September 02, 2015
Wearable technology is predicted to be the next trillion-dollar business in the consumer electronics space. With so much at stake, patent battles are sure to follow. But the current patent landscape may not be an inviting one for potential patent plaintiffs.
In late 2009, Nokia filed a lawsuit against Apple Inc., alleging Apple’s iPhone infringed 10 Nokia patents. Apple quickly struck back, asserting 13 patents against Nokia. And so the “smartphone patent wars” began. Motorola, HTC Corp., Microsoft Corp., Google, Sony Corp., Ericsson, Samsung, Research in Motion (BlackBerry) and others joined Nokia and Apple in fierce global litigation over the burgeoning smartphone market. Six years on, these disputes have largely subsided, but not before dozens of cases were filed, involving hundreds of patents.
The smartphone patent wars were not the first. The sewing machine industry was rocked with patent disputes in the 1850s. Similar lawsuits were fought in the nascent automobile and airplane industries in the early 1900s, over radio beginning in 1913 and television in the 1930s, while the 1980s saw massive patent fights over such disparate products as computer memory, diapers and medical stents. The common thread in these battles is easy to spot—the emergence of new, or “disruptive,” technology that changes the everyday lives of consumers.
Signs are pointing to wearable technology, or simply “wearables,” as a likely source of the next patent war. In November 2014, analysts at Morgan Stanley called wearable technology “a potential $1.6 trillion business,” writing that “wearable devices will far surpass market expectations, and become the fastest ramping consumer technology device to date.” With such potential upside, investment money is easy to get: Venture capitalists reportedly poured over $1 billion into wearable technologies in 2014.
What are wearables? No uniform definition exists, but in general wearables comprise computer or consumer electronics technology incorporated into clothing and accessories that can monitor and record user data, and also provide access to and information from the surrounding environment, the Internet, or both. Whereas the smartphone industry contains a relatively small number of competitors, the wearables market is intriguing because of the diversity of companies involved. Companies from the consumer electronics, software, health care, apparel, fitness and medical device industries are all competing for the opportunity to put a product on a consumer’s body or an app on his smartphone. With so many dollars at stake, it’s not surprising to learn that there has been a significant spike in patent filings in the wearables field. Forbes recently reported that there were over 41,000 patents published on wearable electronics from 2010 to May 2015.
Though the patent arsenals are being stockpiled, the road to victory may be a rocky one. Existing prior art, changes in the law, and the availability of alternative ways to challenge patents will likely give defendants a substantial advantage in patent litigation over wearables.
PRIOR ART IS FORMIDABLE
Products often take years to get to market, and frequently it is advances in underlying technology that result in a product’s commercial viability. Wearables are a prime example. While wearables are now buzz-worthy for their functionality, it was advances in processing speed, memory, battery life, and accelerometer and GPS accuracy that have spurred the consumer wearables market. The functionality provided by wearables, on the other hand, is far from new.
NASA, for example, developed and in 1976 patented a wearable wireless sensing device that continuously monitored a person’s movements and transmitted those movements to a remote receiver (Pat. No. 3,972,038). A patent issued in 1978 (Pat. No. 4,100,401) discloses a calorie counter incorporated into a digital wristwatch that allows a user to enter caloric information, determine caloric expenditure and calculate excess intake over expenditure.
Portable heart rate monitors have been in existence for at least 35 years, as shown by Pat. No. 4,195,642, which discloses a wrist-worn digital heart-rate monitor that provides continuous tracking during exercise. Once the U.S. government opened the Global Positioning System for civilian applications, GPS-based tracking and mapping software became ubiquitous. For example, the first commercial GPS mobile phone was introduced in 1999 in Europe, while patents describing GPS use in mobile applications had already issued by 1995 (see Pat. No. 5,422,816, disclosing a personal navigation tracking system with voice-based communication).
Meanwhile, the Massachusetts Institute of Technology was a pioneer in the development of wearables. In 1997, MIT hosted its first conference on wearables to “discuss the diffusion of technology into clothing and personal articles.” A 1998 thesis by MIT graduate student M. Redin titled “Marathon Man” documented a personal wearable system of multiple monitoring devices used with marathon runners. The system logged time, latitude, longitude, direction, speed, heart rate, temperature and running pace. It also wirelessly transmitted the logged information to an external server for storage or real-time display on PCs. A similar system was used to track and remotely monitor the health and progress of individuals climbing Mount Everest. [See R. Satava et al., "The Physiologic Cipher at Altitude: Telemedicine and Real-Time Monitoring of Climbers on Mount Everest," Vol. 6, Journal of Telemedicine and e-Health (2000).] And feature-rich personal digital assistants (PDAs) were sprouting in the late 1990s. In particular, the Palm-offshoot Handspring Visor incorporated an expansion slot that allowed dozens of add-on modules to boost functionality, such as modems, cellular phones, pedometers, reference manuals, digital cameras, MP3 players, GPS receivers and more. Both Palm and Handspring also provided software applications for download, providing even greater functionality.
In short, there is a large universe of wearable prior art, and diligent searching should prove fruitful for defendants facing a wearables-based patent lawsuit.
THE ‘ALICE’ AFTERMATH
Another potential chilling effect on wearable patents is the fallout from Alice v. CLS Bank, 134 S. Ct. 2347 (2014). The court’s decision effectively narrowed the scope of what is eligible for patent protection. While it was always the case that “abstract ideas” did not qualify for patent protection, Alice clarified that generic references to computer implementation did not transform abstract ideas into patent-eligible inventions.
Since then, the U.S. Court of Appeals for the Federal Circuit and district courts have struck down dozens of software patents for failing the Alice test. Importantly, the Federal Circuit held that an abstract idea does not become nonabstract by limiting the invention to a particular field of use or technological environment. See Intellectual Ventures v. Capital One Financial, 2014-1506 (Fed. Cir. July 6, 2015). Many wearable patents, particularly those that claim functionality implemented on generic computing devices, are in danger under this prohibition. Using sensors to collect certain types of data and a processor to store/manipulate/display that data is a prime example of an abstract idea likely to fail the current application of the Alice test. A company sued over a wearable patent should investigate early the viability of an Alice challenge, as many district courts will resolve the issue through a Rule 12 motion to dismiss the case.
In 2012 the patent statute was amended to give challengers options to test the validity of issued patents at the U.S. Patent and Trademark Office by filing petitions for inter partes review (prior art challenges based on patents and printed publications); covered business method review (challenging the validity of business-method patents); and post-grant review (allowing a party to challenge on any grounds the validity of any patent filed after March 15, 2013).
These proceedings are conducted by a three-judge panel at the Patent Trial and Appeal Board (PTAB). Significantly, patents subject to PTAB proceedings do not enjoy the presumption of validity applied to patents in district court litigation. And statistics published by the PTAB to date decisively favor patent challengers. As of this June, the PTAB has instituted nearly 75 percent of all petitions, and had invalidated thousands of patent claims.
While it remains to be seen whether wearables are the next great disruptive technology in consumer electronics, even if true, it does not follow that patent holders have an advantage over their competitors. Patent challengers have plenty of ammunition at their disposal.
Brian E. Ferguson is co-chair of Weil, Gotshal & Manges’ nationwide patent litigation practice and represents corporations before all of the major patent law venues. Anish R. Desai is a Weil Gotshal partner focusing on patent litigation in U.S. district courts, the U.S. International Trade Commission and the U.S. Court of Appeals for the Federal Circuit.
Reprinted with permission from the “September 2, 2015” edition of the “Law.com”© 2015 ALM Media Properties, LLC. All rights reserved.