Attorneys and Clients Behaving Badly – Deliberately Withheld Offer for Sale Is Inequitable Conduct
In Gs Cleantech Corp. v. Adkins Energy LLC, Appeal No. 16-2231,withholding and obscuring evidence of a pre-critical date offer for sale rendered a patent unenforceable for inequitable conduct.
On August 1, 2003, CleanTech sent Agri-Energy a proposal offering an ethanol processing system for a 60-day trial (the “Proposal”). At the end of the trial, Agri-Energy could either purchase or return the system. Without disclosing the Proposal to its patent counsel, on August 17, 2004, CleanTech filed its patent application for the processing system. In subsequent patent applications, CleanTech declared that its representatives hand-delivered the Proposal to Agri-Energy on August 18, 2003. CleanTech’s counsel did not question its client’s declarations, despite having a copy of the Proposal email to Agri-Energy dated August 1, 2003. The USPTO ultimately issued CleanTech several patents covering its ethanol processing system.
In subsequent infringement litigation, the district court determined that the Proposal was a commercial offer for sale and evidence showed that the system was ready for patenting in August 2003. The Federal Circuit held this determination was not an abuse of discretion. The Federal Circuit also affirmed the ruling that both CleanTech and its counsel engaged in inequitable conduct. The Federal Circuit emphasized that CleanTech was aware of the statutory on-sale bar when it withheld the Proposal from the USPTO. CleanTech also made false declarations to the USPTO by stating that the Proposal was delivered to Agri-Energy on August 18, 2003, when documents showed it was actually delivered on August 1, 2003. The court ruled that CleanTech’s counsel also engaged in inequitable conduct for failing to verify and correct CleanTech’s false declaration.
Claims Including Computer Speed and Efficiency Improvements May Still Be Ineligible Under Section 101
In Customedia Technologies, LLC v. Dish Network Corporation, Dish Network LLC, Appeal No. 18-2239, claims directed towards an abstract idea were ineligible for patent protection even though the claims included features that improved computer speed and efficiency.
Dish Network petitioned for CBM review of two Customedia patents relating to delivering targeted advertisements. The PTAB found many of the claims of each patent ineligible under Section 101. Customedia appealed.
Customedia argued the claimed invention was not an abstract idea under Alice Step One because it improved data transfer speed and efficiencies by dedicating a section of the computer’s memory to advertising data. Even accepting that assertion as true, however, the Federal Circuit determined the claimed invention merely improves the abstract concept of delivering targeting advertisements using a computer as a tool. It did not improve the “functioning of the computer itself.” As for Alice Step Two, the claims merely invoked a “conventional receiver” that was “insufficient to supply the required inventive concept.” Thus, the Federal Circuit affirmed.
Inducing Delay: When a Court Can Deviate from the First-to-File Rule
In Communications Test Design, Inc. v. Contec, LLC, Appeal No. 19-1672, the Federal Circuit ruled that filing a declaratory judgment action in the midst of ongoing licensing negotiations may justify a deviation from the “first-to-file” rule in favor of a later-filed lawsuit.
Contec, LLC (“Contec”) contacted Communications Test Design, Inc. (“CTDI”) regarding its belief that CTDI’s set-top-box testing systems were infringing its patents, threatening to file suit unless CTDI engaged in discussions regarding a potential license agreement. CTDI began discussions with Contec, indicated its intent to provide a counterproposal, and scheduled further discussions with Contec. Two days after accepting Contec’s invitation to discuss licensing terms, CTDI filed a declaratory judgment action in the Eastern District of Pennsylvania. Six days later, Contec filed a suit against CTDI in the Northern District of New York and moved to have CTDI’s suit in Pennsylvania dismissed. Contec alleged in its motion that CTDI had filed the declaratory judgment action in bad faith after inducing Contec to refrain from filing suit in a different forum by entering into licensing negotiations. The district court granted Contec’s motion to dismiss and CTDI appealed.
Citing the district court’s discretion to both decline to hear declaratory judgment suits and to deviate from the first-to-file rule, the Federal Circuit held that the district court did not abuse its discretion in dismissing CTDI’s declaratory judgment suit. Specifically, the Federal Circuit found no abuse of discretion in the district court’s determinations that: (1) CTDI filed its suit in anticipation of a lawsuit by Contec; (2) CTDI’s suit interfered with ongoing negotiations between the parties; and (3) the Northern District of New York was a more convenient forum.
Disclaimer Not Required for Prosecution History to Limit Claim Scope
In Personalized Media Communication, LLC v. Apple Inc., Appeal No. 18-1936, the Federal Circuit ruled that prosecution history evidence need not rise to the level of disclaimer to inform the meaning of disputed claim limitations.
Personalized Media Communication (PMC) challenged the Patent Trial and Appeal Board’s construction of the claim limitation “an encrypted digital information transmission including encrypted information.” PMC argued that the disputed claim limitation should be construed narrowly to include only “digital transmissions.” The Board rejected PMC’s position, finding that the limitation did not exclude transmissions of information that is non-encrypted or analog. Based on this construction, the Board invalided the challenged claims over the cited prior art.
On appeal, the Federal Circuit affirmed-in-part and reversed-in-part the Board’s decision. In reaching its decision, the Federal Circuit acknowledged that, although the Board’s construction of the terms in light of the claim language and specification was plausible, the prosecution history evidence compelled a narrower construction. Here, the applicant’s claim amendments and consistent statements during prosecution clarified that the disputed claim limitation was limited to digital transmissions, even though the statements may not have risen to the level of disclaimer. Because it was undisputed that the cited prior art was not limited to digital transmissions, the Federal Circuit reversed the Board’s final written decision invalidating claims containing the disputed limitation.
Stated Purpose of Invention May Limit Claim Scope
In Kaken Pharmceutical Co., Ltd., Bausch Health Complaints Inc., v. Andrei Iancu, Under Secretary Of Commerce For Intellectual Property And Director Of The United States Patent And Trade Mark Office, Appeal No. 18-2232, a statement of purpose in the specification and statements made to overcome a rejection during prosecution justified a narrow claim construction.
The Patent Trial and Appeal Board found Kaken Pharmaceutical Co.’s and Bausch Health Companies Inc.’s (“Kaken”) patent to be obvious in an IPR filed by Acrux Limited and Acrux DDS Pty. Ltd (“Acrux”). Kaken’s claims were directed to a topical cream used to treat finger/toe nail infections. In reaching its conclusion, the Board relied on a broad definition of “nail” in the specification to construe the claims as pertaining to topical treatment of an infection both in and around the nail. Based on this interpretation, the Board found Kaken’s patent invalid after accepting numerous prior art references involving the use of Kaken’s same active ingredient to treat infections on the surface of the skin.
The Federal Circuit found the Board’s claim construction to be overbroad. While Kaken’s specification did include a broad definition of “nail,” additional factors indicated that the broadest reasonable interpretation of the area of infection treated by Kaken’s product was limited to the “nail plate.” Noting that a patent’s statement of the invention’s purpose informs the proper construction of a claim, the court relied on several passages of the specification that indicated the patent was limited to treatment of infections of the “nail plate.” Additionally, statements made by Kaken and the examiner during prosecution clarified that the claims were limited to treatment of an infection of the “nail plate.” Because the Board’s obviousness determination was based in part on its erroneous claim construction, the Federal Circuit vacated the Board’s final written decision and remanded to the Board.
Time is of the Essence: Preserve Objections to the Jury Instructions
In Hafco Foundry and Machine Co. v. GMS Mine Repair, Appeal No. 18-1904, the Federal Circuit ruled that objections to jury instructions should be timely made at trial in order to be preserved for appeal.
Hafco sued GMS for infringement of a design patent for a rock dust blower. A jury found GMS liable for willful infringement and awarded damages. The district court entered a permanent injunction against infringement. The district court also remitted the awarded damages to zero and offered a new trial on damages, but stayed the new trial pending the appeal. GMS appealed to the Federal Circuit and raised two issues: whether it was entitled to judgment as a matter of law on the issue of infringement; and, in the alternative, whether it was entitled to a new trial on the issue of infringement due to errors of law in the jury instructions.
The Federal Circuit affirmed the judgement of infringement. GMS had proposed a jury instruction that a design patent only protects the non-functional aspects of the design. However, this instruction was not included in the final jury instructions, and GMS did not object to the jury instructions or present evidence of the functional aspects of the design patent at trial. For the first time on appeal, GMS argued that, when certain functional and prior art aspects of the design patent are excluded, the design of GMS’s product did not infringe the design patent. Because GMS did not make this non-infringement argument at the district court and did not present relevant evidence on the functional or prior art aspects of the design patent to the jury, GMS had not preserved this argument for appeal.
GMS also argued that the instructions improperly abridged the Gorham test, and the the jury should have been instructed that the hypothetical purchaser is to view the patented and accused designs in the context of the prior art. The Federal Circuit stated that an “[o]bjection to the presence or absence of an instruction must be timely raised during the trial proceeding, and the correct instruction offered and rejected.” A court may also consider a plain error in the instructions that has not been preserved if the error affects substantial rights. GMS conceded that it did not raise its objections to the jury instructions at trial. However, GMS argued that since the instructions were incorrect in law, it was entitled to a new trial.
The jury instructions defined the ordinary observer as “a person who buys and uses the product at issue.” On appeal, GMS argued that its rights were substantially affected by the district court’s failure to include a complete description of the ordinary observer. However, GMS failed to identify any request for a different instruction on the ordinary observer or an explanation of the alleged flaw. GMS also argued that the jury should have been instructed to familiarize themselves with the prior art designs. However, GMS failed to present any prior art during trial or submit a jury instruction regarding prior art. Accordingly, the Federal Circuit held that GMS failed to timely preserve its objections to the jury instructions and therefore, they were waived. Further, the Federal Circuit found that the jury instructions did not seriously prejudice GMS or warrant a new trial.
Judge Newman concurred with the court’s decision as to the judgment of infringement and the request for a new trial due to the alleged errors in the jury instructions. However, Judge Newman dissented in part, arguing that, a new trial on damages was not necessary.
Claims Using Naturally Occurring Phenomenon in Method of Preparation Found Patent-Eligible
In Illumina, Inc. v. Ariosa Diagnostics, Inc., Appeal No. 19-1419, a use of a natural phenomenon in a method of preparation claim was found patent-eligible under § 101.
Illumina, Inc. (“Illumina”) sued Ariosa Diagnostics, Inc. (“Ariosa”) alleging infringement of patents directed to methods of extracting fetal DNA from the blood of a pregnant woman based on the size difference between fetal DNA and maternal DNA. The District Court for the Northern District of California granted summary judgment in favor of Ariosa, ruling that Illumina’s patents were invalid under 35 U.S.C. § 101 as being directed to a natural phenomenon.
Illumina appealed and the Federal Circuit reversed, finding that Illumina’s patents were directed to patent-eligible subject matter. The court acknowledged that Illumina had discovered a natural phenomenon – the difference in size between fetal and maternal DNA – but concluded that Illumina’s claims were not directed to the natural phenomenon. Rather, the Federal Circuit found the claims were directed to methods that utilize the natural phenomenon, e.g., separation of the fetal DNA based on size using centrifugation, chromatography, electrophoresis, or nanotechnology.
Judge Reyna dissented.
Same-Party and New-Issue Joinder Impermissible in IPRs
In Facebook, Inc., v. Windy City Innovations LLC, Appeal No. 18-1400, the Federal Circuit ruled that an IPR petitioner may not join itself to an earlier IPR in which it was already a party, and may not add new claims or issues to the earlier IPR through such joinder.
Windy City filed a complaint against Facebook for infringement of three patents. Facebook timely petitioned for inter partes review of several claims of each of those patents. When Facebook filed its IPR petitions, Windy City had not yet identified the claims that it accused Facebook of infringing. By the time Windy City identified the asserted claims, the one-year time bar in 35 U.S.C. § 315(b) for seeking IPR had lapsed. Facebook then prepared two additional IPR petitions challenging the specific claims that Windy City had asserted in the infringement case and filed a motion asking the Board to join each new IPR petition to the previously instituted IPR on the same patent under § 315(c). Although the additional petitions would have otherwise been time-barred under § 315(b), the Board granted the motions for joinder and allowed the new claims into the existing proceedings. In its final written decisions, the Board cancelled some of the claims that Facebook challenged in its later petitions.
On appeal, the Federal Circuit held that the Board erred in (1) allowing Facebook to join itself to its own prior IPRs and (2) joining challenges to additional patent claims. As the Federal Circuit explained, § 315(c) authorizes the USPTO to join a person as a party to an existing proceeding, not to join two separate proceedings. The “clear and unambiguous text of § 315(c) does not authorize same-party joinder, and does not authorize the joinder of new issues.” Thus, the Federal Circuit reversed the part of the Board’s final written decisions that cancelled claims raised in the improperly joined petitions.
A Collision of Patents, Copyrights, and Piracy on the High Seas
In Allen v. Cooper, Appeal No. 18-877, the Supreme Court ruled that States cannot be sued for copyright infringement because the Copyright Remedy Clarification Act’s abrogation of State sovereign immunity was invalid under § 5 of the Fourteenth Amendment.
North Carolina contracted with Intersal, Inc. to salvage the shipwrecked Queen Anne’s Revenge—Blackbeard’s infamous pirate ship. Intersal hired videographer Frederick Allen to photograph and record videos of the dives. Allen registered copyrights in these works. North Carolina posted five of Allen’s videos online and published one of the photographs. Allen sued for copyright infringement. North Carolina moved to dismiss on sovereign immunity grounds, but the district court denied the motion, holding that the Copyright Remedy Clarification Act (CRCA), which reads in relevant part, “[a]ny State . . . shall not be immune . . . from suit . . . for a violation of any of the exclusive rights of a copyright owner,” clearly stated Congress’s intent to abrogate State sovereign immunity for copyright claims. The district court further held that although Congress could not use its Article I powers to abrogate State sovereign immunity, the CRCA’s abrogation was based on § 5 of the Fourteenth Amendment.
In an opinion by Judge Niemeyer, the Fourth Circuit reversed. The Fourth Circuit found that under § 5, the CRCA’s abrogation provision must be “congruent and proportional” to the Fourteenth Amendment injury it sought to remedy. The Fourth Circuit then applied Fla. Prepaid Postsecondary Educ. Expense Bd. v. College Savings Bank, 527 U.S. 627, 630 (1999) (“Fla. Prepaid”), which struck down the Patent Remedy Act’s analogous abrogation of State sovereign immunity, and found that the CRCA’s “equally broad” provision, which rested on a “similar legislative record,” was insufficient under § 5.
In an opinion by Justice Kagan, the Supreme Court affirmed the Fourth Circuit with all nine justices concurring in the judgment. The Supreme Court reiterated that States cannot not be sued without their consent unless two conditions are met. First, “Congress must have enacted unequivocal statutory language abrogating the States’ immunity.” And second, “some constitutional provision must allow Congress to have thus encroached on the States’ sovereignty.” The Supreme Court found that the CRCA clearly expressed Congress’s intent to abrogate. With respect to the second condition, the Supreme Court rejected Allen’s argument that the Intellectual Property Clause authorized the CRCA’s abrogation under Fla. Prepaid. As the Intellectual Property Clause could not support the Patent Remedy Act’s abrogation in the patent context, it could not do so in the analogous copyright context. Allen then argued that the CRCA’s abrogation was authorized under § 5 of the Fourteenth Amendment, which gave Congress the “power to enforce by appropriate legislation” the Fourteenth Amendment’s Due Process Clause. The Supreme Court applied Fla. Prepaid to determine whether “there [was] a congruence and proportionality between the injury to be prevented or remedied and the means adopted to that end.” The Supreme Court held that there was only “exceedingly slight” evidence of Constitutional harm on the Congressional record: a dozen examples of potential State copyright infringement, most of which were “honest mistakes” and not due process injuries. Thus, the Supreme Court held that the “indiscriminate scope” of the CRCA’s abrogation of State sovereign immunity was “‘out of proportion’ to any due process problem” and was invalid under § 5.
En Banc Federal Circuit Denies Rehearing of Holding that Severance of an Unconstitutional Restriction in the America Invents Act Is Consistent with Congressional Intent and Is the Least Disruptive Solution
In Arthrex, Inc. v. Smith & Nephew, Inc., Appeal No. 18-2140, Federal Circuit judges who concurred in the denial of rehearing en banc opined that a judicial fix to a constitutional infirmity of a statute was proper because it solved the constitutional problem while preserving the remainder of the statute and minimizing disruption to the system set up by the statute. They explained that a prospective judicial fix does not remedy past harm, and that a new hearing was an appropriate remedy for cases that remain open.
In Arthrex, Inc. v. Smith & Nephew, Inc. (Arthrex I), a panel of Federal Circuit judges found administrative patent judges (APJs) are principal officers of the United States who must be appointed by the President of the United States pursuant to the Appointments Clause of the United States Constitution. The panel then determined that severing a portion of the America Invents Act (AIA) restricting removal of APJs would be sufficient to reclassify APJs as inferior officers, rendering the remainder of the statute constitutionally valid, capable of functioning independently, and consistent with Congress’s basic objectives in enacting the statute. The panel vacated and remanded the PTAB decision and ordered that a new panel of APJs be designated and a new hearing granted.
The appellant and appellees, as well as intervenor United States, filed petitions for rehearing en banc. The petitions for rehearing were denied. Circuit judges Moore and O’Malley each wrote an opinion concurring in the denial, and circuit judges Dyk, Hughes and Wallach wrote independently to dissent from the denial.
The dissenting opinions raised three main issues: (1) The remedy of severing the removal provision of the AIA was contrary to Congressional intent because “[r]emoval protections for administrative judges [are] an important feature of the AIA”; (2) the severance remedy does not require a remand for a new hearing before a new panel because the Arthrex I “judicial fix” should be applied retroactively, rendering the appointment of the PTAB judges constitutional; (3) Arthrex I relied on a narrow test for the distinction between superior and inferior officers based on agency supervision, and APJs should be classified as inferior officers upon consideration of other factors, such as the officer’s authority to formulate agency policy.
The concurring judges agreed that the Arthrex I fix was consistent with Congressional intent and precedent and was the least disruptive solution. The judges noted that the Arthrex I decision would result in at most 81 remands. In their view, Congressional intent would be best served by preserving an agency mechanism for challenging the validity of issued patents and such considerations outweighed the protection of government employees. Further, the decision did not prevent Congress from legislating to provide an alternative fix if it chooses to do so. The concurring judges viewed the severance as a prospective constitutional fix that only prevents future harm, and they contrasted it with the retroactive remedy of a new hearing, which was required to cure the past harm. On the merits, the concurring judges agreed with the panel’s finding that the Director lacked “sufficient control over the [PTAB’s] decision before it issues on behalf of the executive” and lacked the authority to remove APJs at will and without cause.
Enjoining Speech and the Right to Allege Patent Infringement
In Myco Industries, Inc. v. Blephex, LLC, Appeal No. 19-2374, the Federal Circuit ruled that enjoining a patentee from making statements about potential patent infringement requires a finding of bad faith.
Myco asserted that a principal of BlephEx, a competitor, made “loud accusations” of infringement within earshot of, and directly to, prospective Myco customers at a trade show. Myco sought a declaratory judgment of no infringement and filed a motion for a preliminary injunction seeking to bar BlephEx from making “false” allegations of patent infringement and “baseless threats” against Myco’s medical-practitioner potential customers. The district court granted Myco’s motion finding, in part, that Myco demonstrated a likelihood of success in asserting that 1) Myco did not indirectly infringe any asserted claims and 2) any customers of Myco who are medical practitioners are not liable pursuant to § 287(c)(1).
On appeal, the Federal Circuit reversed, vacated, and remanded, holding that the district court failed to find that BlephEx’s allegations were made in bad faith. Under GP Indus. V. Eran Indus., 500 F.3d 1369, 1373 (Fed. Cir. 2007), a showing of bad faith is required before a patentee can be enjoined from communicating its patent rights. The Federal Circuit also rejected Myco’s argument that threatening litigation against medical-practitioner customers is objectively in bad faith because they are immune from infringement under § 287(c). The Court noted that “medical practitioner immunity” does not blanketly preclude a patentee from communicating claims of infringement, rather, it limits a patentee’s ability to seek a remedy for the infringement.
Voluntary Dismissal with Prejudice Does Not Preclude Attorney’s Fees
In Keith Manufacturing Co. v. Butterfield, Appeal No. 19-1136, the Federal Circuit ruled that a voluntary dismissal with prejudice under Rule 41(a) does not preclude consideration of attorney’s fees under Rule 54(d).
Keith Manufacturing filed a lawsuit against its former employee, Larry Butterfield, relating to a patent Mr. Butterfield had obtained. After litigating for eighteen months, the parties filed a stipulation of dismissal with prejudice pursuant to Rule 41(a). Thereafter, Mr. Butterfield moved for attorney’s fees under Rule 54(d). The district court denied the motion. It reasoned that, under the Supreme Court’s decision in Microsoft Corp. v. Baker, 137 S. Ct. 1702 (2017), a voluntary dismissal with prejudice is not a “judgment” as required to obtain attorney’s fees under Rule 54(d). Mr. Butterfield appealed.
The Federal Circuit reversed and remanded for further proceedings. It held that Microsoft does not apply when determining whether a stipulated dismissal with prejudice constitutes a “judgment” under Rule 54. The court noted that Microsoft involved a “final decision” under 28 U.S.C. § 1291, rather than a “judgment” under Rule 54, and that the two terms are not equivalent. The Federal Circuit also reasoned that its inquiry into Rule 54 did not raise the policy concerns at issue in Microsoft, which involved the potential that a class-action plaintiff would use voluntary dismissals with prejudice to stop and start district court proceedings with repeated interlocutory appeals.
Secret Third-Party Processes May Not Trigger Pre-AIA § 102 Public Knowledge or Use Bars
In Basf Corporation v. SNF Holding Company, Appeal No. 19-1243, the Federal Circuit ruled that a third party’s sale of products made by a secret process may not create a bar to another inventor patenting the process under pre-AIA § 102, unless the essential features of the claimed process are embodied in a product sold or offered for sale before the critical date.
BASF Corporation (“BASF”) filed a complaint in district court alleging infringement of its patent directed to an improved process for preparing high-molecular-weight polymers. Defendants filed a motion for summary judgment, arguing unpatentability under pre-AIA § 102(a) and § 102(b). Defendants asserted that a third party’s (Sanyo’s) process for manufacturing preparing high-molecular-weight polymers anticipated and rendered obvious claims in the BASF patent, and that Sanyo had entered into an exclusive license allowing another to make, use, and sell its polymers in the Americas. The licensee was obligated to protect the secrecy of Sanyo’s confidential information for ten years and was only allowed to disclose such information to its employees and subcontractors to the extent necessary to build and operate the plant. Based on the Sanyo license agreement, the district court granted SNF’s motion for summary judgment on all issues. BASF appealed.
On appeal, BASF argued the district court misinterpreted the phrase “known or used” in § 102(a) and erroneously disregarded the confidentiality of the licensee’s knowledge and use. The Federal Circuit agreed with BASF, stating the “known or used” prong of § 102(a) means “knowledge or use which is accessible to the public.” As such, prior knowledge or use that is not accessible to the public upon reasonable inquiry confers no benefit on the public, and thus does not suffice as a defense under § 102(a). BASF next argued that the district court misinterpreted the public-use bar of § 102(b) to apply to a third party’s secret commercial use. The Federal Circuit agreed with BASF, stating the public-use bar only applies to uses “not purposely hidden.” The court also stated a third party’s sale of products made by a secret process does not create a bar to another inventor patenting the process. Finally, BASF argued that neither the Sanyo license agreement itself, nor the acquisition of the licensee by another company, is a sale of the invention within the meaning of § 102(b). The court agreed, noting that although in certain circumstances, a process may be sold in a manner which triggers the on-sale bar, in this case, the essential features of the claimed process were not embodied in a product sold or offered for sale before the critical date. The court ultimately determined that the record revealed genuine issues of fact as to whether the Sanyo process was “known or used” or was publicly used in accordance with the court’s guidance and remanded for further proceedings.
Registration of a Multi-Color Mark Does Not Require Acquired Distinctiveness
In In Re Forney Industries, Inc., Appeal No. 19-1073, the Federal Circuit ruled that multi-colored marks may be inherently distinctive when used on product packaging.
Forney filed a Trademark Application for a proposed mark for packaging for welding and machining goods. Forney identified the proposed mark as a color mark, containing the colors black, yellow, and red, arranged in a fading pattern.
The examining attorney refused the registration, stating that such marks are registrable on the Supplemental Register or on the Principal Register only with sufficient proof of acquired distinctiveness. The Board affirmed the examining attorney’s refusal to register, concluding that a particular color on a product or its packaging can never be inherently distinctive and may only be registered on a showing of acquired distinctiveness.
The Board also alternatively found that a color mark consisting of color applied to product packaging cannot be inherently distinctive in the absence of an association with a well-defined peripheral shape or border.
The Federal Circuit vacated the Board’s holdings and remanded for further proceedings, finding that the Board erred both in holding that a multi-colored mark can never be inherently distinctive, and in holding that product packaging marks that employ color cannot be inherently distinctive in the absence of a well-defined shape or border. The Federal Circuit disagreed with the Board’s conclusion that Supreme Court precedent, including Qualitex Co. v. Jacobson Prod. Co., 514 U.S. 159 (1995), precluded a finding that a multi-color product packaging mark can be inherently distinctive, and concluded that the Board should have considered whether the mark at issue satisfies the Federal Circuit’s criteria for inherent distinctiveness. The Federal Circuit also found that nothing in the existing case law required a color mark to be associated with a specific shape or border in order to be inherently distinctive.
An Inference that Compounds with Common Properties Share Other Related Properties Should Not Be Rejected as a Matter of Law at Summary Judgement
In Valeant Pharmaceuticals Intl. v. Mylan Pharmaceuticals Inc., Appeal No. 18-2097, prior art ranges for solutions of structurally and functionally similar compounds that overlapped with a claimed range established a prima facie case of obviousness.
Mylan filed an Abbreviated New Drug Application (ANDA) and Valeant responded by bringing suit against Mylan in district court. The claim at issue was directed to a formulation with a pH of 3.0 – 4.0. Valeant moved for summary judgment that the claim at issue was not obvious. The court rejected Mylan’s expert testimony and cited references as insufficient, because although the references taught the pH range of interest, they did not teach formulations of the claimed compound but instead formulations of different, albeit related, compounds. Mylan’s second argument was based on an obvious-to-try theory. The district court rejected this argument, noting that there are an infinite number of possible pH values between two finite numbers. Ultimately, the district court granted summary judgment, finding the claim at issue not invalid. Mylan appealed.
The Federal Circuit reversed and remanded. With regard to Mylan’s first argument, the Federal Circuit held that a person of skill in the art would expect that compounds with common properties would likely share other related properties. The district court erred by rejecting this inference as a matter of law at the summary judgment stage. The Federal Circuit further held that, because the prior art molecules bore significant structural and functional similarity, and because the prior art taught pH ranges that overlapped the pH range recited in the claim at issue, Mylan at least succeeded in raising a prima facie case of obviousness sufficient to survive summary judgment. With regard to Mylan’s second argument, the Federal Circuit held that there was no requirement that, for a variable to be obvious to try, it must be the first variable a person of skill would alter. Additionally, the Federal Circuit clarified that a range of parameters, like a range of pH values, does not present an infinite number of possibilities. Limitations in measuring equipment, and the practical importance of adding significant figures to a measured value, render the possibilities finite. The Federal Circuit found the district court’s grant of summary judgment on Mylan’s obvious-to-try theory was in error.
Ignoring Antecedent Basis in the Claim Results in Reversal of Patentability Determination
In Technical Consumer Prods., Inc. v. Lighting Science Grp Corp., Appeal No. 19-1361, the Federal Circuit ruled that a term with a narrow antecedent basis in an open-ended claim may allow a wider range of prior art references to anticipate
Technical Consumer Products (“TCP”) petitioned for IPR of the claims of the ’968 patent owned by Lighting Science Group (“LSG”), based on anticipation or obviousness in view of the Chou reference. The Board determined that TCP failed to demonstrate that Chou disclosed a single limitation, referred to as the “H/D limitation,” which required a particular height to diameter ratio of “the heat sink.” The Board determined that the only way Chou could meet the H/D limitation was to remove an essential element of Chou (the second heat sink) and ruled the claims were not unpatentable.
The Federal Circuit vacated and remanded. The court looked to the plain language of the claim and determined that the H/D limitation required “the heat sink” to have a particular ratio of H/D. The court further explained that antecedent basis for “the heat sink” could be found in earlier claims and required “the heat sink” to have a particular structure. The parties agreed that Chou had two structures that functioned as heat sinks, however, only one heat sink in Chou had the particular structures required to be “the heat sink,” as claimed. LSG argued that both heat sinks in Chou needed to be included in the H/D calculation because both components provided the “heat sink” feature in Chou, and separating them would render Chou inoperable. The court rejected this argument because TCP’s theory of anticipation did not require removing the second heat sink. Rather TCP’s theory of anticipation did not include the second heat sink in the H/D calculation because only the first sink had the required structures to be “the heat sink,” as recited by the claim. In addition, because the claim was open-ended, it did not preclude the presence of additional heat sinks. Accordingly, the court agreed with TCP’s claim construction and position regarding Chou and remanded to the Board for further consideration.
The court also noted that the Board reached the opposite conclusion regarding Chou’s disclosure when reviewing a nearly identical limitation in a related patent. The court found it “difficult to reconcile [the Board’s] seemingly inconsistent findings” and agreed with the Board’s analysis in the other case.
PTAB Must Give Notice and Opportunity to Respond When Raising Its Own Theory of Unpatentability
In Nike, Inc. v. Adidas AG, Appeal No. 19-1262, the Federal Circuit ruled that, while the Patent Trial and Appeal Board may sua sponte identify a patentability issue for a proposed substitute claim based on the prior art of record, it must provide notice and an opportunity for the parties to respond before issuing a final decision.
The PTAB granted Adidas’s IPR against a Nike patent. Nike moved to amend, cancelling all claims and substituting four new claims. Adidas opposed on the ground that the proposed substitute claims were obvious. The PTAB agreed and denied Nike’s substitution. In a first appeal, the Federal Circuit remanded for the PTAB to reevaluate obviousness. The Federal Circuit then decided Aqua Products en banc, which held that the patent owner does not have the burden of persuasion on patentability of proposed amended claims during IPR. Then the PTAB issued its decision after remand, finding a proposed substitute claim obvious based on a prior-art reference that was of record but not cited by Adidas. On a second appeal, Nike argued that the Board violated the notice provisions of the Administrative Procedure Act by finding obviousness based on a prior-art reference that was of record but never cited by Adidas as disclosing the limitation at issue.
The Federal Circuit held that, while the Board is permitted to raise its own theory of obviousness, the Board must the parties with notice and an opportunity to respond as required by the APA. The Federal Circuit vacated as to the substitute claim at issue and remanded for the Board to determine whether the claim was obvious after providing the parties with an opportunity to respond.
Infringement Need Not Be Ex Ante Determinable for a Claim to Be Definite
In Nevro Corporation v. Boston Scientific Corporation, Appeal No. 18-2220, a functional claim term directed at avoiding a side effect was sufficiently definite, despite infringement being determinable only after using the device or system.
Nevro sued Boston Scientific for patent infringement related to an improvement on spinal cord stimulation therapy using high-frequency wave forms. The district court held, inter alia, that twelve asserted claims were indefinite. The Federal Circuit reversed for all twelve claims. Significantly, the district court construed “paresthesia-free” to mean “does not produce a sensation usually described as tingling, pins and needles, or numbness.” The district court found this term indefinite in that infringement depended on the effect of systems and devices on a patient, rather than the parameters of the system or device itself. The Federal Circuit rejected this reasoning, stating that a claim may be definite, despite infringement varying case-by-case, so long as the claim term informs “about the scope of the invention with reasonable certainty.” A wave form’s elimination of paresthesia in “some patients, but not others, does not render the claims indefinite.” Definiteness does not require infringement to be ex ante determinable.
Do Not Bank on a Bank Not Being a “Person” Under the AIA
In Bozeman Financial LLC v. Federal Reserve Bank, Appeal No. 19-1018, the Federal Circuit ruled that banks that are members of the Federal Reserve System but are operationally distinct from, and not owned by, the federal government are “persons” for purposes of the America Invents Act.
Several Federal Reserve banks (“the Banks”) petitioned for covered business method review of two of Bozeman’s patents. The Board found all of the claims of the challenged patents invalid under 35 U.S.C. § 101. Bozeman appealed the Board’s authority to decide the petitions by arguing the Banks were not “persons” under the AIA.
Bozeman argued the Banks were government entities, which the Supreme Court held in Return Mail are not “persons” under the AIA. Bozeman relied on the Banks being members of the U.S. Federal Reserve System, implementing policies of the United States and conducting important governmental functions. The Federal Circuit disagreed and held the Banks were “persons” because they were not government-owned and were operationally distinct from the federal government. The Banks could be sued for patent infringement in any court, whereas remedies against government entities are limited and must be filed in the Court of Federal Claims. Having concluded that the Board had the authority to resolve the petitions, the court affirmed the Board’s determination that the challenged claims were invalid under 35 U.S.C. § 101.
Patent Owners Cannot Sue the Government for Patent Infringement as a Fifth Amendment Taking
In Golden v. U.S., Appeal No. 19-2134, the Federal Circuit ruled that (1) patent infringement claims against the government must be brought under 28 U.S. § 1498, not as a Fifth Amendment taking claim, and (2) an IPR initiated by a government agency cannot be a taking if the patent owner voluntarily canceled all claims in a non-contingent motion to amend.
Larry Golden filed suit pro se in the U.S. Court of Federal Claims seeking compensation for the government’s alleged taking of his patents. The complaint alleged the takings occurred by (1) the government’s use of subject matter “outlined” in the claims and specification of Golden’s patents, (2) the cancellation of patent claims during an IPR initiated by the Department of Homeland Security (DHS), and (3) the dismissal of Golden’s taking claims in a previous case. The Claims Court dismissed Golden’s claims because they were duplicative of the previous case and were actually patent infringement claims that had to be pursued under 28 U.S.C. § 1498. Golden appealed.
The Federal Circuit concluded the dismissal of Golden’s patent infringement-based takings claims was proper because a patentee cannot sue the government for patent infringement as a Fifth Amendment taking. Rather, patent claims against the government for patent infringement as a Fifth Amendment taking. Rather, patent claims against the government must be pursued exclusively under 28 U.S.C. § 1498. As for the IPR-based takings claims, the Federal Circuit previously held in Celgene Corp. that IPR is not normally an unconstitutional taking under the Fifth Amendment. The Federal Circuit noted that the DHS is a government agency, not a “person” that can petition for IPR under the Supreme Court’s Return Mail decision. However, that did not impact the decision because (1) Golden did not appeal the IPR, which became final before Return Mail, and (2) the claims were canceled as a result of Golden’s voluntary non-contingent motion to amend during the IPR.
Stay of District Court Proceedings Followed by a Voluntary Dismissal Is Not a Final Decision Under 35 U.S.C. § 285
In O.F. Mossberg & Sons, Inc. v. Timney Triggers, LLC, Appeal No. 19-1134, the Federal Circuit ruled that a stay followed by a voluntary dismissal is not a final court decision capable of establishing the judicial imprimatur required for a litigant to emerge as the prevailing party under 35 U.S.C. § 285.
Mossberg & Sons, Inc. (Mossberg) sued Timney Triggers, LLC and Timney Manufacturing Inc. (Timney) for patent infringement. Timney filed for a series of reexamination proceedings (an inter partes reexamination and three ex parte reexaminations) of the asserted patent and filed for a stay of district court proceedings. The district court granted the stay. Throughout the reexamination proceedings, the district court maintained the stay despite Mossberg’s several attempts to lift it. In the end, the Patent Trial and Appeal Board (PTAB) affirmed the invalidity of all claims of the asserted patent, and Mossberg filed a notice of voluntary dismissal without prejudice under Rule 41(a)(1)(A)(i). The district court subsequently entered an order stating that the case was dismissed. Following the dismissal, Timney filed a motion to declare the case exceptional in order to pursue attorney’s fees under 35 U.S.C. § 285. The district court denied the motion, noting that Timney was not a prevailing party because the district court’s dismissal without prejudice was not a decision on the merits and therefore was not a judicial declaration altering the legal relationship between the parties. Timney appealed.
The Federal Circuit affirmed. The Federal Circuit acknowledged that a district court final decision rejecting a plaintiff’s claim for non-merits reasons may be sufficient to find that a defendant is a prevailing party. Here, however, the Federal Circuit found that the district court’s dismissal order had no legal effect as Mossberg’s voluntary dismissal under Rule 41(a)(1)(A)(i) became effective immediately upon the filing of notice of voluntary dismissal. Accordingly, there was no final court decision in the case. The Federal Circuit also rejected Timney’s argument that the staying of the district court proceedings provided the necessary judicial imprimatur, noting that it was the PTAB’s invalidity decision and Mossberg’s voluntary dismissal that changed the legal relationship of the parties, not the stay entered by the district court.
No Waiver of Patent Eligibility Challenge Under § 101
In Ericsson Inc. v. TCL Communication Technology, Appeal No. 18-2003, the Federal Circuit ruled that the issue of patent eligibility under § 101 may be preserved for appeal even if not raised for decision or mentioned in the district court’s final judgment if there is an “effective grant of summary judgment” in favor of the non-moving party.
Ericsson sued TCL for infringement of patent claims directed to controlling access to resources in a telecommunications system. TCL moved for summary judgment that the claims were patent ineligible under § 101. The district court denied the motion, finding that the claims were not directed to an abstract idea under step one of Alice. The case proceeded to trial and the jury found the claims infringed. TCL did not raise the issue of ineligibility under § 101 in a motion for judgment as a matter of law under Federal Rule of Civil Procedure 50. TCL appealed the district court’s decision denying summary judgment that the patent claims were ineligible under § 101.
Ericsson argued that TCL waived its right to appeal the issue of ineligibility. The Federal Circuit found that TCL had not waived the right to appeal the issue of ineligibility under § 101 for two reasons. First, the district court had effectively granted summary judgment in favor of the non-moving party by deciding the issue because, once the district court found that the patent was not directed to an abstract idea under step one, there was no set of facts that could have been raised at trial to change the conclusion. Second, the Federal Circuit has discretion to hear issues that have been waived, and this was an appropriate case for the exercise of that discretion because the issue was fully briefed and the district court had addressed the issue with finality.
The Federal Circuit found that the claims were patent ineligible under § 101. Under step one of Alice, the Federal Circuit found the claims were directed to the abstract idea of controlling access to, or limiting permission to, resources. The Federal Circuit found the claims required “a system for controlling access to a platform” and were not limited to mobile platform technology as argued by Ericsson. Under step two of Alice, the Federal Circuit found that the claims did not contain an inventive concept. The Federal Circuit rejected Ericsson’s arguments that the layered architecture of the software provided the necessary inventive step, noting that this architecture was not recited in the claims.
Not All DuPont Factors Are Made Equal
In Stratus Networks, Inc. v. Ubta-Ubet Communications Inc., Appeal No. 19-1351, the absence of explicit findings on particular DuPont factors used by the Board to assess whether there is a likelihood of confusion did not give rise to reversible error because the record demonstrated that the Board considered the factor and the corresponding arguments and evidence.
Stratus Networks, Inc., (“Stratus”), a facilities-based telecommunications provider, filed a trademark application for the STRATUS NETWORKS design mark. UBTA, a telecommunications provider, filed an opposition to Stratus’s trademark application for the STRATUS NETWORKS design mark on the ground of a likelihood of confusion. UBTA owned trademark registrations for the STRATA NETWORKS design mark and STRATA word mark. The Board considers the DuPont factors when assessing the likelihood of confusion. In the opposition, the Board found the DuPont factors relating to the similarity of the parties’ marks, services, and trade channels weighed in favor of a likelihood of confusion. The Board found that the factor relating to consumer sophistication was neutral or weighed slightly against a likelihood of confusion, and the factors relating to the strength of the opposer’s marks and the length of time during and conditions under which there had been concurrent use without actual confusion were neutral in determining a likelihood of confusion.
Stratus argued that the record evidence supported a different conclusion than the conclusion reached by the Board. The Federal Circuit held that, even if different conclusions may be reasonably drawn from the record evidence, a Board decision must be sustained if supported by substantial evidence. Here, the Board’s findings were supported by substantial evidence such as dictionary definitions, testimony, and third-party registrations and websites.
Stratus also argued that the Board committed legal error when considering the factors relating to consumer sophistication and actual confusion. Specifically, Stratus argued that the Board improperly discounted the consumer sophistication factor and made no express finding on consumer sophistication. The Federal Circuit held that while it is “preferable for the Board to make explicit findings” about each factor, the “absence of explicit findings on a given factor does not give rise to reversible error where the record demonstrates” the Board considered the factor, arguments, and evidence. Here, the parties’ extensive arguments and the Board’s decision demonstrated that the Board sufficiently considered the consumer sophistication factor.
Lastly, Stratus argued that the Board erred in finding that the actual confusion factor was neutral. Stratus argued that the parties had “coexisted for over six years with not one example of actual confusion.” The Federal Circuit held that, even if the record shows no evidence of actual confusion, the significance of the factor can be reduced if the record indicates no consumers were exposed to both trademarks during the relevant time period. Here, the record showed that the parties’ services did not geographically overlap. Accordingly, the Federal Circuit affirmed the Board’s refusal to register Stratus’s STRATUS NETWORKS design mark based on a likelihood of confusion.
Competing Evidence Regarding Whether a Reference Qualifies as a Primary Reference Precludes Summary Judgment of Obviousness of a Design Patent
In Spigen Korea Co., Ltd. v. Ultraproof, Inc., Appeal No. 19-1435, the Federal Circuit ruled that summary judgment of obviousness is improper for a design patent if there is a genuine dispute as to whether a prior art design is “basically the same” as the claimed design.
Spigen sued Ultraproof for infringement of its design patents. Ultraproof filed a motion for summary judgment of invalidity, arguing that the design patents were obvious in view of primary and secondary references. After hearing competing expert testimony regarding whether a reference qualified as a primary reference because it was “basically the same” as the asserted design patents, the district court granted summary judgment of invalidity and held that the design patents were obvious.
The Federal Circuit reversed the district court’s decision. The Federal Circuit noted that although a trial court judge may determine almost instinctively whether two designs create basically the same visual impression, the trial court must deny summary judgment of obviousness if there is a genuine dispute of material fact as to whether the designs are basically the same. The Federal Circuit concluded that there was a genuine dispute of material fact because a reasonable factfinder could have found that the relevant prior art design did not qualify as a primary reference in view of the competing evidence of record. Accordingly, the Federal Circuit reversed the district court’s grant of summary judgment and remanded for further proceedings.
Using the Intrinsic Record to Resolve Alice Step One
In Cardionet, Llc v. Infobionic, Inc., Appeal No. 19-1149, the Federal Circuit ruled that Alice step one is a threshold inquiry that can be resolved by analyzing the intrinsic record without considering the prior art.
CardioNet’s patent discloses systems and methods for detecting certain heart conditions based on evaluating the variability of an irregular heartbeat. The district court granted Infobionic’s motion to dismiss, finding that the claims were directed to an abstract idea under Alice step one. CardioNet appealed.
The Federal Circuit reversed, reasoning that the district court relied on “the incorrect assumption that the claims [were] directed to automating known techniques.” Looking to the intrinsic record, the Federal Circuit found no evidence that doctors used the claimed techniques, but rather that the written description disclosed material advantages of the claimed invention to the field of cardiac monitoring technology.
The court then determined that it could resolve Alice step one as a matter of law without remanding to assess the state of the art. The court distinguished Alice step one, which only determines what the claims are “directed to,” from §§ 102 and 103, which require comparison to the prior art for definitive resolution. The court further held that it “need not consult the prior art to see if, in fact, the assertions of improvement in the patent’s written description are true.”
Judge Dyk concurred in the result but dissented to the extent the majority limited the use of extrinsic evidence to establish that a practice is longstanding.
Supreme Court Rejects Appeals of IPR Time-Bar Decisions
In Thryv, Inc., Fka Dex Media, Inc. v. Click-To-Call Technologies, Lp, Et Al., Appeal No. 18-916, the Supreme Court ruled that a decision to institute an IPR, even if it violates the statutory time bar, is not appealable.
Thryv, Inc. requested inter partes review (“IPR”) of a patent owned by Click-To-Call Technologies (“CTC”) in 2013. Under §315(b) of the Leahy-Smith America Invents Act (“AIA”), an IPR may not be instituted if it is requested more than one year after the requesting party is served with a complaint alleging infringement of the challenged patent. Based on this statute, CTC argued that the IPR was time barred. The PTAB disagreed, so it instituted the IPR and cancelled 13 of CTC’s patent claims. CTC appealed, challenging only the Board’s decision that the IPR was not time barred. In 2016, the Federal Circuit dismissed the appeal for lack of jurisdiction, holding that §314(d) of the AIA bars review of an IPR institution decision. Subsequently, in a separate case decided en banc, the Federal Circuit held that time bar determinations are appealable. In light of that decision, the Federal Circuit granted a panel rehearing on CTC’s case and held that the Board had erred in instituting review. Thus, the Federal Circuit vacated the Board’s decision, including the invalidation of CTC’s claims.
The Supreme Court granted certiorari to resolve the appealability issue. The Court started its analysis with §314(d), which states that determinations whether to institute an IPR are final and non-appealable. The Court had previously held that this statute applies to matters “closely tied to the application and interpretation of statutes related to” the institution decision. Cuozzo Speed Techs. LLC v. Lee, 136 S. Ct. 2131 (2016). Since the time bar expressly governs institution of IPRs, the Court held that judicial review of the PTAB’s decision is improper under Cuozzo. Considering Congressional intent and the purpose of the AIA, the Court further stated that allowing time bar appeals would “operate to save bad patent claims.” Thus, the Court vacated the Federal Circuit’s judgment and remanded with instructions to dismiss the appeal for lack of jurisdiction.
Justice Gorsuch dissented, with Justice Sotomayor joining in part. Gorsuch argued that §315(b) is meant to affirmatively limit the PTAB’s authority and disagreed with the Court’s decision because it eliminated checks and balances.
Assignor Estoppel Does Not Preclude Reliance on Invalidity Decision
In Hologic, Inc. v. Minerva Surgical, Inc., Appeal No. 19-2054, the Federal Circuit ruled that the doctrine of assignor estoppel precludes an assignor from challenging the validity of a patent in district court, but not at the Patent Office.
Hologic sued Minerva Surgical for infringement of U.S. Patent Nos. 6,872,183 (“the ’183 patent”) and 9,095,348 (“the ’348 patent”). Both patents list Minerva founder, Truckai, as an inventor.
Prior to founding Minerva, Truckai assigned NovaCept his interest in two applications to which the ’348 and ’183 patents claimed priority, as well as all continuation applications. NovaCept was acquired by Cytyc, which was later acquired by Hologic (the ultimate assignee of the ’348 and ’183 patents). Truckai and Minerva then developed a competing device.
Hologic sued Minerva alleging infringement of the ’348 and ’183 patents. Hologic moved for summary judgment on the issue of patent validity on the grounds that the doctrine of assignor estoppel barred Minerva from challenging the validity of the ’348 and ’183 patents in district court. The district court granted Hologic’s motion for both patents. Hologic moved for a permanent injunction with respect to the ’183 patent (the ’348 patent had expired).
In parallel, Minerva requested inter partes review (“IPR”) challenging the patentability the ’348 and ’183 patents. The PTAB denied institution of the ‘348 patent but instituted review of and invalidated the ’183 patent. Hologic appealed the PTAB’s decision and the Federal Circuit affirmed. The district court then denied Hologic’s motion for permanent injunction as moot in light of the Federal Circuit’s affirmance of invalidity. Hologic argued that assignor estoppel precludes Minerva from relying on the Federal Circuit’s holding of invalidity. The district court disagreed. Both parties appealed.
The Federal Circuit affirmed the district court’s holding that assignor estoppel precluded Minerva from challenging the validity of the ’348 patent in district court. The Federal Circuit also affirmed the district court’s decision that Hologic is collaterally estopped from asserting infringement of the ’183 patent because it was found invalid at the PTAB. The Federal Circuit noted the “seeming unfairness” that Minerva would have been estopped from challenging the validity of the ’183 patent in district court but could still do so in an IPR proceeding. However, under the AIA and existing precedent, the Federal Circuit noted that Minerva was within its rights.
Justice Stoll provided further comments regarding situations in which an assignor can circumvent the doctrine of assignor estoppel by attacking the validity of a patent in the Patent Office, but cannot do the same in district court. Justice Stoll suggested that the Federal Circuit consider en banc the doctrine of assignor estoppel as it applies both in district court and the Patent Office.
Sharing Active Moiety With an FDA-Approved Product Is Not Enough to Be Considered an Approved Product for the Purposes of Patent Term Extension Under Hatch-Waxman
In Biogen International Gmbh v. Banner Life Sciences LLC, Appeal No. 20-1373, the Federal Circuit ruled that, if a claimed product is not the active ingredient of an FDA-approved product, or an ester or salt of that active ingredient, no patent term extension is available under the Hatch-Waxman Act.
Biogen obtained a patent and FDA approval for dialkyl fumarates (DMF) to treat multiple sclerosis, marketed as Tecfidera®. During administration, DMF metabolizes to monomethyl fumurate (MMF). Banner sought to market an MMF pill to treat multiple sclerosis. Biogen sued Banner for patent infringement. Banner moved for a judgment of non-infringement, arguing that § 156(b)(2) limited the scope of the patent at issue to methods of using the approved product, which was limited to DMF, its salts, or its esters. MMF is not a salt or ester of DMF. Biogen argued that § 156(b)(2) does not limit extension of a method of treatment to uses of the approved product (DMF), but to uses within the original scope of the claims (which included MMF). Additionally, Biogen argued that § 156 encompasses any compound that shares an “active moiety” with an approved product, which would have included MMF. The district court rejected Biogen’s arguments and granted judgment of non-infringement.
The Federal Circuit affirmed the district court. The Federal Circuit held that § 156(b)(2) limits the scope of the patent extension to “any use approved for the product,” and further, for method of treatment patents, to uses also “claimed by the patent.” The Federal Circuit noted that 156(f) defines a “product,” as “the active ingredient of… a new drug… including any salt or ester of the active ingredient.” The Federal Circuit held that this definition of “product” has a plain and ordinary meaning that is not coextensive with “active moiety.” Since MMF was not the active ingredient of the approved product or the ester or salt of that active ingredient, the patent term extension under § 156 did not extend to the use of MMF.
A Party Can Be the Prevailing Party in an Attorney’s Fees Motion Despite Receiving No Relief on the Merits
In Dragon Intellectual Property v . Dish Network LLC, Appeal No. 19-1283, the Federal Circuit ruled that a defendant can be a “prevailing party” under § 285 even if the case is dismissed on procedural grounds.
Dragon sued DISH Network, SXM, and eight other defendants in Delaware for patent infringement. DISH filed an inter partes review (IPR) petition. The Board instituted the IPR and SXM joined. The district court stayed proceedings pending resolution of the IPR but proceeded with claim construction. Following claim construction, the parties stipulated to non-infringement and the district court entered judgment of non-infringement in favor of all defendants. Meanwhile in the parallel IPR proceedings, the Board found all asserted claims unpatentable.
DISH and SXM moved for attorneys’ fees under 35 U.S.C. § 285 and 28 U.S.C. § 1927. While the motions were pending, the district court vacated the judgment of non-infringement as moot after Dragon’s unsuccessful appeal of the Board’s final decision. The district court retained jurisdiction to resolve the fees motions and denied the motions, holding that DISH and SXM were not “prevailing parties” under § 285 because they were not granted actual relief on the merits.
The Federal Circuit vacated and remanded the district court’s holding. The Federal Circuit held that a defendant can be deemed a prevailing party even if the case is dismissed on procedural grounds rather than on the merits. The Court found that by succeeding to invalidate the asserted claims in the IPR, DISH and SXM “rebuffed Dragon’s attempt to alter the parties’ legal relationship in an infringement suit.” Accordingly, the Federal Circuit held that DISH and SXM were “prevailing parties” under § 285.
Supreme Court Holds Willfulness Is Not Required to Award Profits for Trademark Infringement
In Romag Fasteners, Inc. v. Fossil, Inc., Appeal No. 18-1233, the Supreme Court ruled that trademark owners are not required to show willfulness as a precondition to an award of the infringer’s profits.
Romag Fasteners, Inc. (“Romag”) sued Fossil, Inc. and certain retailers (collectively, “Fossil”) for trademark infringement. A jury found that Fossil infringed but did not act willfully. Romag sought an award of Fossil’s profits under 15 U.S.C. § 1117(a) of the Lanham Act. Relying on Second Circuit precedent requiring willfulness to award profits for trademark infringement, the district court rejected Romag’s request. On appeal, the Federal Circuit applied the same Second Circuit law and affirmed the district court’s decision.
The Supreme Court granted certiorari and reversed, holding willfulness is not a prerequisite to an award of profits for trademark infringement. The Court began its analysis by noting that the text of § 1117(a) requires a showing of willfulness to award profits for trademark dilution, but not for trademark infringement. The Court found this distinction instructive, noting that other sections of the Lanham Act exhibit “considerable care” with standards regarding mental states. The Court then considered the text of § 1117(a) stating an award of defendant’s profits is “subject to the principles of equity.” The Court found it unlikely that Congress intended to obliquely incorporate a mental state through this language, when Congress expressly prescribed mental state conditions elsewhere throughout the Lanham Act. The Court also found it unlikely that Congress directed the phrase “principles of equity,” which suggests fundamental and broadly applicable rules, to a specific rule about trademark remedies. Considering traditional principles, the Court found that a defendant’s mental state is a “highly important consideration” in determining whether to award profits, but that it cannot be a prerequisite to such an award. Accordingly, the Court vacated the Federal Circuit’s judgment and remanded for further proceedings.
Justice Alito concurred, joined by Justice Breyer and Justice Kagan. Justice Alito wrote that pre-Lanham Act case law shows that willfulness is a highly important consideration in awarding profits, but not an absolute precondition.
Justice Sotomayor, concurring in the judgment only, distinguished willful infringement from innocent infringement in the context of profit awards for trademark infringement. Justice Sotomayor wrote that an award of profits for innocent infringement would be inconsistent with “principles of equity” referenced in § 1117(a).
Standing to Appeal an Adverse IPR Decision Requires an Injury
In Argentum Pharm. LLC v. Novartis Pharm. Corp., Appeal No. 18-2273, the Federal Circuit ruled that a party lacks standing to appeal an adverse IPR decision if it cannot show an injury attributable to the decision.
Argentum joined an inter partes review (“IPR”) that had been instituted on a patent owned by Novartis. The Patent Trial and Appeal Board (“PTAB”) issued a final written decision holding that Argentum and the other petitioners had failed to show the challenged claims were unpatentable, and petitioners appealed to the Federal Circuit. During the appeal, all petitioners other than Argentum settled with Novartis. Novartis moved to dismiss Argentum from the appeal for lack of Article III standing.
The Federal Circuit granted the motion and dismissed Argentum’s appeal, finding Argentum failed to establish an injury sufficient to confer Article III standing. Argentum argued that it faced an imminent threat of litigation with Novartis due to its manufacturing partner’s forthcoming Abbreviated New Drug Application (“ANDA”) for a generic version of Novartis’s patented product. However, the court found no evidence beyond generic statements that Argentum would bear the risk of any such litigation. Next, Argentum argued that once its ANDA was approved, it would lose $10-50 million of profit per year due to the challenged patent. But the court found that Argentum failed to produce sufficient evidence to establish economic injury and that its claims to lost profits were conclusory and speculative. Finally, Argentum argued that it would be injured because an estoppel provision in the IPR statutes would preclude it from later challenging the Novartis patent. The court noted that estoppel, absent other cognizable harm, is not an injury sufficient for standing.
USPTO Guidance Cannot Modify or Supplant the Alice/Mayo Framework
In In Re: Christopher John Rudy, Appeal No. 19-2301, the Federal Circuit ruled that the Patent and Trademark Office’s October 2019 Revised Patent Subject Matter Eligibility Guidance cannot be used to modify or supplant case law regarding patent-eligibility requirements.
Christopher Rudy (“Rudy”) filed a patent application related to fishing hooks. During prosecution, a patent examiner rejected claims related to selecting a fishing hook as ineligible under 35 U.S.C. § 101. Rudy appealed the Examiner’s rejection to the Patent Trial and Appeal Board (“PTAB”). The Board conducted its review of Rudy’s appeal under a dual framework for patent eligibility, examining Rudy’s claims under (1) the Alice/Mayo framework and (2) the PTO’s October 2019 Revised Patent Subject Matter Eligibility Guidance (“Office Guidance”). The Board affirmed the Examiner’s rejection and Rudy appealed, arguing that both the Board’s reliance on the October Revised Guidance and its ultimate conclusion were improper.
Although the Federal Circuity affirmed the Board’s finding of patent ineligibility, it also agreed with Rudy that the Office Guidance does not carry the force of law and is not binding on the courts. On the contrary, the Federal Circuit explained that when determining whether a judicial exception under 35 U.S.C. § 101 applies, the courts are bound to follow the Supreme Court’s two-step framework set forth in the Alice and Mayo decisions, as well as the Federal Circuit’s precedent on the proper application of these tests. Moreover, the Federal Circuit explained, to the extent the Office Guidance contradicts or does not fully agree with case law, Federal Circuit or Supreme Court precedent must control. Nonetheless, the Federal Circuit found that, although the Board’s analysis was framed as a recitation of the Office Guidance, the Board’s reasoning and conclusion were consistent with the relevant case law. In particular, the Federal Circuit agreed with the Board that Rudy’s claim for selecting a fishing hook did not amount to anything more than an abstract idea. Specifically, the Federal Circuit found Rudy’s claim for selecting a fishing hook was equivalent to collecting information (determining water clarity and light transmittance) and analyzing that data (applying a chart from the claims), which collectively amounted to the abstract idea of selecting a fishing hook based on the observed water conditions. Accordingly, the Federal Circuit held Rudy’s claim failed the Alice/Mayo test and affirmed the Board’s ruling.
Standing to Appeal an IPR Decision Remains Even After the Accused Products Are Divested
In Grit Energy Solutions, LLC v. Oren Technologies, LLC, Appeal No. 19-1063, an IPR petitioner had standing to appeal an adverse Board decision even after divesting the products previously accused of infringement.
Oren Technologies sued Grit Energy for patent infringement. During the pendency of the litigation, Grit transferred ownership of all accused products, and Oren and Grit stipulated to dismiss the infringement action without prejudice. Soon thereafter Grit petitioned for IPR. The Board ultimately found that Grit did not meet its burden to show the challenged claims were unpatentable. On appeal, Oren challenged Grit’s standing to appeal. The Federal Circuit held that Grit had standing. Because Oren had previously sued Grit for patent infringement, and Oren was free to reassert those infringement claims (because dismissal was without prejudice), Grit faced a sufficient threat of litigation to maintain standing to appeal. Further, Grit’s divestment of the accused products did not absolve it of liability based on actions that occurred prior to the transfer.
An Invention That Changes the Normal Operation of a System Is Not Abstract Under § 101
In Uniloc USA, Inc. v. LG Electronics USA, Inc., Appeal No. 19-1835, a claim directed to an improved communication system was not abstract because it changed the normal operation of a system.
Uniloc sued LG, asserting patent claims directed to a communication system including a primary station and at least one secondary station (e.g., a computer mouse or keyboard). In conventional systems, primary stations alternated between sending “inquiry” messages to identify new secondary stations and “polling” secondary stations already connected to determine whether they have information to transmit. The claimed system incorporated a polling data field into the inquiry message, thereby decreasing response latency. The district court granted LG’s motion to dismiss, holding that the asserted claims were directed to the abstract idea of “additional polling in a wireless communication system.”
The Federal Circuit reversed and remanded. The claims were not abstract because they were directed to a specific improvement to computer functionality, namely the reduction of response time by peripheral devices. The Court emphasized the claimed invention “changes the normal operation of the communication system itself” to address a specific problem rooted in computer technology.