Archive for September, 2016

Supreme Court Case of the Week: Encino Motorcars v. Navarro

Saturday, September 24th, 2016

I was recently listening to an oral argument of a Federal Circuit case that was argued in August where one of the parties brought up ENCINO MOTORCARS, LLC v. Navarro, No. 15-415 (U.S. June 20, 2016).  The case was mentioned with reference to an obviousness decision by the PTO and why the PTO, as an administrative agency, must provide an explanation of its decisions — if the PTO fails to provide any analysis, then its action should be deemed arbitrary and capricious under 5 U.S.C. §706(2)(A).  I think the most pertinent part of Encino that would be of interest to patent practitioners would be:

One of the basic procedural requirements of administrative rulemaking is that an agency must give adequate reasons for its decisions. The agency “must examine the relevant data and articulate a satisfactory explanation for its action including a rational connection between the facts found and the choice made.” Motor Vehicle Mfrs. Assn. of United States, Inc. v. State Farm Mut. Automobile Ins. Co., 463 U. S. 29, 43 (1983) (internal quotation marks omitted). That requirement is satisfied when the agency’s explanation is clear enough that its “path may reasonably be discerned.” Bowman Transp., Inc. v. Arkansas-Best Freight System, Inc., 419 U. S. 281, 286 (1974). But where the agency has failed to provide even that minimal level of analysis, its action is arbitrary and capricious and so cannot carry the force of law. See 5 U. S. C. §706(2)(A); State Farm, supra, at 42–43.

Agencies are free to change their existing policies as long as they provide a reasoned explanation for the change. See, e.g., National Cable & Telecommunications Assn. v. Brand X Internet Services, 545 U. S. 967, 981–982 (2005); Chevron, 467 U. S., at 863–864. When an agency changes its existing position, it “need not always provide a more detailed justification than what would suffice for a new policy created on a blank slate.” FCC v. Fox Television Stations, Inc., 556 U. S. 502, 515 (2009). But the agency must at least “display awareness that it is changing position” and “show that there are good reasons for the new policy.” Ibid. (emphasis deleted). In explaining its changed position, an agency must also be cognizant that longstanding policies may have “engendered serious reliance interests that must be taken into account.” Ibid.; see also Smiley v. Citibank (South Dakota), N. A., 517 U. S. 735, 742 (1996). “In such cases it is not that further justification is demanded by the mere fact of policy change; but that a reasoned explanation is needed for disregarding facts and circumstances that underlay or were engendered by the prior policy.” Fox Television Stations, supra, at 515–516. It follows that an “[u]nexplained inconsistency” in agency policy is “a reason for holding an interpretation to be an arbitrary and capricious change from agency practice.” Brand X, supra, at 981. An arbitrary and capricious regulation of this sort is itself unlawful and receives no Chevron deference. See Mead Corp., supra, at 227.

ENCINO MOTORCARS, LLC v. Navarro, No. 15-415 (U.S. June 20, 2016)(slip opinion at pages 9-10)


The entire decision of ENCINO MOTORCARS, LLC v. Navarro, No. 15-415 (U.S. June 20, 2016) is shown below.


No. 15-415.Supreme Court of the United States.

Argued April 20, 2016.Decided June 20, 2016.KENNEDY, J., delivered the opinion of the Court, in which ROBERTS, C. J., and GINSBURG, BREYER, SOTOMAYOR, and KAGAN, JJ., joined. GINSBURG, J., filed a concurring opinion, in which SOTOMAYOR, J., joined. THOMAS, J., filed a dissenting opinion, in which ALITO, J., joined.

JUSTICE KENNEDY, delivered the opinion of the Court.

This case addresses whether a federal statute requires payment of increased compensation to certain automobile dealership employees for overtime work. The federal statute in question is the Fair Labor Standards Act (FLSA), 29 U. S. C. § 201 et seq., enacted in 1938 to “protect all covered workers from substandard wages and oppressive working hours.” Barrentine v. Arkansas-Best Freight System, Inc., 450 U. S. 728, 739 (1981). Among its other provisions, the FLSA requires employers to pay overtime compensation to covered employees who work more than 40 hours in a given week. The rate of overtime pay must be “not less than one and one-half times the regular rate” of the employee’s pay. § 207(a).

Five current and former service advisors brought this suit alleging that the automobile dealership where they were employed was required by the FLSA to pay them overtime wages. The dealership contends that the position and duties of a service advisor bring these employees within § 213(b)(10)(A), which establishes an exemption from the FLSA overtime provisions for certain employees engaged in selling or servicing automobiles. The case turns on the interpretation of this exemption. (more…)

Oral Argument in Mandarin at the Federal Circuit

Wednesday, September 21st, 2016

A pro se appellant recently showed up at the Federal Circuit to present oral argument — the only problem was that he only speaks Mandarin.  I don’t know if there is an official rule; but, generally oral arguments at the Federal Circuit are conducted in English.  As luck* would have it, one of Judge O’Malley’s clerks, Dr. Glenn Cheng, was able to step in and translate for the appellant.

The oral argument is short, approximately five minutes, and is available [here].

The decision is available [here].

*Perhaps “luck” isn’t the best word choice — Mandarin is the world’s most popular language and spoken by 14% of the world’s population.  English comes in a distant third at 5.5%.

Federal Circuit to visit six law schools in LA area

Monday, September 19th, 2016
The Federal Circuit has posted more details about its upcoming visit to the LA area to conduct oral arguments.  The information from the Federal Circuit Announcement page (last visited 9/19/2016) is shown below.  This visit is somewhat unique in that the Federal Circuit is not sitting at any federal courthouses during this trip — all the appearances will be at law schools.

Pursuant to 28 U.S.C. § 48, six panels of the Federal Circuit Court of Appeals will hear oral arguments in Los Angeles on October 4 and 5 and in Orange County on October 6. In accordance with routine practice, the names of the panel judges will not be released prior to the morning of scheduled arguments.

The schedule and location of the panels is as follows:

Tuesday, October 4

Panel A: 10:00 a.m.
USC Gould School of Law
Ackerman Courtroom
699 Exposition Boulevard
Los Angeles, CA 90089
(213) 740-7331 is external)

Panel B: 10:00 a.m.
Pepperdine University School of Law
24255 Pacific Coast Highway
Malibu, CA 90263
(310) 506-4611 is external)

Wednesday, October 5

Panel C: 10:00 a.m.
Loyola Law School
The Robinson Courtroom
919 Albany Street
Los Angeles, CA 90015
(213) 736-1000 is external)

Panel D: 10:00 a.m.
UCLA School of Law
A. Barry Capello Courtroom
385 Charles E. Young Drive E
Los Angeles, CA 90095
(310) 825-4841 is external)

Thursday, October 6

Panel E: 2:00 p.m.
UC Irvine School of Law
Mark P. Robinson, Jr. Courtroom
401 East Peltason Drive
Irvine, CA 92697
(949) 824-0066 is external)

Panel F: 2:00 p.m.
Chapman University Fowler School of Law
Appellate Courtroom
One University Drive
Orange, CA 92866
(714) 997-6815 is external)

McRO v. Bandai — Lack of Evidence

Wednesday, September 14th, 2016

Others, as well as myself, have submitted comments to the PTO in the past commenting on the PTO’s Subject Matter Eligibility Guidance and highlighting to the PTO that, under Zurko, evidence is required in the assessment of whether a claim is limited to an abstract idea or natural phenomenon. [Link][Link].  Yesterday’s opinion in McRO v. Bandai supports that observation.

In assessing whether the claim in question was directed to an abstract idea, the Federal Circuit stated:

2. Claims Directed To

Claim 1 of the ’576 patent is focused on a specific asserted improvement in computer animation, i.e., the automatic use of rules of a particular type. We disagree with Defendants’ arguments that the claims simply use a computer as a tool to automate conventional activity. While the rules are embodied in computer software that is processed by general-purpose computers, Defendants provided no evidence that the process previously used by animators is the same as the process required by the claims.

McRO v. Bandai, __ F.3d __ (Fed. Cir. 2016)(slip opinion at page 24)(emphasis added).

The defendants didn’t show by evidence that the claimed process was previously practiced — let alone practiced conventionally.  Thus, the defendants failed to prove that the claimed process was merely automating a conventional activity.

The PTAB has previously commented on the need for evidence in Ex Parte Poisson [Link].  One quote from Ex Parte Poisson that might be of interest relates to “rules” as well:

Thus, in the first step of the Alice analysis, the question is whether claim 1, i.e., as a simulation of a football game using a table and cards, is directed to an abstract idea. That determination has not been made in this case based on evidence. Instead, the Examiner merely expresses an opinion that “a set of rules qualifies as an abstract idea.” Yet, absent supporting evidence in the record — of which there is none, the Examiner’s opinion is an inadequate finding of fact on which to base the Alice analysis.

Ex Parte Poisson, Appeal No. Appeal 2012-011084 (PTAB Feb. 27, 2015)

You can listen to the oral argument of McRO v. Bandai here: [Link].

Judge Reyna’s well-reasoned opinion for the court in McRO v. Bandai is available [here].

Director Michelle Lee testifying before Congress

Tuesday, September 13th, 2016

Director Michelle Lee testified before Congress today. Her testimony is available here:

Oral Argument of the Month: IPLEARN-FOCUS, LLC v. Microsoft Corp.

Wednesday, September 7th, 2016

The oral argument of the month is from IPLEARN-FOCUS, LLC v. Microsoft Corp., No. 2015-1863 (Fed. Cir. July 11, 2016).  The issue in dispute was step two of the Alice/Mayo test.  The Appellant argued that the claims, while broad, nevertheless did not recite a conventional system when considered as an ordered combination.

The oral argument recording has a lot of interesting sound bites.  For example, Judge Linn made the astute point that under the current state of affairs, a claimed system that is entirely patent eligible under 35 U.S.C. §101 suddenly becomes patent ineligible when the claim is narrowed to perform an arguably abstract function. [Listen].

The fact that a broad claim can become patent ineligible by making the claim narrower illustrates just how nonsensical the Supreme Court’s jurisprudence has become with respect to 35 U.S.C. §101 and how the Court has strayed from its original concerns about preemption.  The test for judicial exceptions is now the tail that wags the dog of patent eligibility.

Judge O’Malley also proposed an example of a drone for delivering packages and asked why the function of package delivery should make a normally patent eligible drone suddenly patent ineligible.  At the 35 minute, 6 second mark, she also talks briefly about her change in position in the Ultramercial case.

At the 20 minute, 17 second mark, Judge Moore proposed a new claim based on the Appellant’s specification, in which facial feature recognition techniques could be used to detect when a user’s attention has drifted away from a computer screen. In jest, she suggested that her system could be used to monitor the PTAB’s hoteling judges.  [Listen].  I suppose their retort, equally in jest, might be:  “Thank you for the helpful suggestion on how we can improve our production.  Some day we hope to have a small brigade of judicial clerks of our own and a heavy club like your Rule 36  to help us attack our workload.

The panel decided the case by a Rule 36 Judgment, available [here].

You can listen to the entire oral argument [here].


Sunday, September 4th, 2016

Concurrent use proceedings under trademark law are fact-intensive proceedings.  They are also relatively rare.  In SOUTHWESTERN MANAGEMENT, INC. v. OCINOMLED, LTD., No. 2015-1939 (Fed. Cir. June 15, 2016), the Federal Circuit heard oral argument with respect to a concurrent use proceeding over the mark –DELMONICO’S– for restaurant services.

You can listen to the oral argument [here].

The Rule 36 Judgment is available [here].

You can read the precedential TTAB decision [here].