The article, "Apple Snuffs Out NPE Patents That Almost Cost Company $533M" originally appeared in the National Law Journal on March 1, 2017.


The U.S. Supreme Court’s Alice decision has claimed another victim, this one once worth $533 million. The U.S. Court of Appeals for the Federal Circuit on Wednesday held three patents on mobile payments owned by Smartflash ineligible for protection under Section 101 of the Patent Act.

Smartflash once asserted the patents to the tune of a $533 million jury verdict against Apple Inc. in the Eastern District of Texas. But U.S. District Judge Rodney Gilstrap set the damages aside while the parties appealed liability, and last year Apple invalidated all of the challenged claims at the Patent Trial and Appeal Board. The Federal Circuit signaled at argument in December that it was heading to the same place.

Wednesday’s nonprecedential decision by Chief Judge Sharon Prost said the Smartflash patents “fail to recite any inventive concepts sufficient to transform the abstract idea into a patent-eligible invention.”

Smartflash v. Apple is another Section 101 win for Gibson, Dunn & Crutcher partner Mark Perry, who argued the appeal for Apple. Perry is also the lawyer who argued Alice to the Supreme Court in 2014.

The Smartflash card and reader were developed by inventor Patrick Racz in the late 1990s. The idea was to load digital content and billing information to a single portable device—originally, a chip-equipped card—to secure payments while preventing online piracy. The Smartflash business never gained traction, but with backing from Latitude Investments Ltd., Racz began licensing the patents and ultimately sued Apple, Samsung, Google and others.

Caldwell Cassady & Curry piloted Smartflash to the $533 million verdict in 2015, arguing successfully that Apple’s iTunes store infringes the patents. In rejecting Apple’s 101 challenge, Gilstrap had acknowledged that some claim language “is functional and somewhat generic.” But he ruled that limitations involving memories, data type and use rules were sufficiently narrowing and transformative.

On Wednesday, Prost wrote that, under Alice, “merely storing, transmitting, retrieving, and writing data to implement an abstract idea on a computer” does not render a claim patent-eligible.

Read the full article HERE.


Mark A. Perry is a partner in the Washington, D.C. office of Gibson, Dunn & Crutcher LLP and Co-Chair of the Firm's nationwide Appellate and Constitutional Law Practice Group. His practice focuses on complex commercial litigation at both the trial and appellate levels.

Mr. Perry is an accomplished appellate lawyer who has briefed and argued many cases in the Supreme Court of the United States—including winning the landmark decisions in Alice Corp. v. CLS Bank and Janus Capital Group v. First Derivative Traders—and the federal courts of appeals. He has served as chief appellate counsel to Fortune 100 companies in significant securities, intellectual property, and employment cases. He also appears frequently in federal district courts, serving both as lead counsel and as legal strategist in complex commercial cases. He has special expertise in class actions, and teaches the upper-level course in Class Action Law and Practice at Georgetown University Law Center.

Mr. Perry has been recognized by Best Lawyers in America® in the fields of Appellate Practice and Securities / Capital Markets Law, named an Appellate Litigation Star and a National Litigation Star by Benchmark Litigation, identified in the Appellate category by Super Lawyers, and ranked in the National Appellate category by Chambers USA. Mr. Perry has been recognized as the Appellate Lawyer of the Year by Benchmark Litigation, identified as an Appellate MVP by Law360, and named a Litigator of the Week by the American Lawyer. He is a Fellow of the Litigation Counsel of America.