a consequence, presents an oddball test that roughly asks whether the cause of action at issue was (or is analogous to) a common law cause of action that was tried before an English jury back in in 1791 and then whether the particular trial decision in question is one that was (or would have been) decided by a jury. See Markman v. Westview Instruments, Inc., 517 U.S. 370 (1996).
The Supreme Court has indicated that patent infringement lawsuits where the patentee is seeking damages are cases at law protected by the Seventh Amendment right to a jury trial. However, as far as I know, the Supreme Court has never held that the right to a jury particularly to an obviousness challenge or to the underlying factual conclusions that serve as the basis for an obviousness decision. 1800's cases do suggest that the factual underpinnings to the "invention" requirement are subject to a jury determination. See, for example, Battin v. Taggert, 58 U.S. (17 How.) 74 (1854); and Turrill v. Michigan S. & N. Ind. R.R. Co., 68 U.S. (1 Wall.) 491 (1864) ("[T]here was an important question of fact which should have been left to the jury, whether … any of the prior movable pressblocks … were substantially the same as the machine of the patentee."). However, the 1952 Patent Act expressly eliminated the doctrine of invention in favor of the new doctrine of obviousness. In its last foray into this area, the Supreme Court recognized in Markman that claim construction included both questions of fact and questions of law, but ultimately determined that no fundamental right to a jury trial existed for that doctrine.
An interesting inside issue here is that Judge Newman has been a strong proponent of the right to a jury trial on obviousness. See Newell Cos. v. Kenney Manufacturing Co., 864 F.2d 757 (Fed.Cir. 1988) (J. Newman dissenting from holding that ultimate question of obviousness may be decided by judge over party's objection). However, it was Newman who found Soverain's patent obvious in the present case. In the 1988 Newell case, the majority held that the patentee has no right to a jury trial on obviousness unless the factual underpinnings are in dispute.
The defendant was, of course, entitled to have a jury summoned in this case, but that right was subject to the condition, fundamental in the conduct of civil actions, that the court may withdraw a case from the jury and direct a verdict, according to the law if the evidence is uncontradicted and raises only a question of law.
Of course, Judge Nies did not walk through the weeds of history (as required by the Supreme Court) to arrive at this answer but instead only looked to the "fundamental notion" that there is no right to a jury decision regarding a question of law. See also, In re Lockwood, 50 F.3d 966 (Fed. Cir. 1995) (Nies, C.J. writing in dissent) (arguing that a patent is a public right created by Congress and "[a] constitutional jury right to determine validity of a patent does not attach to this public grant") (mandamus vacated without opinion by the Supreme Court).
Focusing back, the Soverain petition does not ask the Supreme Court to overrule Newell, but rather to merely limit courts ability to unilaterally expand take would-be factual question and then make those factual conclusions under the guise of legal determinations. Soverain writes:
The Federal Circuit's decision to take for itself questions this Court has reserved for the trier of fact has significant consequences that threaten the stability and predictability of the patent system. This decision shifts the boundary between the ultimate legal question of obviousness and the underlying factual questions. It thus paves the way for district courts and other panels to decide factual questions and undermines the role that the jury and procedural safeguards play in ensuring that hindsight bias does not skew the analysis of obviousness. By downplaying the factual component of obviousness, the Federal Circuit's decision also erodes the clear and convincing evidence standard for proving invalidity, which this Court reaffirmed in Microsoft Corp. v. i4i Limited Partnership, 131 S. Ct. 2238 (2011).
I also see this case as asking for clarification of the KSR decision in terms of what elements of the "common sense" analysis should be considered determinations rightfully before a jury. I suspect that the brief strategically avoided that issue because the Federal Circuit is a much riper target for review than a recent unanimous and popular Supreme Court opinions.
In an amicus brief supporting the petition, Professor Eileen Herlihy argues that the Federal Circuit systematically gets Seventh Amendment questions wrong and needs to be set straight by the Supreme Court. Herlihy has written two articles on how the Seventh Amendment should be applied to patent cases.
- Download Soverain Cert Petition 10.16.2013
- Download Herlihy Mossoff 7th Amendment amicus brief Soverain v. Newegg
- Download Brief of i4i Limited Partnership
- Download 13-477acMDBCapitalGroup