Summaries of recent reported decisions of the Federal Circuit prepared by Irfan Lateef.
District Court Abused Discretion in Ignoring Federal Circuit Mandate to Reconsider Attorneys’ Fees Under Octane Fitness
In Adjustacam, LLC v. Newegg, Inc., Appeal No. 2016-1882, the Federal Circuit held that a district court abused its discretion in denying attorneys’ fees when the court failed to follow the Federal Circuit’s mandate to reconsider the case under a new legal standard, and when the facts independently merited an award of attorneys’ fees.
AdjustaCam sued Newegg and other defendants for infringing a patent directed to a rotating clip for a webcam. Shortly after an adverse claim construction order, AdjustaCam settled with most defendants but continued to litigate against Newegg. AdjustaCam eventually moved to dismiss the case with prejudice, and Newegg moved for a declaration of exceptional case under 35 U.S.C. § 285 and an award of fees, pointing to AdjustaCam’s past nuisance-value settlements, weak infringement positions post-Markman, and abusive litigation tactics.
The district court denied Newegg’s motion and Newegg appealed. The Supreme Court then issued its decision in Octane Fitness, and the Federal Circuit remanded for reconsideration in light of Octane. On remand, a new judge adopted the previous judge’s factual determinations without much explanation and again concluded that the case was not exceptional. Newegg again appealed.
The Federal Circuit reversed, finding that the district court abused its discretion for two reasons. First, the district court failed to examine the case under the totality of the circumstances and lower burden of proof required by Octane Fitness. By adopting the previous judge’s findings of fact without substantive analysis, the court did not follow the Federal Circuit’s mandate. Second, the district court clearly erred in its findings about the substantive strength of AdjustaCam’s case. The Federal Circuit found that AdjustaCam’s suit became “baseless” after the claim construction decision and that AdjustaCam litigated in an “unreasonable manner,” especially by repeatedly serving belated expert declarations and reports. The court further found that AdjustaCam’s pattern of seeking nuisance-value damages reinforced a conclusion of unreasonableness.
Federal Circuit Reverses PTAB for Improper Means-Plus-Function Analysis
In IPcom GmbG & Co. v. HTC Corporation, Appeal No. 2016-1474, the Federal Circuit held that the PTO may not interpret mean-plus-function limitations as purely functional based on the “broadest reasonable interpretation” standard. Instead, the PTO must look to the specification for the corresponding structure that performs the function.
IPCom sued HTC for allegedly infringing a patent directed to methods and systems for handing over a phone call from one base station to another. HTC requested inter partes reexamination. In construing the means-plus-function limitation “arrangement for reactivating the link,” the Board rejected IPCom’s proposed 3-step algorithm for performing the function. However, the Board did not identify what it believed to be the correct algorithm from the specification. Instead, the Board determined that each individual step of IPCom’s proposed algorithm was not separately necessary. Thus, the Board held that several claims were obvious after concluding that it need not consider whether the prior art disclosed any of the three steps.
IPCom argued that the Board erred by never identifying the structure in the patent specification that corresponds to the “arrangement for reactivating the link” term. The Federal Circuit held that the Board impermissibly treated that limitation as a purely functional limitation. The Board’s conclusion was inconsistent with the Federal Circuit’s prior decision in In re Donaldson Co., 16 F.3d 1189, 1193 (Fed. Cir. 1994), which held that the PTO may not disregard structure disclosed in the specification that corresponds to a means-plus-function limitation. Thus, the Federal Circuit vacated and remanded the Board’s finding of obviousness based on the term “arrangement for reactivating the link.”
Federal Circuit Reverses Invalidity of Patent for Chemical Compound in Cancer Drug
In Millennium Pharmaceuticals, Inc. v. Sandoz Inc., Appeal Nos. 2015-2066, 2016-1008, -1009, -1010, -1109, -1110, -1283, -1762, the Federal Circuit held that a district court erred in concluding that a new compound was obvious as a “natural result” of a chemical procedure known in the art.
This appeal arises out of an ANDA case. Sandoz and other defendants sought FDA approval for a generic version of Velcade, a drug for treating certain forms of cancer. The patent in suit claimed the mannitol ester of bortezomib generated by lyophilizing bortezomib with mannitol. The district court determined the plaintiff had conceded that the claimed ester was a natural result of the lyophilization of bortezomib in the presence of mannitol. The district court held the patent claims obvious because they were the inherent result of an allegedly obvious chemical process (lyophilizing bortezomib in the presence of mannitol).
The Federal Circuit first stated that the issue in the case was whether a person of ordinary skill seeking to remedy known instability and insolubility issues of bortezomib would have found it obvious to produce the previously unknown ester compound. The Federal Circuit then reversed the district court’s ruling of obviousness.
The Federal Circuit explained that, although lyophilization was a known method of drug formulation, and although mannitol was a known bulking agent used in lyophilization, nothing on the record taught or suggested (1) the new ester, (2) that the new ester would be formed during the lyophilization process, (3) a reason to make the new ester, or (4) that the new ester would remedy the known shortcomings of bortezomib.
The Federal Circuit further found that the district court erred in concluding that the prior art did not teach away from the claimed invention and in examining secondary considerations of nonobviousness. In making these findings, the Federal Circuit relied on evidence that the chemical modification of bortezomib would have been unattractive to a person of ordinary skill for fear of disturbing the chemical properties whereby bortezomib functions effectively as an anti-cancer agent. The court also cited evidence that the invention produced unexpected results, addressed a long-felt need, and was commercially successful because it made bortezomib treatment marketable.
Federal Circuit Affirms Invalidity of Patent Claims for Soft Gel Capsule Version of Coenzyme Q-10
In Soft Gel Technologies, Inc. v. Jarrow Formulas, Inc., Appeal No. 2016-1815, the Federal Circuit affirmed the invalidity of patent claims directed to soft gel CoQ10 capsules, holding that the legal standard for obviousness requires a reasonable expectation of success, not absolute predictability.
Jarrow Formulas requested inter partes reexaminations of three related patents directed to using d-limonene (a monoterpene) as a solvent for CoQ10. The PTAB invalidated numerous claims from each of the three patents for obviousness. On appeal, Soft Gel challenged the Board’s factual finding that a person of ordinary skill would have had a reasonable expectation of success in combining prior art references. Soft Gel argued that, because the references cited by the Board did not expressly mention d-limonene, a person of skill in the art would not have expected d-limonene to function like carvone, the monoterpene that was actually disclosed by the prior art. The Federal Circuit rejected this argument, noting that another prior art reference discussed future studies on interactions between CoQ10 and essential oils, such as limonene. As the Board correctly noted, “[t]hose recommendations for future research show that a person of skill in the art would have recognized  that the monoterpenes limonene and carvone are of interest in the essential oil–CoQ10 mixtures. “
Soft Gel also highlighted follow-up research by a prior-art author that evaluated the use of d-limonene in drug delivery systems. Soft Gel argued that the reason for conducting follow-up research was because it was not obvious that the results in the prior art experiments were attributable to d-limonene. The Federal Circuit rejected this argument because “Soft Gel applies an incorrect legal standard for obviousness, requiring ‘absolute predictability’ rather than a reasonable expectation of success.” The Federal Circuit reasoned that a “supplemental study does not imply lack of awareness of the likely result; rather, studies are frequently conducted to confirm what is suspected to be true.”
Federal Circuit Clarifies Standard for Determining Whether Marks Containing a Surname Are Primarily Merely a Surname
In Earnhardt v. Kerry Earnhardt, Inc., Appeal No. 2016-1939, the Federal Circuit held that the determination of whether a mark containing a surname and an additional term is primarily merely a surname requires determining whether the additional term is merely descriptive of the applicant’s goods and services and determining whether the additional term alters the primary significance of the mark as a whole.
Teresa Earnhardt, the widow of Dale Earnhardt, filed notices of opposition seeking to prevent registration of the mark EARNHARDT COLLECTION based on the position that the mark is primarily merely a surname. The Board denied her petition, explaining that the addition of “collection” diminishes the significance of “Earnhardt” in the mark as a whole and that “collection” is “not the common descriptive or generic name” for the KEI’s goods and services.
On appeal, the Federal Circuit provided a two-part framework for determining whether a mark containing a surname and an additional term is primarily merely a surname: one considers (1) whether the additional term is merely descriptive of the applicant’s goods and services, and (2) whether adding the additional term to the surname alters the primary significance of the mark as a whole to the purchasing public. The Federal Circuit determined that the Board had not adequately performed the first part of this analysis because it was unclear that the Board intended its usage of “common descriptive” to represent a finding that “collection” is not merely descriptive. Consequently, the Federal Circuit vacated and remanded the case to the Board to clarify its findings and analysis.
District Court May Sanction Discovery Abuses with Adverse Inference of Specific Intent to Deceive the USPTO
In Regeneron Pharmaceuticals v. Merus N.V., Appeal No. 2016-1346, the Federal Circuit held that a district court did not abuse its discretion in drawing an adverse inference of specific intent to deceive the patent office due to the plaintiff’s widespread litigation misconduct.
Regeneron sued Merus for patent infringement. Merus counterclaimed for a finding of unenforceability due to inequitable conduct based on four prior art references that were withheld from the examiner during prosecution of the asserted patent. The district bifurcated the inequitable conduct trial into two bench trials to determine the materiality of the prior art references and Regeneron’s specific intent to deceive the PTO. At the first bench trial, the district court held that each of the four withheld prior art references were were not cumulative and, in fact, were but-for material to prosecution. However, instead of holding a second bench trial on specific intent, the district court sanctioned Regeneron for widespread litigation misconduct by drawing an adverse inference of specific intent by Regeneron to deceive the PTO.
The Federal Circuit affirmed. The court noted that Regeneron’s behavior during litigation, in which Regeneron repeatedly failed to make full and adequate production of documents during discovery by withholding non-privileged documents relating to the alleged attempt to deceive the PTO, suggested a pattern of misconduct. This pattern of misconduct during litigation was sufficient to support an adverse inference that Regeneron had specific intent to deceive the PTO by withholding material references during prosecution. The Federal Circuit reasoned that Regeneron’s litigation misconduct had obfuscated its prosecution misconduct, and concluded that the district court did not abuse its discretion by drawing an adverse inference of specific intent to deceive the PTO.
In dissent, Judge Newman argued that specific intent to deceive cannot be inferred, and must be proved by clear and convincing evidence. She also argued that, while litigation misconduct can support dismissal of a suit, unenforceability must be established based on the law of enforceability and should not be imposed as a discovery sanction.