Summaries of recent reported decisions of the Federal Circuit prepared by Irfan Lateef.
District Court’s Remand to State Court Was Unreviewable
In Preston v. Nagel, Appeal No. 2016-1524, the Federal Circuit rejected a proposed exception to 28 U.S.C. § 1447(d), which bars review of an order remanding a case back to the state court from which it was removed, where the defendant removes a case to federal court based on a patent law counterclaim.
Preston filed a complaint against Nagel in Massachusetts Superior Court alleging various state-law claims. Nagel counterclaimed for declaratory judgment of noninfringement of several patents and removed the case to federal court. The district court remanded the case back to the state court, finding that it lacked subject-matter jurisdiction because the state-law claims did not arise under federal law and Nagel lacked standing to assert the declaratory judgment counterclaims.
Under 28 U.S.C. § 1447(d), an order remanding a case back to the state court from which it was removed is not reviewable if the order was based on lack of subject matter jurisdiction or for procedural defects. Nagel conceded that the remand was based on subject matter jurisdiction, therefore § 1447(d) barred review of the order unless an exception applied.
Nagel argued that an exception exists where defendants invoke § 1454 to remove patent claims over which federal courts have exclusive jurisdiction. In Osborn v. Haley, the Supreme Court created a narrow exception to the § 1447(d) bar “in the extraordinary case in which Congress has ordered the intercourt shuttle to travel just one way—from state to federal court.” 549 U.S. 225, 243-44 (2007). The Federal Circuit determined that this was not an extraordinary case where the AIA created a one-way shuttle because the district court still needs to make threshold inquiries for subject matter jurisdiction. The Federal Circuit also was not convinced that Nagel would lose his opportunity to have his claims heard on the merits—Nagel could file a separate federal declaratory judgment action. Accordingly, the Federal Circuit dismissed the appeal for lack of subject-matter jurisdiction.
District Court Abused Discretion in Not Finding Case Exceptional
In Rothschild Connected Devices v. Guardian Protection Services, Appeal No. 2016-2521, the Federal Circuit held that a district court abused its discretion in determining that the case was not exceptional, where the plaintiff was willfully ignorant of the prior art and had engaged in a pattern of vexatious litigation to extract nuisance-value settlements.
Rothschild sued ADS for patent infringement. ADS emailed Rothschild alleging that the asserted patent was ineligible under § 101 and anticipated under § 102(a)(1). ADS next filed a motion for judgment on the pleadings raising its § 101 argument. ADS also sent Rothschild a Rule 11 Safe Harbor Notice and a copy of its proposed Rule 11(b) motion for sanctions, citing purportedly anticipatory prior art. Rothschild then moved to voluntarily dismiss, within the safe-harbor period. ADS opposed the motion to dismiss, and cross-moved for attorneys’ fees, alleging Rothschild’s suit was objectively unreasonable. The District Court granted Rothschild’s motion to dismiss, but denied ADS’s cross-motion for attorneys’ fees.
The Federal Circuit reversed the denial of attorney’s fees under § 285, finding that the district court abused its discretion in not finding the case to be exceptional. In particular, the district court failed to consider Rothschild’s willful ignorance of the prior art, evidenced in part by Rothschild’s affidavits stating that neither it nor its counsel conducted an analysis of the prior art cited in the cross-motion for attorneys’ fees, yet it maintained a good faith belief that the asserted patent was valid. There was also no evidence suggesting that Rothschild or its attorneys evaluated the defendant’s products or publicly available information prior to bringing suit. The Federal Circuit also stated that the district court misjudged Rothschild’s conduct in other litigation, stating that undisputed evidence of vexatious litigation against more than 50 other defendants warranted an affirmative exceptional-case finding.
Lastly, the district court erred by conflating Rule 11’s safe harbor provision with a § 285 attorneys’ fee award. Unreasonable conduct does not need to be independently sanctionable under Rule 11 to be exceptional under § 285.
District Court Abused Discretion in Finding Case Exceptional
In Checkpoint Systems, Inc. v. All-Tag Security S.A., Appeal No. 2016-1397, the Federal Circuit reversed a district court’s finding that a case was exceptional under § 285, where there was no improper purpose in bringing the lawsuit, there was an adequate pre-suit investigation, and where the products examined by the plaintiff’s expert were not different from the actual accused products.
Checkpoint sued All-Tag for infringement of its patent relating to anti-theft merchandise tags. Following a jury verdict of non-infringement, invalidity, and unenforceability, the district court found the case to be “exceptional” under § 285 and awarded $6.6 million in attorneys’ fees, costs, and interest to All-Tag. The case was appealed up to the Supreme Court and remanded back down to the district court for further consideration in light of the Supreme Court’s decision in Octane Fitness. The district court again held that the case was exceptional because: (1) Checkpoint’s pre-suit investigation was inadequate because its expert inspected tags produced in a different country, rather than the actual accused products, and because the investigation was based on a European infringement verdict against All-Tag on a foreign counterpart to the U.S. patent and infringement opinions given years before filing, and (2) Checkpoint was improperly motivated to bring the lawsuit in order to interfere with All-Tag’s business and protect Checkpoint’s competitive advantage.
In the current appeal, the Federal Circuit once again reversed the district court’s finding of an exceptional case. The expert’s failure to examine the actual accused products did not support an exceptional case finding because there was no evidence that the tags produced in the other country were different from the actual accused products. Checkpoint’s basis for infringement was also objectively reasonable because Checkpoint was able to survive summary judgment motions and a Daubert challenge, and was able to proceed to jury trial. Finally, the Federal Circuit held that there was no improper motivation in bringing suit: “[M]otivation to implement the statutory patent right by bringing suit based on a reasonable belief in infringement is not an improper motive.” Accordingly, the Federal Circuit held that the district court had abused its discretion in finding the case “exceptional” and reversed the award of attorneys’ fees
Federal Circuit Affirms District Court’s Rejection of “Wholly Groundless” Assertion of Arbitrability
In Evans v. Building Material Corporation, Appeal No. 2016-2427, the Federal Circuit affirmed the district court’s rejection of arbitration because the asserted patent, trade dress, and unfair competition claims did not “arise under” the parties’ previously terminated agreement.
In 2009, Roof N Box (“RNB”) and Building Materials Corporation of America (“BMC”) entered a promotion agreement, whereby BMC agreed to promote RNB’s three-dimensional roofing model to contractors. The agreement contained a binding arbitration clause for disputes “arising under” the agreement. BMC terminated the agreement after one year. In 2016, RNB sued BMC for design patent infringement, trade-dress infringement, and unfair competition, related to the three-dimensional roofing model. BMC moved to dismiss or stay the action pending arbitration. The district court denied the motion, holding that RNB’s claims were outside the scope of the 2009 arbitration provision.
The Federal Circuit applied the “wholly groundless” standard in determining whether the court may reject arbitration. The court explained that the arbitration provision in the 2009 agreement only reached claims “arising under” the agreement, and that the claims for patent infringement, trade dress infringement, and unfair competition were not related to the performance or interpretation of any contractual provisions. The Federal Circuit also rejected BMC’s other arguments relating to unfair competition due to a breach of confidentiality on the merits and because those arguments had not been preserved for appeal. Accordingly, the Federal Circuit affirmed the district court’s rejection of arbitration.
Federal Circuit Holds That “Means” Did Not Invoke Means-Plus-Function Statute
In Skky, Inc. v. Mindgeek, s.a.r.l., Appeal No. 2016-2018, the Federal Circuit held that the use of the word “means” in the claim term “wireless device means” created a presumption that the term was a means-plus-function limitation invoking § 112 ¶ 6, but that presumption was overcome because the claim term recited sufficient structure.
MindGeek filed a petition for inter partes review of Skky’s patent. The challenged claims were directed to a method of transmitting multimedia files to a “wireless device means.” The Board found that “wireless device means” did not invoke § 112 ¶ 6 because the phrase was not associated with a function. Under this construction, the Board found the challenged claims invalid as obvious in view of two references. Skky appealed.
The Federal Circuit affirmed the Board’s finding. The Federal Circuit noted that it is not bound by the examiner’s view that the claim term invoked § 112 ¶ 6. Moreover, the Federal Circuit stated that determining whether a claim term invokes § 112 ¶ 6 does not turn on the mere presence of the word “means.” Instead, the determination turns on whether the claim term is understood by the skilled artisan to designate structure. Here, the term “wireless device” is used in common parlance to designate structure. Despite use of the term “means,” the phrase lacked any associated function. Thus, the presumption that the phrase was a means-plus-function limitation was overcome. Under this construction, the Federal Circuit upheld the Board’s determination of obviousness.
Federal Circuit Reaffirms That Cease and Desist Letters Do Not Establish Specific Personal Jurisdiction
In New World Int’l, Inc. v. Ford Global Techs., LLC, Appeal No. 2016-2097, the Federal Circuit held that a cease and desist letter in combination with an exclusive license agreement that does not contain a meaningful obligation to enforce or defend the patents fails to confer specific personal jurisdiction because it fails the due process fairness prong.
New World sued Ford Global Techs, LLC (“FGTL”) for declaratory judgment of non-infringement and invalidity of two patents that FGTL exclusively licensed to an aftermarket parts manufacturer, LKQ, which does business in all 50 states. FGTL moved to dismiss for lack of personal jurisdiction. New World argued that specific personal jurisdiction over FGTL is based on multiple cease and desist letters and the license agreement. The district court granted FGTL’s motion.
On appeal, the Federal Circuit noted that a cease and desist letter alone is insufficient to establish specific personal jurisdiction because the principles of fair play and substantial justice allow a patentee to inform others of its patent rights without subjecting itself to jurisdiction in a foreign forum. The court also rejected the argument that the mere existence of the license agreement in combination with the cease and desist letters is enough for personal jurisdiction. For jurisdiction to exist, the license agreement must not only contemplate an “’ongoing relationship . . . beyond royalty payments but [the agreement must have] actually resulted in such a relationship to enforce the patent.”
The Federal Circuit rejected the argument that an indemnity provision in the agreement satisfies that requirement. The indemnity provision required FGTL to indemnify LKQ for suits initiated by third parties, which by definition are not actions that FGTL directed toward Texas. The court also found that FGTL was “free to decide how to enforce the patent, or whether to enforce it at all.” Thus, New World had not shown that the obligations in the license “resulted in an undertaking by FGTL to enforce or defend the patents with LKQ,” and were insufficient for personal jurisdiction. Accordingly, the Federal Circuit affirmed.
Service Mark Was Owned by Trade Organization, Not Founding Member of Organization
In Lyons v. THE AMERICAN COLLEGE OF VETERINARY SPORTS MEDICINE AND REHABILITATION, Appeal No. 2016-2055, the Federal Circuit affirmed the TTAB’s cancellation of a mark on the Supplemental Register in an ownership dispute between a former member of an organization and the organization itself.
Lyons appealed the Board’s decision to cancel her registration of the service mark “THE AMERICAN COLLEGE OF VETERINARY SPORTS MEDICINE AND REHABILITATION” on the Supplemental Register on the ground that Lyons did not own the mark. Lyons was part of a group of veterinarians who formed a veterinary specialist organization. The group began using the mark in association with the organization and sought accreditation from the American Veterinary Medical Association. Lyons was subsequently dismissed from the group. The following year, Lyons sought and obtained registration of the mark for “veterinary education services” based on actual use of the mark.
In resolving the ownership of a mark, the relevant factors are: (1) the parties’ objective intentions or expectations; (2) who the public associates with the mark; and (3) to whom the public looks to stand behind the quality of goods or services offered under the mark. The Federal Circuit affirmed the Board’s determination, finding that the Board had applied the proper legal framework and that substantial evidence supported the Board’s findings regarding each of the three relevant factors. The Federal Circuit agreed that the objective expectation of all members of the organizing committee was that the mark would be associated with services rendered by the College, rather than by Lyons as an individual. Additionally, the Federal Circuit noted that the relevant public looks to the College, not Lyons as an individual, for services in connection with the mark. The Court emphasized that although Lyons used the mark first, her use was de minimis and did not rise to the level of use in commerce sufficient to create an association between Lyons and the mark in the minds of the public. Accordingly, the Federal Circuit affirmed the cancellation of Lyons’ mark.
Supreme Court Issues First Decision On Patent Provisions of Biologics Price Competition and Innovation Act of 2009
In Sandoz Inc. v. Amgen Inc. et al., No. 15-1039, the Supreme Court held that: (1) the requirement that a biosimilar applicant provide application materials and manufacturing information to the reference drug manufacturer is not enforceable by injunction under federal law; and (2) the applicant’s required notice of commercial marketing may be made prior to FDA approval.
Sandoz applied to the FDA for approval of a drug that is biosimilar to Amgen’s product under the Biologics Price Competition and Innovation Act of 2009. In its notice, Sandoz refused to provide the application and manufacturing information required by 42 U.S.C. § 262(l)(2)(A). Sandoz also stated that it intended to begin marketing the product commercially immediately upon receipt of approval from the FDA (and at least 180 days from that notice). Amgen sued under § 262(l)(9)(C) and California unfair competition law, seeking an injunction requiring disclosure of the information, and requiring that the 180-day notice begin after FDA approval.
The Federal Circuit affirmed dismissal of Amgen’s state law claims and further held that federal law does not provide for this type of injunctive relief. The Federal Circuit held for Amgen that an applicant must provide notice of commercial marketing only after the FDA has approved the biosimilar.
The Supreme Court affirmed the Federal Circuit’s ruling that injunctive relief is not available under federal law, explaining that the declaratory remedies of § 262(l)(9)(C) are the exclusive federal remedies for a violation of § 262(l)(2)(A). However, the Supreme Court remanded to the Federal Circuit to consider whether an injunction could be available under state law based on a violation of § 262(l)(2)(A) being “unlawful” there.
The Supreme Court then reversed the Federal Circuit on the issue of notice timing, holding that the applicant’s notice of commercial marketing may be given prior to FDA licensure. In interpreting the language of § 262(l)(8)(A), the Court held that the term “licensed” referred back to the biosimilar which is to be commercially marketed and has no grammatical connection to the notice required of the applicant.
Federal Circuit Reverses ITC Indefiniteness Ruling
In One-E-Way, Inc. v. International Trade Commission, Appeal No. 2016-2105, the Federal Circuit reversed a summary determination of indefiniteness of the term “virtually free from interference.”
One-E-Way filed a complaint with the ITC against Sony and other respondents for infringement of two of its patents. Those patents related to wireless digital audio systems that provide users with private listening even when operated within a shared space. Each asserted claim contained the term “virtually free from interference.” At the International Trade Commission, respondents argued that the term did not appear in the asserted patents’ shared specification and is indefinite. The administrative law judge granted summary determination of indefiniteness, invalidating all asserted claims. The Commission affirmed and One-E-Way appealed.
The Federal Circuit reversed, agreeing with One-E-Way’s proposed construction that “virtually free from interference” here means that “eavesdropping cannot occur.” During the prosecution of a related parent application, the applicant explained that a prior art reference “does not teach, disclose, or suggest such a relationship where interference is virtually eliminated (e.g. where eavesdropping cannot occur)…” The Federal Circuit explained that the applicant’s statement was “entirely consistent with the specification” and provided a POSITA with guidance as to the term’s meaning. The ITC and respondents had argued that the statement is irrelevant because it was made in the context of claims that recited “free from interference” rather than “virtually free from interference.” The Federal Circuit disagreed, noting that the statement’s very language employs the term “virtually.” The Federal Circuit explained that the term “virtually” is a term of degree and although applicant did not provide a technical definition for that term, “[f]or the purpose of definiteness, the term is not required to have a technical measure of the amount of interference.” Because a POSITA, viewing the term in light of the specification and prosecution history, would be informed of the scope of the invention with reasonable certainty as required by the Supreme Court’s Nautilus standard, the term satisfies the definiteness requirement.
PTAB Must Give Notice to Patentee and Opportunity to Respond to Specific Prior Art References Relied Upon in IPR
In EmeraChem Holdings, LLC v. Volkswagen Group Of America, Appeal No. 2016-1984, the Federal Circuit vacated in part the PTAB’s final written decision in an IPR because the PTAB failed to give the patentee adequate notice of and opportunity to respond to the specific prior art references that applied to each claim.
Volkswagen filed an IPR petition asserting that certain claims of Emerachem’s ’758 patent were obvious over several references, including a reference called “Stiles.” The Board held that all claims at issue were obvious. However, the Board’s final written decision relied on Stiles to invalidate several dependent claims even though neither the IPR petition nor the institution decision applied Stiles to those claims.
Emerachem appealed and argued that it did not have a sufficient opportunity to respond with respect to Stiles. Under the Administrative Procedure Act, the Board must inform the patent owner of all matters of fact and law asserted and give the patent owner an opportunity to respond and submit rebuttal evidence. Volkswagen argued that Emerachem had sufficient notice because Volkswagen’s IPR petition and the Board’s institution decision discussed the same portions of Stiles in their discussion of other claims. The Federal Circuit held that was insufficient because the discussion of the dependent claims in the IPR petition and institution decision made no reference to Stiles. Thus, the Federal Circuit vacated and remanded with respect to those claims.
Emerachem also appealed the Board’s decision rejecting Emerachem’s argument that another patent did not qualify as prior art under Section 102(e). Emerachem relied on a declaration of one of the inventors of the ’758 patent, which stated that he and his coinventor were the only inventors of the relevant portions of the prior patent. The Federal Circuit held that such a “naked assertion” of inventorship by one of the inventors was insufficient because it lacked any corroborating evidence. Thus, the Federal Circuit affirmed the remaining portion of the Board’s decision.
Federal Circuit Affirms that a Motivation to Combine References Is Not Limited to the Problem Faced by the Inventor
In Outdry Technologies Corp. v. Geox S.p.A., Appeal No. 2016-1769, the Federal Circuit held that a motivation to combine prior art references for obviousness does not need to be the same motivation articulated by the patentee.
Geox filed an IPR petition challenging all claims of Outdry’s patent as obvious. The Board issued a final written decision holding all claims unpatentable for obviousness.
Outdry raised two arguments why the Board failed to adequately articulate a motivation to combine the cited references. First, Outdry argued the Board erred by relying solely on Geox’s petition, without making any explicit findings of its own. Second, Outdry argued the Board failed to identify why a POSITA would combine the cited references to solve the problem identified by Outdry’s patent.
The Federal Circuit rejected both arguments. First, substantial evidence supported the Board’s finding that there was a motivation to combine the references because the Board articulated and adopted Geox’s arguments with evidentiary support. Second, a motivation to combine references does not need to be the same motivation articulated in Outdry’s patent; any motivation to combine references, whether stated in the references or supported by the knowledge of a skilled artisan, can be sufficient to arrive at the claimed invention. The Federal Circuit therefore affirmed the Board’s obviousness conclusion.
Federal Circuit Reaffirms that Section 101 Issues May Be Properly Addressed by a Motion to Dismiss
In The Cleveland Clinic Foundation v. True Health Diagnostics LLC, Appeal No. 2016-1766, the Federal Circuit held that a district court may rule on § 101 subject-matter-eligibility challenges raised in a motion to dismiss.
Cleveland Clinic filed a complaint in district court accusing True Health of infringing three patents directed to methods of testing a particular biomarker and a fourth patent directed to treating cardiovascular disease. True Health filed a motion to dismiss, arguing that the testing patents were directed to patent-ineligible subject matter and that Cleveland Clinic had failed to state a claim for indirect infringement of the treatment patent. The district court granted True Health’s motion and denied leave to amend the complaint.
Cleveland Clinic appealed and made several procedural arguments. First, Cleveland Clinic asserted that that the district court erred by analyzing only certain representative claims for patent eligibility, instead of analyzing all asserted claims. The Federal Circuit disagreed, determining that the analyzed claims were substantially similar and linked to the same law of nature as the other claims. Cleveland Clinic also argued that the district court should have undertaken claim construction before analyzing whether the claims were eligible under § 101. The Federal Circuit disagreed and stated that it has “repeatedly affirmed § 101 rejections at the motion to dismiss stage.”
The Federal Circuit affirmed that the three testing patents were directed to a patent-ineligible law of nature. Under Alice step one, the claims were directed to the natural existence of a biomarker and its correlation to cardiovascular risk. Under step two, the claims did not contain a sufficient inventive concept because the claims tested the biomarker using known techniques rather than a new and useful laboratory technique.
The Federal Circuit also ruled that the district court properly dismissed Cleveland Clinic’s contributory infringement claim because True Health merely provides a testing service—True Health cannot be liable for contributory infringement because it does not provide a material or apparatus for use in practicing the patented method. Additionally, Cleveland Clinic’s claim for induced infringement was also properly dismissed because Cleveland Clinic failed to allege specific intent and action to induce infringement.
Supreme Court Rules That Restriction of “Disparaging Marks” Violates the First Amendment
In Matal v. Tam, No. 15-1293, the Supreme Court held that the Lanham Act’s limitations on registration of disparaging marks violate the free-speech provision of the U.S. Constitution.
Simon Tam, the lead singer of the rock band, The Slants, sought Federal trademark registration for the mark “THE SLANTS.” Tam chose this mark in order to “reclaim” and “take ownership” of Asian stereotypes. The PTO denied Simon Tam’s application for the mark “THE SLANTS” under a Lanham Act provision prohibiting registration of trademarks that may “disparage” any “persons, living or dead.” 15 U.S.C. § 1052(a). The Federal Circuit held en banc that the disparagement clause is unconstitutional under the First Amendment’s free speech clause. The Supreme Court granted certiorari.
Central to the Supreme Court’s decision to affirm was its holding that trademarks constitute private, not government speech. The Court cautioned that “[i]f private speech could be passed off as government speech by simply affixing a government seal of approval, government could silence or muffle the expression of disfavored viewpoints.” The Federal Government does not “dream up” the trademarks for registration, nor can it edit the marks submitted for registration. In contrast to a prior case where the Supreme Court held that specialty vehicle license plates constituted government speech, trademarks have not traditionally been used to convey a Government message. The Supreme Court also rejected the Government’s proposal for a new “government-program” doctrine where some content- and speaker-based restrictions would be permitted.
Federal Circuit Affirms Dismissal of Patent-Infringement and Breach-of-Contract Claims for Lack of Personal Jurisdiction
In NexLearn, LLC v. Allen Interactions, Inc., Appeal Nos. 2016-2170, 2016-2221, the Federal Circuit held that a choice-of-law and a forum-selection clause in an NDA did not establish personal jurisdiction in federal district court.
NexLearn sued Allen in Kansas, alleging patent infringement and breach of contract. The companies had entered into a Non-Disclosure Agreement (NDA) and an End-User License Agreement (EULA) to allow Allen to test a trial version of NexLearn’s software. Allen accessed the software several times, then stated it was no longer interested in a deal with NexLearn and developed a competing product. The NDA and EULA stated that Kansas law governed the agreements. Allen, a Minnesota corporation with its principal place of business in Minnesota, argued it was not subject to Kansas jurisdiction due to its limited contacts with the forum. The district court agreed, finding Allen did not purposefully direct itself to the Kansas forum and that NexLearn’s patent-infringement claim did not arise out of or relate to Allen’s activities in Kansas. NexLearn also argued the district court had supplemental jurisdiction over the breach-of-contract claim under 28 U.S.C. § 1367 because it goes “hand in hand” with the patent-infringement claim and because it arose out of Allen’s activities in Kansas. The district court exercised its discretion to dismiss the breach-of-contract claim after dismissing the patent-infringement claim (over which the district court had original jurisdiction).
The Federal Circuit affirmed dismissal for lack of personal jurisdiction. Allen’s website plus its contacts with NexLearn created only an “attenuated affiliation” with Kansas, not a “substantial connection” as required for specific jurisdiction. And because the Federal Circuit affirmed the district court’s dismissal of the patent-infringement claim for lack of personal jurisdiction, the Federal Circuit also affirmed the district court’s dismissal of the supplemental claim for breach of contract because a “district court cannot exercise supplemental jurisdiction over a claim where original subject matter jurisdiction does not exist.”
Non-Instituted Claims in Post Grant Proceeding Are Not Barred from Subsequent Post Grant Proceedings
In Credit Acceptance Corp. v. Westlake Services, Appeal No. 2016-2001, the Federal Circuit held that the estoppel provisions of 35 U.S.C. § 325(e)(1) do not apply to non-instituted claims in future proceedings before the PTO.
Westlake petitioned for CBM review of all claims of a patent. The Board instituted a first proceeding on some claims and declined to institute review of the remaining claims under the then-prevailing law of Ultramercial, Inc. v. Hulu, LLC, 722 F.3d 1335 (Fed. Cir. 2013). Following the Supreme Court’s decision in Alice Corp. v. CLS Bank International, 134 S. Ct. 2347 (2014), Westlake requested CBM review of the previously non-instituted claims. The Board instituted review in a second proceeding. Both proceedings resulted in the respective claims being found unpatentable. CAC appealed the second CBM review, arguing that the final written decision in the first proceeding estopped Westlake from maintaining the second proceeding under 35 U.S.C. § 325(e)(1).
The Federal Circuit explained that a final written decision on instituted claims is not a final determination on the patentability of non-instituted claims. Because a final written decision does not determine the patentability of non-instituted claims, it follows that estoppel does not apply to those non-instituted claims in future proceedings before the PTO. On the merits, the court also upheld the Board’s decision that the claims in the second proceeding were unpatentable under § 101.
Patents for New Chemical Compounds Must Provide Guidance on How to Obtain the New Compounds
In Storer v. Clark, Appeal No. 2015-1802, the Federal Circuit affirmed the Board’s finding that claims directed to a new chemical compound were not enabled, where the patentee relied on the existence of chemical precursors in the prior art and the knowledge of one of ordinary skill in the art to arrive at the final compound.
This appeal arises out of an interference proceeding in which two applicants claimed an antiviral compound with a specific structure and stereochemistry. The Board found that the provisional application on which Storer relied for priority did not enable the patent and that Storer was not entitled to the asserted June 28, 2002 priority date.
Storer argued that the provisional application disclosed the final compound, that a prior-art reference disclosed a precursor compound, and that one of ordinary skill in the art would have been able to carry out the conversion of the precursor into the final compound. Although the prior-art precursor was not included in the provisional application, Storer argued that a precursor to the prior-art precursor and a pathway to make the prior-art precursor were disclosed. However, none of the pathways identified by Storer showed conversion to the prior art compound. Rather, as Clark argued, each scheme instead produced compounds with a stereochemistry opposite that of the prior art precursor. The Board awarded priority to Clark, finding that the contested patent claims were not entitled to claim priority to the provisional because the provisional did not teach one of ordinary skill how to make or use the claimed invention without undue experimentation.
On appeal, the Federal Circuit found that there was substantial evidence supporting the Board’s decision. Noting that, “[i]t is the specification, not the knowledge of one skilled in the art, that must supply the novel aspects of an invention,” the Federal Circuit reviewed the record with special attention to the level of predictability in the art. The Federal Circuit found that the record contained ample evidence that the steps that Storer had claimed to be routine were, in fact, highly unpredictable, and that significant experimentation would have been necessary to synthesize the target compound. Thus, the combination of the specification of the provisional application with the prior art and the ordinary level of skill in the field was insufficient to provide enablement of the later patent, and the Board’s decision awarding priority to Clark was affirmed.
Appellants Seeking Review Under 35 U.S.C. § 145 Must Pay USPTO’s Attorneys’ Fees
In Nantkwest, Inc. v. Matal, Appeal No. 2016-1794, the Federal Circuit held that an applicant who appeals a PTAB decision to the District Court for the Eastern District of Virginia under 35 U.S.C. § 145 must pay all expenses of the proceeding, including the government’s attorneys’ fees.
The PTAB affirmed an examiner’s rejection of a patent application for a method to treat cancer. The patent applicant appealed to the District Court for the Eastern District of Virginia under 35 U.S.C. § 145. That section allows an applicant who is dissatisfied with the decision of the PTAB to appeal to the District Court for the Eastern District of Virginia, but “[a]ll the expenses of the proceedings shall be paid by the applicant,” regardless of the outcome. After the Director prevailed at the district court, the court awarded Director’s requested witness fees but denied the requested attorneys’ fees. On appeal, the applicant argued that the term “expenses” in § 145 lacks the requisite specificity to overcome the American-rule presumption that each party pays its own attorneys’ fees. The Federal Circuit had “substantial doubts” that § 145 implicates the American Rule. Still it held that, even if the American rule applied, the statutory language is clear and the term “all of the expenses” includes the government’s attorneys’ fees in § 145 proceedings.
Federal Circuit Vacates PTAB Decision of Lack of Written Description for Claims Directed to Methods for Diagnosing Chromosomal Abnormalities
In Stanford Univ. v. The Chinese Univ. Of Hong Kong, Appeal No. 2015-2011, the Federal Circuit vacated the Board’s decision in an interference finding lack of written description, and declined to review evidence obtained in district court, when the district court lacked subject matter jurisdiction to hear the appeal from the interference.
In interference proceedings between Stanford and Chinese University of Hong Kong, the Board found unpatentable Stanford’s claims directed to diagnosing chromosomal abnormalities because the claims lacked written description support. Stanford had argued that its sequencing claims drew support from the specification’s reference to the Illumina sequencing platform. The Board rejected that argument, concluding that the specification would not have indicated to one of ordinary skill in the art that Stanford was in possession of the claimed sequencing method.
Stanford appealed the Board’s decision to a district court pursuant to 35 U.S.C. § 146, before transferring the appeal to the Federal Circuit. As an initial matter, the Federal Circuit considered whether § 146 was available to appellants from an interference declared on or after September 16, 2012. The Federal Circuit declined to revisit its prior holding in Biogen MA, Inc. v. Japanese Found. for Cancer Research, 785 F.3d 648 (Fed. Cir. 2015), that the AIA abolished appeals to a district court under § 146.
Because the district court originally lacked subject matter jurisdiction, the Federal Circuit declined to review any evidence obtained during the district court proceedings. The Federal Circuit then found that the Board’s conclusion was not supported by substantial evidence. The Board had relied on several publications to determine what the specification’s reference to Illumina products meant. But all of these publications focused on a third-party platform, not the Illumina platform. The Board did not cite any evidence to connect the third-party platform the Illumina system. The Board did not explain what it found persuasive about the third-party platform references, nor did it cite these references with specificity. Because the Federal Circuit did not have a reviewable record from which it could sustain the Board’s factual findings, and it vacated and remanded for further consideration.