A Costly Reminder to Continually Re-Evaluate Your IP
Stites & Harbison Client Alert, March 21, 2019
by Stites & Harbison, PLLC
The patent process can be frustrating and often involves a significant investment of time and money. As such, it may be tempting to assume that when the Patent Office issues a patent it is safe to assert your rights therein. However, according to a recent decision from the District Court for the District of Delaware, doing so may leave you on the hook for attorney’s fees.
On March 23, 2018, Finnavations LLC (“Plaintiff”) filed suit against Payoneer, Inc., and Stitch Labs, Inc., (“Defendants”) alleging infringement of U.S. Patent No. 9,569,755 (‘755 Patent). Shortly thereafter, Defendants filed Motions to Dismiss for Failure to State a Claim. The motions were granted on November 26, 2018, based upon a finding that the ‘755 Patent was directed to an abstract idea, and therefore patent ineligible. Following the dismissal, Defendants filed Motions for Exceptional Case and Attorneys’ Fees, which were recently granted on March 18, 2019.
From the start, the court in this case was quite clear on its thoughts about the strength of the ‘755 Patent. Before addressing any of Plaintiff’s arguments, Judge Andrews stated that he has “rarely been more confident in the patent ineligibility of a set of claims or more confident in the unreasonableness of a Plaintiff’s decision to sue on a patent.” Finnavations LLC v. Payoneer, Inc., Civil Action No. 1:18-cv-00444-RGA, 2019 U.S. Dist. LEXIS 45306, at *3 (D. Del. Mar. 18, 2019). While most issued patents will likely not be so clearly directed to patent ineligible subject matter, the overall discussion serves as a much broader reminder about IP strategy and the need to actively monitor your portfolio. More specifically, the court’s response to Plaintiff’s first two arguments highlights the need to not only continually re-evaluate your IP portfolio as the law evolves, but to do so independently of the decisions made by an examiner during prosecution.
Plaintiff first argued that it was reasonable to believe the patent was directed to eligible subject matter because the Examiner raised and subsequently withdrew four Section 101 rejections before allowing the ‘755 Patent. In response, the court stated that while “[a]ll patents are issued by the Patent Office,” plaintiffs still “have a duty to critically assess the merits of their case prior to suit.” Id. With that in mind, it was held that “[t]he issuance of a patent cannot and should not be a license to sue with abandon.” Id. Additionally, in response to Plaintiff’s argument that it was reasonable to assert the patent since the Patent Office continued to issue nearly identical patents, the court went on to state that “[p]atent examiners are non-lawyers” whose “opinion on the legal question of patent eligibility does not relieve a patent attorney from her obligation to make an independent assessment based on an evaluation of the relevant law.” Id. at *4. In other words, at least in the eyes of this district court, a plaintiff cannot rely on the fact that an examiner withdrew a rejection to support the reasonableness of believing the patent is valid over that rejection. Therefore, no matter what issues were raised or determinations were made by an examiner during prosecution, it is the patent holder’s responsibility to re-evaluate the validity of every aspect of their patent before asserting their rights therein.
Although this decision has limited precedential effect, the court’s rationale raises some important issues regarding intellectual property protection. Chief among them is how important it is to continually review your IP as both your specific goals and the law evolve. The decision to file a patent application is only one step in the much larger process of developing a strong IP portfolio. How you choose to prosecute and ultimately enforce any patents that issue from an application should work together to advance your overall strategy. By periodically re-evaluating the strength of your existing IP, you can better decide how to invest in all stages of patent protection.