Damned if you do . . .

By Kevin E. Noonan –

Great cases like hard cases make bad law.  For great cases are called great, not by reason of their importance . . . but because of some accident of immediate overwhelming interest which appeals to the feelings and distorts the judgment.

Northern Securities Co. v. U.S. (1904) (Holmes, Jr., J., dissenting)

It is a reality not needing emphasis or reiteration that the extent of subject matter eligibility in patent law has been in turmoil following the U.S. Supreme Court's decisions in Bilski v. Kappos, Mayo Collaborative Servs. v. Prometheus Labs, AMP v. Myriad Genetics, and Alice Corp. v. CLS Bank Int'l.  During this same timeframe, the Court arguably relaxed the standards for district courts to award attorney's fees under 35 U.S.C. § 285 in Octane Fitness v.  ICON Health & Fitness, Inc. and Highmark Inc. v. Allcare Health Mgmt. Sys., Inc.  Consequences of the confluence of these two branches of patent law jurisprudence befell plaintiff (and in one magistrate judge's eyes, patent troll) My Health, Inc., who awarded a total of $371,862.95 to defendants ALR Technologies, Inc.; InTouch Technologies, Inc.; MyNetDiary, Inc.; and McKesson Technologies, Inc. in My Health, Inc. v. ALR Technologies, Inc.

These consolidated cases arose as part of a patent assertion campaign by My Health, extending from 2012 to these cases, which were filed in May 2016 involving U.S. Patent No. 6,612,985; claim 1 is representative:

A method for tracking compliance with treatment guidelines, the method comprising: determining a current assessment of one or more diagnosed conditions in a patient based on data about each of the diagnosed conditions from the patient who is at a remote location and on one or more assessment guidelines for each of the diagnosed conditions; updating an existing treatment plan for each of the diagnosed conditions based on the existing treatment plan, the current assessment, and on one or more treatment guidelines for each of the diagnosed conditions to generate an updated treatment plan for each of the diagnosed conditions; reviewing the updated treatment plan for each of the diagnosed conditions; determining if one or more changes are needed to the reviewed treatment plan for each of the diagnosed conditions; changing the reviewed treatment plan if the one or more changes are determined to be needed; providing the patient with the reviewed treatment plan for each of the diagnosed conditions; and generating and providing compliance data based on the updated treatment plan and the reviewed treatment plan for each of the diagnosed conditions.

This patent is assigned on its face to the University of Rochester and later assigned to My Health.  Ten months after the complaints were filed, the district court held the asserted claims to be invalid for failure to satisfy patent eligibility requirement of 35 U.S. § 101.  The court granted the defendants' motions to dismiss and entered judgment, and prompted by "[t]his outcome, in addition to My Health's extensive litigation campaign, the manner in which My Health litigated the cases, and the weakness of My Health's § 101 position, prompted the prevailing defendants to move for their attorneys' fees under 35 U.S.C. § 285," according to Magistrate Judge Payne.

The magistrate judge's Memorandum and Order sets forth a history of My Heath's patent assertion history, which started in April 2012.  According to the magistrate judge, this began a series of 31 lawsuits filed in the Eastern District of Texas (as well as 11 declaratory judgment cases filed in other judicial districts) where there was never a finding on the merits and what settled for anywhere from $240,000 to $30-50,000 (with the higher settlement amounts occurring in the earlier-filed litigations which settled prior to the Supreme Court's Alice decision; $50,000 was the median settlement amount).  In all cases until these latest ones, the parties settled and no court ruled on validity or infringement of the '985 patent claims.  In additions, five inter partes review (IPR) petitions were filed; none of these IPRs came to Final Written Decision after the parties settled each of them.

In addition to this history, the magistrate judge's recitation of the facts include tales of a pattern of behavior wherein My Health contacted certain defendants directly threatening suit, despite these defendants being represented by counsel (and in many instances inquiring about settlement), in the face of these defendants refusing to confer without defendant's counsel being present.  One example was in this litigation, wherein MyNewDiary's counsel informed My Health (by e-mail):

Please direct any future correspondence regarding this matter to me and to me alone.  I wish there to be no misunderstandings.  My client will not be entering into any licensing agreements with PLA, for the reasons I have previously explained.  I wish this to be very clear.  Should you contact me or my client(s) with any further unlawful extortion requests, I will seek sanctions against you . . . .  I hope I have made myself imminently clear.

According to the Memorandum, "[t]he request was ignored."

Finally with respect to My Health's "bad actions," counsel apparently made false representations to the Federal Circuit regarding defendants' acquiescence to My Health's voluntary dismissal of its appeal of the District Court's invalidity determination under § 101 (as well as an agreement that the parties bear their own costs), and manipulated the docket in an unrelated case to avoid a hearing on defendants' motion for attorney's fees.

Based on this record, the Magistrate Judge granted defendants' motion for fees in varying amounts depending on the extent of each defendant's claim.  According to the Magistrate:

My Health's cases are exceptional for a number of reasons.  The first is the weakness of My Health's post-Alice patent-eligibility position.  Patient treatment and monitoring methods such as those claimed by the '985 patent had been declared ineligible long before My Health filed its 2016 lawsuits.  . . .  As the [District] Court recognized in evaluating defendants' § 101 motion, "[s]uch claims have universally been found to be unpatentable under Alice."  By the time My Health filed its 2016 lawsuits, guidance from the Federal Circuit regarding claims in this category had mounted to a level that would give any litigant a reasonably clear view of § 101's boundaries. . . .  There were of course gray areas, but by the time My Health's 2016 lawsuits were filed, it should have been clear that the '985 patent claims were "manifestly directed to an abstract idea."

Importantly, the Magistrate asserted that "[t]he weakness in My Health's § 101 position is by itself a sufficient basis for finding the cases exceptional," which places within a court's discretion not only the objective baselessness of whether duly granted claims deserve the presumption of validity but also the subjective bad faith with which an infringement claim is brought, based solely on the court's invalidity determination.  Citing Inventor Holdings, LLC v. Bed Bath & Beyond, Inc., the Magistrate justified this decision by saying it is "necessary to deter wasteful litigation in the future."  No. 2016-2442, 2017 WL 6062460, at *4 (Fed. Cir. Dec. 8, 2017).  And the Magistrate stated that it was My Health's responsibility to "reassess its case in view of new controlling law," specifically the Supreme Court's Alice decision (despite the difficulties attendant upon determining how the Court's patent eligibility jurisprudence should be applied).

In addition, the Magistrate's opinion makes it clear that My Health's conduct in asserting its patents was a factor in its decision to award attorney's fees.  The Order cites My Health's extensive litigation campaign and avoidance of the case reaching the merits in the "31 lawsuits, 11 declaratory judgment actions, and 5 IPRs."  While stating that "[t]o be sure, a volume litigant does not automatically expose himself to attorneys' fees simply because he files a lot of lawsuits, "the number of lawsuits filed by My Health, many of which settled right on the cusp of a merits determination (most for similar amounts), supports the conclusion that My Health was filing lawsuits 'for the sole purpose of forcing settlements, with no intention of testing the merits of [the] claims,'" wrote the Magistrate, citing SFA Sys., LLC v. Newegg Inc., 793 F.3d 1344, 1350 (Fed. Cir. 2015) in support.  The "remarkable" similarities in the settlement amounts also supported the Magistrate's conclusion that My Health was "exploiting the high cost to defend complex litigation to extract a nuisance value settlement" as in Eon-Net LP v. Flagstar Bancorp, 653 F.3d 1314, 1327 (Fed. Cir. 2011), inter alia, because "[t]he settlement amounts against the different defendants could not have possibly been tied to a reasonable royalty for use of the claimed invention" nor relating to "the alleged inventions' footprint in the marketplace" or the rough equivalence of the amounts of infringing units made by each of these disparate defendants.  And the settlement amounts appeared to the Magistrate to represent "nuisance" value, signaling the Magistrate's apprehension that My Health was acting as a patent troll (without ever mentioning this disparaging term).

My Health's purported misfeasance and malfeasance undoubtedly made it easy for the Magistrate to be persuaded that these defendants were entitled to attorney's fees and that this was an exceptional case.  But the Magistrate's predicate basis for reaching his decision is frankly based on a conclusion that, regardless of a patent claim's presumption of validity, merely asserting the '985's claims was improper because they were clearly invalid.  There may be circumstances where a change in the law rendered by the Federal Circuit or Supreme Court might support such a decision.  Respectfully, the current state of patent subject matter eligibility is not one of them.