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Nintendo’s $10 Million Escape a Cautionary Patent Law Tale

Feb. 6, 2020, 11:01 AM

Nintendo of America Inc.'s escape from a $10 million patent verdict may be a warning for patent owners and challengers, amid uncertainty in trial courts over how and when to decide patent eligibility.

A North Texas jury found that Nintendo infringed iLife Technologies’ motion detection patent with its Wii controllers. But the judge threw out the verdict in January after finding the disputed claim shouldn’t have been patented because it covered an abstract idea.

Courts in the past generally have decided patent eligibility questions early in infringement cases. But a pair of U.S. Court of Appeals for the Federal Circuit decisions admonishing judges not to decide eligibility too fast has led more courts to postpone the question until deeper into litigation.

“I think we will see more cases in which early resolution is not going to be an option,” Tania Shapiro-Barr, an attorney at Dykema Gossett PLLC who focuses on drafting patent applications, said.

Nintendo’s case could be a lesson in this new landscape. The video game maker and iLife fought through an expensive jury trial over whether Nintendo infringed the patent, without the eligibility question coming into play. The judge overseeing the case held on to the eligibility question until well after jurors reached their verdict.

“I see it as one of the most colossal wastes of client resources and judicial time of any case I’ve come across,” Wayne Stacy, a partner in Baker Botts LLP’s intellectual property group, said.

Creating Confusion

The U.S. Court of Appeals for the Federal Circuit in Berkheimer v. HP Inc. and Aatrix Software Inc. v. Green Shades Software Inc. said the eligibility analysis can involve factual questions that may preclude early rulings.

Questions of fact generally go to a jury, while judges typically decide questions of law, which turn on interpretations of legal statutes.

The appeals court didn’t provide guidance about what the 2018 rulings mean in terms of procedure, other than to suggest it would scrutinize judges who try to resolve disputes over eligibility under Section 101 of the Patent Act too quickly.

Attorneys said the rulings have caused more courts to delay eligibility decisions and sowed confusion about the approach for handling such disputes.

“In terms of how to treat 101 issues after the pleading stage, there is a lot of uncertainty about how these issues should be handled and what evidence is necessary to prevail,” Harper Batts, a partner in Sheppard Mullin Richter & Hampton LLP’s intellectual property practice group, said.

The uncertainties, and fears about a potential Federal Circuit reprimand for prematurely dismissing a case, may prompt district court judges to push eligibility issues past trial—even when the court has everything it needs to make a decision, some practitioners say.

“By building up a trial record, even if it’s totally irrelevant, it’s some insurance against reversal,” Paul Gugliuzza, a Boston University School of Law professor who studies civil procedure and patent law, said.

Unnecessarily delaying eligibility decisions could force accused patent infringers to spend hundreds of thousands of dollars fending off a lawsuit over an invalid patent claim. But it could also be unwelcomed by patent owners and raise concerns about “judicial efficiency,” patent attorney Irfan Lateef, a partner at Knobbe Martens Olson & Bear LLP, said.

When a factual question about an invention’s patentability arises, “everyone needs to treat it as one and focus on getting it to the jury,” Stacy said. But if there is no factual issue, the case needs to be “done early and save everyone the attorney’s fees,” he said.

Conversation ‘Past Due’

The Nintendo case illustrates a broader confusion in patent law about which validity grounds should be decided by a judge, and which grounds should go to a jury, according to Gugliuzza, who is studying the topic.

The judge allowed jurors to decide enablement, as courts often do. But the court held onto a question about whether the patent was indefinite, which not all courts do. Gugliuzza said there are “scores” of jury verdicts on indefiniteness.

Since the Federal Circuit’s ruling in Berkheimer and Aatrix, at least one court has allowed jurors to weigh in on issues related to eligibility. But Gugliuzza said many courts continue to keep eligibility as a “judge decision.”

General practices among courts have evolved in a “haphazard kind of way,” with no real discussion on why juries are allowed to decide some of these invalidity grounds but judges commonly decide others, Gugliuzza said.

“It’s long past due we have that discussion, and this iLife opinion is a great example of why we need to talk about it,” he said.

Decision Delayed

iLife and Nintendo’s patent battle dates to 2013, when iLife sued Nintendo in the U.S. District Court for the Northern District of Texas, alleging infringement of its U.S. Patent No. 6,864,796.

After a detour to the Patent Trial and Appeal Board, where the relevant patent claim survived review, Nintendo asked the court to rule the claim was invalid because it covers an abstract idea and lacked an inventive concept. The court delayed answering the question in a 2017 order, although it did not explain why.

The infringement trial started in August 2017, and lasted six days. Jurors found Nintendo infringed the patent, rejecting the gamemaker’s argument that the patent didn’t adequately describe the invention or enable an expert in the field to make the invention.

Shortly after the verdict, Nintendo renewed its argument the patent claim covered an abstract idea. The case sat largely dormant until Jan. 17, when U.S. District Court Judge Barbara M. G. Lynn invalidated the claim.

The case is iLife Technologies Inc v. Nintendo of America Inc, N.D. Tex., No. 13-cv-04987

To contact the reporter on this story: Matthew Bultman in New York at mbultman@correspondent.bloomberglaw.com

To contact the editors responsible for this story: Rebecca Baker at rbaker@bloomberglaw.com; Keith Perine at kperine@bloomberglaw.com

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