$5 Million Attorneys’ Fee Award Affirmed Because Government’s Litigation Position Not Substantially Justified
In HITKANSUT LLC V. UNITED STATES, Appeal No. 19-1884, the Federal Circuit held that fee-shifting under 28 U.S.C. § 1498(a) turns on whether “the position of the United States was substantially justified.” The relevant inquiry is the government’s position during litigation, not its pre-litigation conduct.
Hitkansut sued the United States (acting through a national laboratory) for patent infringement in the Court of Federal Claims. Hitkansut sought royalties of nearly $6 million, but was awarded only $200,000. The CFC also awarded Hitkansut nearly $5 million dollars in attorneys’ fees because the CFC did not find that “the position of the United States was substantially justified.” The CFC focused on the government’s pre-litigation failures to act, as well as its positions during litigation. On appeal, the Federal Circuit examined the legislative history of the fee-shifting provision and clarified that pre-litigation conduct should not be considered when analyzing whether to shift fees. Despite the CFC’s error, the Federal Circuit affirmed the attorneys’ fees award. The government maintained non-infringement positions that were factually inconsistent with the national laboratory’s actions. The government maintained invalidity arguments that were not substantially justified and, in some respects, were contradicted by the government’s expert witness. Also, the CFC did not err in refusing to reduce the fee award because, while Hitkansut achieved “limited success” in recovering $200,000, Hitkansut established its sole liability claim and recovered the maximum amount of damages allowed by law.
IPR Petitioners May Not Raise Appointments Clause Challenges Under Arthrex
In CIENA CORPORATION v. OYSTER OPTICS, LLC, Appeal No. 19-2117, affirmatively petitioning for IPR waived the petitioner’s Appointments Clause challenge, such that the petitioner could not request remand and a new panel under Arthrex.
Ciena petitioned for IPR of Oyster’s patents. The PTAB instituted review and held that Ciena failed to establish that any of the claims were unpatentable. Ciena appealed based on the Federal Circuit’s Arthrex decision. Ciena argued that, under Arthrex, the PTAB’s decision must be vacated and remanded for a new hearing before a different panel because the original panel was not appointed in conformity with the Appointments Clause.
The Federal Circuit distinguished Arthrex because Ciena affirmatively petitioned for IPR, unlike the patent owner in Arthrex. Accordingly, the Federal Circuit held that Ciena waived its Appointments Clause challenge. The court noted it could forgive waiver in certain circumstances, but declined to do so because Ciena affirmatively sought both IPR and a stay in related district court proceedings pending the outcome of the IPR.
Finite Methods as a Ground for Obviousness
In UBER TECHNOLOGIES, INC. v. X ONE, INC., Appeal No. 19-1164, the Federal Circuit held that, because a mapping technique must be performed on either a server or a terminal, using a server-side technique disclosed in one piece of prior art was a “predictable variation” of the terminal-side technique disclosed in another piece of prior art.
Uber petitioned for IPR of X One’s patent. The claims generally related to a remote server creating a map, populating it with group members’ locations, and then transmitting the map to a user’s device. The PTAB considered two pieces of prior art: Okubo and Konishi. Okubo disclosed creating a terminal-side method wherein the map is created on a user’s device and then populated with group members’ locations. Konishi disclosed a server-side method of mapping vehicles. The Board held the patent was not obvious because Konishi’s server-side plotting would be a “wholesale modification to Okubo.” Uber appealed.
The Federal Circuit reversed, stating that Okubo and Konishi demonstrate there are two finite and predictable methods of map-plotting in the field of location-sharing: server-side and terminal-side. Because a person of ordinary skill in the art would have to choose between one of those two methods, using the server-side method disclosed in Konishi was a “predictable variation” of Okubo.
Remands Under Arthrex Limited to Final Written Decisions Issued Prior to Arthrex
In CATERPILLAR PAVING PRODUCTS v. WIRTGEN AMERICA, INC., Appeal No. 20-1261, the Federal Circuit held that remand of an IPR based on Arthrex is not justified where the final written decision issued after the Arthrex decision.
Wirtgen America, Inc. petitioned the Patent Trial and Appeal Board for inter partes review (“IPR”) of Caterpillar Paving Products Inc.’s (“Caterpillar”) patent, and the Board instituted review. Caterpillar appealed the final written decision issued in November 2019, arguing the decision should be vacated and remanded for a new hearing before a differently constituted panel in light of the Federal Circuit’s decision in Arthrex v. Smith & Nephew, Inc., 941 F.3d 1320 (Fed. Cir. 2019), regarding the constitutionality of Board judges.
The Federal Circuit found Arthrex expressly limited to final written decisions issued prior to the issuance of Arthrex. Although most of the IPR proceedings in the case took place before Arthrex, the final written decision was issued by a constitutionally appointed panel following Arthrex. Thus, a remand based on Arthrex was not justified.
The Disclosure-Dedication Doctrine Applies Even When Disclosure Relates to a Different, Unclaimed Embodiment
In EAGLE PHARMACEUTICALS INC. V. SLAYBACK PHARMA LLC., Appeal No. 19-1924, the Federal Circuit held that the disclosure-dedication doctrine precludes infringement under doctrine of equivalents where the patent discloses an unclaimed alternative to a claim limitation even when the disclosure relates to a different embodiment than the claimed embodiment.
Eagle Pharmaceuticals Inc. (“Eagle”) filed suit against Slayback Pharma LLC (“Slayback”) for patent infringement under the doctrine of equivalents. Slayback moved for judgment of non-infringement on the pleadings because Slayback’s accused generic pharmaceutical product used ethanol rather than the claimed propylene glycol. The district court found that the disclosure-dedication doctrine barred Eagle’s claim of infringement under the doctrine of equivalents because the asserted patents disclosed, but did not claim, ethanol as an alternative to propylene glycol. Accordingly, the district court granted Slayback’s motion and Eagle appealed.
On appeal, Eagle argued that the disclosure-dedication doctrine did not apply because ethanol was only disclosed as an alternative for propylene glycol in an unclaimed formulation. The Federal Circuit rejected Eagle’s embodiment-level approach, finding that the disclosure-dedication doctrine does not require the disclosure to exactly match the claimed embodiment. Rather, the unclaimed matter need only be disclosed as an alternative to the relevant claim limitation. The Federal Circuit found that ethanol was disclosed as an alternative to propylene glycol. Thus, the Federal Circuit affirmed.
Facts in Complaint that Arguably Show Patent Ownership Are Sufficient to Confer Standing
In SCHWENDIMANN V. ARKWRIGHT ADVANCED COATING, INC., Appeal No. 18-2416, the Federal Circuit held that exclusionary rights in a patent are a prerequisite to obtaining relief for infringement, but need not be proven to establish constitutional standing and subject matter jurisdiction.
Jodi Schwendimann sued Arkwright Advanced Coating for infringing 6 patents. However, a 2002 assignment by which Schwendimann obtained her rights in one of the asserted patents contained errors. Arkwright moved to dismiss for lack of standing, arguing that the assignment was ineffective. The district court denied the motion to dismiss, concluding that it did not have enough evidence to assess whether the 2002 assignment was effective. After additional discovery, Schwendimann moved for summary judgment on the standing issue. The district court granted summary judgment, finding that reformation of the 2002 assignment was appropriate under Minnesota law, and the reformed 2002 assignment established standing. The case proceeded to trial, where the jury awarded Schwendimann $2.6 million for willful patent infringement.
Arkwright appealed, alleging that Schwendimann lacked standing at the time she filed suit and the district court’s subsequent reformation of the 2002 assignment could not establish standing retroactively. The Federal Circuit majority stated that Lone Star Silicon Innovations LLC v. Nanya Tech. Corp., 925 F.3d 1225 (Fed. Cir. 2019), decided while Schwendimann’s case was pending on appeal, was dispositive of the standing issue. According to the majority, Lone Star held that proof of patent ownership is a prerequisite to obtaining relief for infringement, but is not a prerequisite to standing or subject matter jurisdiction. So long as the Plaintiff alleges “facts that support an arguable case or controversy under the Patent Act, the court has both the statutory and constitutional authority to adjudicate the matter.”
Judge Reyna dissented, arguing that a plaintiff needs exclusionary rights in a patent to establish constitutional standing, and that Lone Star did not hold otherwise. The dissent argued that Schwendimann lacked standing when she filed suit, and the reformation failed to cure that problem because standing must exist at the outset of a lawsuit.
Unconstitutionally Appointed Patent Judges Cannot Decide Appeals From Inter Partes Reexaminations
In VIRNETX INC. v. CISCO SYSTEMS, INC. and VIRNETX INC. v. CISCO SYSTEMS, INC., Appeal No. 19-1671, the Federal Circuit held that, when administrative patent judges are unconstitutionally appointed, their decisions in appeals from inter partes reexamination must be vacated, just like their decisions in inter partes review.
Appellee Cisco and Intervenor Andrei Iancu, the Director of the U.S. Patent and Trademark Office, petitioned for panel rehearing and rehearing en banc to challenge the Federal Circuit’s decision extending the holding of Arthrex, Inc. v. Smith & Nephew, Inc., 941 F.3d 1320 (Fed. Cir. 2019), beyond the context of inter partes review (IPR). Arthrex held that an IPR decision issued by a panel of administrative patent judges (APJs) who were unconstitutionally appointed had to be vacated. The original panel decision in VirnetX extended the holding of Arthrex to inter partes reexamination.
The rehearing petitions argued that, based on differences between IPRs and inter partes reexaminations, APJs should be deemed constitutionally appointed with respect to their duties reviewing appeals from inter partes reexamination. In response to the rehearing petitions, the panel issued an order “for the purpose of more fully explaining our rationale.”
The panel analyzed Freytag v. Commissioner, 501 U.S. 868 (1991), where the Supreme Court held that the constitutionality of an appointment is based on all of the appointee’s duties and not just the authority exercised in a particular case. Because the APJs who decide appeals from inter partes reexaminations also conduct IPRs, their appointments were unconstitutional under Arthrex. Further, the panel found that even if inter partes reexaminations were analyzed on their own, they were similar enough to IPRs that they would raise the same constitutional problems identified in Arthrex. Thus, the petitions for panel rehearing were denied.
In a separate order, the Federal Circuit also denied the petitions for rehearing en banc, without comment.
Shop ’Til You Drop (That Claim)
In ELECTRONIC COMMUNICATION TECHNOLOGIES, LLC v. SHOPPERSCHOICE.COM, LLC., Appeal No. 19-1587, the Federal Circuit held that claims directed to longstanding commercial practices do not pass step one of the § 101 test.
Electronic Communication Technologies, LLC (“ECT”) sued ShoppersChoice.com, LLC (“SC”) for patent infringement of U.S. Patent No. 9,373,261 (“the ’261 patent”). SC moved for judgment on the pleadings that claim 11 of the ’261 patent was invalid under 35 U.S.C. § 101. The district court granted the motion. ECT appealed to the Federal Circuit, which affirmed the invalidity of claim 11.
The ’261 patent recited a delivery notification system for goods. Claim 11 specifically recited the delivery notification system in terms of its hardware and software components and their function. The district court found claim 11 invalid under Section 101 because “claim 11 is directed to the abstract idea of providing advance notification of the pickup or delivery of a mobile thing” and “does not include an inventive concept.” The Federal Circuit agreed, applying the two-step Alice/Mayo test. The Federal Circuit reiterated that claims directed to longstanding commercial practices do not pass step one of the test, and found that the idea of providing advance notification of the pickup or delivery of a mobile thing was a longstanding commercial practice. The court also found that Claim 11 failed step two of the test because it “did not include an inventive concept sufficient to transform the claimed abstract idea into a patent eligible application.”
ECT argued that the enhanced security protocols of its delivery notification system, the speed with which the ’261 patent received allowance from the USPTO, and ECT’s good faith in requesting that the USPTO check § 101 eligibility during prosecution should have made claim 11 patent eligible. The Federal Circuit found these arguments unpersuasive. Finally, ECT argued that the district court erred in finding Claim 11 ineligible without engaging in claim construction. The Federal Circuit also rejected this argument, because ECT did not propose a single term that it believed required construction. Thus, the Federal Circuit affirmed the invalidity of Claim 11 of the ’261 patent.
Chalk It up to a Non-Copyrightable Idea
In Lanard Toys Limited v. Dolgencorp LLC, Ja-Ru, Inc., and Toys “R” US, Appeal No. 19-1781, the Federal Circuit held that a useful article is not copyrightable if the asserted expression is not separable from the utilitarian aspects of the article.
Lanard Toys sued Ja-Ru for design patent infringement, copyright infringement, and trade dress infringement of Lanard’s toy chalk holder designed to look like a pencil with an eraser. Ja-Ru did not dispute using Lanard’s chalk pencil as a reference in designing a similar toy chalk pencil. The district court granted summary judgment to Ja-Ru, holding (i) Ja-Ru’s product did not infringe Lanard’s asserted design patent, (ii) the asserted copyright over the chalk pencil was invalid and not infringed, and (iii) Ja-Ru’s product did not infringe Lanard’s trade dress. The Federal Circuit affirmed.
The district court began its design-patent infringement analysis by construing the claim, including identifying the functional and ornamental aspects of the design and considering the prior art. The district court then applied the ordinary observer test, finding that the design similarities stem from either functional aspects or well-established features in the prior art. An ordinary observer would not have believed Ja-Ru’s design to be the same as Lanard’s patented design in view of the prior art. The Federal Circuit affirmed, holding that the district court did not err in its analysis.
With regard to the copyright claim, the district court noted that Lanard’s design was a useful article and therefore would only be entitled to copyright protection if it incorporated artistic features separable from the utilitarian aspects. The district court found that the pencil design did not merely disguise the chalk holder—it was the chalk holder, and therefore was not capable of existing independently as a work of art and was not protectable. The Federal Circuit affirmed, holding that Lanard could not assert protection over the idea of a pencil-shaped chalk holder.
Lastly, the district court found that Lanard also failed to show secondary meaning to support its trade dress claim because it never presented evidence demonstrating its promotional efforts or how customers viewed Lanard’s product. The Federal Circuit again affirmed.
Not All § 112 ¶ 6 Indefiniteness Prevents Prior Art Analysis By PTAB
In COCHLEAR BONE ANCHORED SOLUTIONS AB V. OTICON MED. AB, Appeal No. 19-1105, the Federal Circuit held that the PTAB can analyze anticipation and obviousness when some but not all claimed alternatives are indefinite under 35 U.S.C. § 112 ¶ 6.
The PTAB instituted Oticon’s petition for inter partes review of Cochlear Bone Anchored Solutions’ (“Cochlear”) patent relating to rehabilitating a patient with unilateral hearing loss. The PTAB determined that because claims 7–10 contain means-plus-function limitations without a corresponding structure disclosed in the specification, it could not construe the claims in order to compare the claim requirements with the prior art. The PTAB thus declined to invalidate those claims. Oticon appealed this decision.
The Federal Circuit affirmed in part and vacated in part. The Federal Circuit agreed that claims 7–9 were indefinite under § 112 ¶ 6 because each contained at least one required means-plus-function claim element for which the specification provided no corresponding structure. Thus, “it [wa]s impossible to conduct a prior-art analysis” and the “necessary course of action was to conclude that unpatentability of claims 7–9 could not be shown.” The Federal Circuit, however, vacated the PTAB’s decision with respect to claim 10. Unlike claims 7–9, claim 10 did not contain a required claim element in means-plus-function form. Claim 10 recited “directivity means comprising at least one directivity dependent microphone and/or signal processing means in the electronic circuitry.” The Federal Circuit held that the use of the “and/or” disjunctive created three alternative subsets of claim coverage. And although the PTAB correctly held that “signal processing means” was indefinite, “directivity-dependent-microphone” was “clear structure” for performing the claimed function. It was error for the PTAB to rely entirely on the indefiniteness of some of the alternatives to conclude that a prior art analysis was impossible for every alternative. The Federal Circuit remanded for determination of whether the “directivity-dependent-microphone” alternative was subject to § 112 ¶ 6 and whether this alternative was anticipated or rendered obvious by the prior art.
Intrinsic Evidence Establishing the Context of a Claim Term Can Limit Claim Scope
In MCRO, INC. v. BANDAI NAMCO GAMES AMERICA, Appeal No. 19-1557, the Federal Circuit held that the scope of a claim term may be limited when intrinsic evidence establishes that the context of the patent is narrowly focused.
McRO sued a number of game developers (“Developers”) for infringement of a patent related to a method of automatically animating lip movement and facial expression in three-dimensional characters. The district court initially granted the Developers’ motion for summary judgment of patent ineligibility of the asserted claims under 35 U.S.C. § 101. The Federal Circuit reversed, finding the claims patent eligible. On remand, the district court construed the claim term “morph set weight” to require three-dimensional vectors, and granted the Developers’ motion for summary judgment of non-infringement and invalidity for non-enablement. McRO appealed.
On appeal, the parties did not dispute that when “morph set weight” is construed to require three-dimensional vectors, the Developers do not infringe. McRO argued that the district court erred in construing the term “morph set weight” by narrowly construing “vector” to require three-dimensional vectors, rather than adopting McRO’s broader construction of “vector” which included any ordered set of numbers. The Federal Circuit rejected McRO’s argument, finding that spatial terms such as “vertex” and “topology” in the specification and “three-dimensional characters” in the preamble of the asserted claims “strongly favor[ed] the narrow geometric meaning of ‘vector’.” The Federal Circuit also found support in an equation summarizing the claimed process. Because the equation required addition of a three-dimensional vector with a sum of the vectors at issue, the court concluded the summed vectors must also be three dimensional. The Federal Circuit concluded that the meaning most appropriate in the context of the patent was that “vector” required three-dimensional vectors and affirmed the district court’s claim construction and finding of non-infringement.
The Federal Circuit also addressed the district court’s finding of invalidity for lack of enablement. The Federal Circuit explained that a determination of enablement requires the identification of at least some embodiments that are or may be within the scope of the claim that is not enabled. However, the only specific embodiments identified by the district court and the Developers were the accused products and a second embodiment, all of which were outside the scope of the claims when construed to require the “vector” be a three-dimensional. The Federal Circuit declined to depart from the existing requirement that the challenger identify specific embodiments that are or may be within the claim but are not enabled. Without “concrete identification of matter that is not enabled” but within the claim scope, the Developers could not meet the burden to show non-enablement by clear and convincing evidence. The Federal Circuit vacated the district court’s summary judgment of invalidity for lack of enablement and remanded for further proceedings.
Courts Have No Jurisdiction Over Challenge to PTO Action Before Final Agency Decision
In ODYSSEY LOGISTICS AND TECH. v. IANCU, Appeal No. 19-1066, the Federal Circuit held that PTO procedural actions are not appealable before the Board has issued a final decision, and that the statute of limitations for facially challenging amendments to PTO rules runs from the date of publication.
Odyssey filed suit in the Eastern District of Virginia, challenging three procedural actions taken by the PTO. First, after the PTAB reversed an examiner’s rejection, the examiner requested rehearing rather than directly issuing a notice of allowance. In Count I, and before the PTAB had issued a final decision on the rehearing request, Odyssey challenged the procedural propriety of the rehearing request. Second, in a different Odyssey patent application, Odyssey appealed a final rejection and separately filed a petition demanding that the examiner make certain evidence part of the written record and provide additional explanation for the rejection. The Technology Center Director dismissed the petition as moot. In Count II, and while the appeal was still pending, Odyssey challenged the TCD’s petition dismissal. In Count III, Odyssey challenged the PTO’s 2011 amendments to its rules of practice in ex parte appeals. The PTO had published the final rules more than six years before Odyssey raised its challenge, but Odyssey’s challenge came within six years of their effective date.
The district court dismissed Counts I and II for lack of subject matter jurisdiction, because the challenged actions were not yet final. The district court ruled Count III was barred by the six-year statute of limitations, based on the publication date of the final rules, rather than their effective date. The Federal Circuit affirmed on all three counts. For Counts I and II, the Federal Circuit noted that until the Board issued its final decisions, the PTO’s decision-making process would not have been consummated and Odyssey’s rights and obligations would not have been determined. For Count III, the Federal Circuit noted that under both Federal Circuit and Fourth Circuit precedent, a “facial” challenge to an agency rule is subject to the statute of limitations based on the publication date, not the effective date.
The Federal Circuit May Not Award Attorney Fees For Work Performed During an IPR
In Amneal Pharmaceuticals LLC v. Almirall, LLC, Appeal No. 20-1106, the Federal Circuit ruled that, while fees can be awarded under Section 285 for work performed during appellate proceedings, they cannot be awarded for prior work performed during IPR proceedings at the Patent Office.
Amneal petitioned for IPR of Almirall’s patent. In its final written decision, the Board determined all claims were not unpatentable. Amneal appealed and then moved to dismiss its appeal. Almirall agreed the appeal should be dismissed, but requested fees under Section 285 for certain work performed during the IPR proceeding at the Patent Office.
The Federal Circuit noted that it had not yet decided if Section 285 applies to IPR appeals. However, the Federal Circuit ruled that, even if it could award fees in connection with the appeal, the Federal Circuit could not award fees for work performed in connection with the Patent Office proceeding. The Federal Circuit explained that Section 285 “speaks only to awarding fees that were incurred during, in close relation to, or as a direct result of, judicial proceedings.” The Federal Circuit acknowledged authority suggesting that a district court could award attorney fees for parallel Patent Office proceedings that were “intimately tied” to the resolution of the district court action. However, the Federal Circuit found that it lacked authority to award fees incurred during Patent Office proceedings before the Federal Circuit appeal.
Litigants Face a Significant Hurdle When Seeking Fees for Unadjudicated Claims
In Munchkin, Inc. V. Luv N’ Care Ltd, Appeal No. 19-1454, the Federal Circuit ruled that, when a litigant seeks fees for an exceptional case based on issues that were not fully adjudicated at the district court, the litigant’s fee motion must demonstrate not only that they would have succeeded, but also that the opposing party’s position was unreasonable.
Munchkin brought claims against Luv N’ Care (“LNC”) for trademark infringement and unfair competition. Munchkin later moved to amend the complaint to add (1) additional trademark claims; (2) trade dress claims; and (3) patent infringement claims. The district court granted the motion. Later, Munchkin dismissed its trademark, unfair competition, and trade dress claims with prejudice. LNC successfully petitioned for IPR of the asserted patent and the Federal Circuit summarily affirmed the PTAB’s determination of unpatentability. After that decision, Munchkin dismissed its patent infringement claims. LNC then sought fees for an exceptional case under 35 U.S.C. § 285 and 17 U.S.C. § 1117. The district court granted the fees motion, finding that Munchkin should have been aware of the substantive weakness in the patent’s validity and that the trademark and trade dress claims were substantively weak.
The Federal Circuit reversed. The Court noted that this case represented “an unusual basis for fees” because the “exceptional-case determination rests on an examination of issues … that were not fully litigated before the [district] court.” Though fees are potentially recoverable, in such situations district courts should provide “a fuller explanation of the court’s assessment of a litigant’s position.” Here, neither LNC nor the district court provided such a “detailed, fact-based analysis” and the record failed to show that Munchkin’s litigating positions were “wholly lacking in merit.”
On the patent infringement claims, the Federal Circuit noted that LNC’s invalidity arguments turned on claim construction. But, the district court’s claim construction order had adopted Munchkin’s construction, not LNC’s broader proposal. It was only at the PTAB, under a broadest reasonable construction standard, that LNC was successful. The district court also erred in ruling that Munchkin was unreasonable in maintaining the lawsuit after institution of the IPR based on general IPR success statistics. The Federal Circuit explained that such statistics “tell us nothing about the” strength of Munchkin’s positions. Any remaining analysis by the district court was “wholly conclusory and cannot support a determination of exceptionality” in the circumstances. Thus, the award of fees under § 285 was an abuse of discretion.
On the trademark and trade dress claims, the Federal Circuit ruled that the exceptional case finding was in conflict with the district court’s prior order allowing Munchkin to amend the complaint. Neither the district court nor LNC pointed to a single fact that the district court did not consider at the time it allowed Munchkin to amend the complaint. The fact Munchkin chose to dismiss its claims with prejudice likewise failed to establish that the case was exceptional because there were many reasons Munchkin could have decided to drop those claims. The district court’s analysis on the trade dress claims was likewise conclusory. Thus, the Federal Circuit found that it was also an abuse of discretion to award fees on the trademark and trade dress claims.
Non-Infringement Need Not Be “Actually Litigated” To Shield Accused Products From Infringement Liability In Subsequent Actions
In In Re Personal Web Technologies LLC, Appeal No. 19-1918, the Federal Circuit ruled that the Kessler doctrine is not limited to cases involving a finding of non-infringement; it applies to cases that are dismissed with prejudice.
PersonalWeb Technologies LLC (“PersonalWeb”) sued dozens of Amazon’s customers alleging infringement of several related patents. Amazon intervened and sought declaratory judgment that PersonalWeb’s lawsuits against Amazon’s customers were precluded as a result of a prior lawsuit PersonalWeb brought against Amazon, which was dismissed with prejudice. The district court agreed with Amazon that PersonalWeb’s infringement actions against Amazon’s customers were barred as a result of the dismissal of the prior action. PersonalWeb appealed to the Federal Circuit.
On appeal, PersonalWeb challenged the district court’s decision on two grounds. First, PersonalWeb argued that claim preclusion does not apply to the actions against Amazon’s customers because the prior action involved a different feature of Amazon’s S3 system and, thus, constituted a different cause of action. The Federal Circuit noted, however, that the particular feature of Amazon’s S3 system in the customer cases was identified in the infringement contentions in the prior action. Further, every alleged act of infringement in the customer cases was based on the use of the same Amazon S3 product that was accused of infringement in the prior action. The Federal Circuit therefore rejected this argument.
Second, PersonalWeb argued that the with-prejudice dismissal of the prior action against Amazon did not constitute an adjudication of noninfringement and therefore is not sufficient to trigger the Kessler doctrine. The Federal Circuit explained that the Kessler doctrine “‘fills the gap’ left by claim and issue preclusion, by ‘allowing an adjudged non-infringer to avoid repeated harassment for continuing its business as usual post-final judgment in a patent action where circumstances justify that result.’” PersonalWeb argued that since the prior action was dismissed before there was any adjudication “no issues” were actually litigated and the Kessler doctrine does not apply. Since “no issues” were actually litigated in the prior action, PersonalWeb argued, Amazon is not an “adjudged non-infringer.” The Federal Circuit rejected PersonalWeb’s characterization of the Kessler doctrine and explained that issues of non-infringement or invalidity do not need to have been litigated in order for the Kessler doctrine to be properly invoked.
Having rejected PersonalWeb’s arguments on appeal, the Federal Circuit affirmed the district court’s dismissal of the customer cases.
No Specific Threat of Infringement Litigation Needed to Establish Standing for IPR Appeal
In Adidas AG v. Nike, Inc., Appeal No. 19-1787, the Federal Circuit ruled that a patent challenger can establish standing to appeal a final written decision in an IPR by showing that its past, present, or anticipated future activity would give rise to a possible infringement suit, even if the patentee has not specifically alleged infringement.
Adidas requested inter partes review of two Nike patents directed to methods of manufacturing footwear. The Board held that Adidas had not proven the challenged claims unpatentable. Adidas appealed.
Nike alleged that Adidas lacked standing to appeal, arguing that Adidas could not establish the requisite injury in fact because Nike had not sued or threatened to sue Adidas for infringing the challenged patents. The Federal Circuit disagreed.
The Federal Circuit found that (1) Nike had asserted one of the challenged patents against a third-party product similar to Adidas’ footwear, (2) Adidas and Nike are direct competitors, and (3) in the past Nike had accused Adidas of infringing one of its patents and expressed its intent to protect Nike’s rights against further infringement. Accordingly, the Federal Circuit held that Adidas had standing.
On the merits, the Federal Circuit found that the Board did not err in its obviousness analysis and thus affirmed the decisions below.
Found Limiting Where It Supplied Antecedent Basis For Other Claim Limitations
In Shoes By Firebug LLC v. Stride Rite Children’s Group, Appeal No. 19-1622, in similar claims of two related patents, one preamble was limiting because it supplied antecedent basis for a subsequent structural claim limitation, and another preamble that supplied no antecedent basis was not limiting.
Firebug sued Stride Rite for infringing two patents related to footwear illumination systems. In response, Stride Rite petitioned for inter partes review of all asserted claims. After instituting review, the Board held the challenged claims unpatentable as obvious. Firebug appealed, arguing that the Board erred by construing the preambles of the challenged independent claims as non-limiting. Specifically, Firebug asserted that the term “textile” in the preamble phrase “internally illuminated textile footwear” limited the claims and distinguished them from the prior art.
Addressing the first patent, the Federal Circuit noted that the body of the independent claim reintroduced “a footwear” immediately after the preamble and the claim recited a structurally complete invention without the preamble. Thus, the preamble was not limiting. In contrast, the independent claim of the second patent did not reintroduce “footwear” after the preamble and instead relied on the preamble phrase “textile footwear” for antecedent basis in a subsequent structural claim limitation. Thus, the preamble in the second patent was limiting.
Although the Board erred by construing the second preamble as non-limiting, the Federal Circuit deemed the error harmless because the Board found that the prior art also disclosed the use of “textile” footwear, and that finding was supported by substantial evidence. Thus, the Federal Circuit affirmed the Board’s decisions on both patents.
Federal Circuit Affirms Use of Common Sense for Obviousness Determination
In B/E Aerospace, Inc. v. C&D Zodiac, Inc., Appeal No. 19-1935, the Federal Circuit ruled that common sense was properly invoked in an obviousness determination because it was accompanied by reasoned analysis and supporting evidence.
C&D Zodiac filed petitions for inter partes review of patents owned by B/E Aerospace. The challenged claims recited space-saving modifications to the walls of aircraft enclosures (e.g., lavatories). The claims required (a) a first recess accommodating a seatback and (b) a second recess accommodating a seat support (e.g., rear seat leg). Zodiac argued that the challenged claims were obvious even though none of the asserted prior art references disclosed the second recess.
The Board found that the prior art taught the first recess, and skilled artisans would have added the second recess because it was an obvious application of a known technology. The Board also found that it would have been a matter of common sense to incorporate the second recess.
B/E appealed, arguing that the Board’s obviousness determination was improper because the asserted prior art references did not disclose the second recess. The Federal Circuit found that modifying the prior art to include the second recess would have been nothing more than a predictable application of known technology. A skilled artisan would have seen the benefit of the first recess and applied a variation of the first recess to create the second recess. The Federal Circuit added that the Board’s use of common sense was proper because it was accompanied by reasoned analysis and evidence showing that lower recesses were a well-known solution for providing space for seat supports.
A Mark Styled “Generic.com” May Be Trademark Eligible
In USPTO v. Booking.com, Appeal No. 19-46, the Supreme Court ruled that a term styled “generic.com” is not necessarily generic and can be eligible for federal trademark protection if consumers view the mark as distinguishing the source of the goods.
Booking.com sought to register the mark “Booking.com.” The USPTO refused registration, concluding that “Booking.com” is a generic name for online hotel-reservation services. The Board affirmed the examining attorney’s refusal to register, concluding that “Booking” means making travel reservations and “.com” signifies a commercial website such that customers would understand the term “Booking.com” primarily to refer to an online reservation service for travel.
Booking.com sought review in the U.S. District Court for the Eastern District of Virginia. The District Court concluded that “Booking.com” is not generic, based on evidence of consumer perception provided by Booking.com. The USPTO appealed the District Court’s determination that “Booking.com” is not generic to the Court of Appeals for the Fourth Circuit. The Fourth Circuit affirmed the District Court’s ruling that the mark is not generic.
The Supreme Court granted certiorari and affirmed, holding that whether a term styled “generic.om” is generic depends on whether consumers in fact perceive that term as a name of a class or capable of distinguishing among members of the class. The USPTO argued that adding a domain name, like “.com,” is similar to adding a generic corporate designation like “Company.” In Goodyear’s India Rubber Glove Mfg. Co. v. Goodyear Rubber Co., 128 U.S. 598, the Supreme Court held that adding “Company” to a generic term did not confer trademark eligibility because Company only indicated the parties formed an association. The Supreme Court disagreed with the USPTO, holding that “.com,” unlike a company designation, may convey to consumers a source-identifying characteristic, an association with a particular website. The USPTO further argued a categorical rule against registration of “generic.com” terms was needed for policy reasons, to avoid giving mark owners undue control over similar language. However, the Supreme Court held this policy concern was true of any descriptive mark, noting there are doctrines in place against anticompetitive effects. Because the lower court found that “Booking.com” is not a generic name to consumers, the Supreme Court affirmed.
Justice Breyer dissented, noting that the mark “Booking.com” does no more than inform the consumer of the basic nature of its business and is thus generic. Justice Breyer further noted that the decision will lead to a proliferation of “generic.com” marks, which would inhibit free competition in online commerce.
Pattern of Vexatious Litigation a Relevant Consideration in Awarding Attorney’s Fees in Patent Infringement Cases
In Electronic Communication Technologies, LLC v. Shopperschoice.Com, LLC, Appeal No. 19-2087, the Federal Circuit claims the grant or denial of attorney fees requires consideration of a party’s manner of litigation when abuses are alleged. The analysis also requires consideration of the objective unreasonableness of infringement claims.
After the district court found Plaintiff ECT’s asserted claim invalid under 35 U.S.C. § 101, ShoppersChoice sought attorney’s fees. ShoppersChoice presented evidence of ECT’s pattern of seeking low-value license fees and forcing settlements. The evidence also showed that ECT consistently failed to proceed in patent litigation past claim construction and showed no intention of testing the strength of its patents on the merits. Prior to the district court’s attorney fees decision, ShoppersChoice provided an opinion from another district court awarding attorney fees against ECT in a case involving the same claim. That opinion detailed plaintiff’s pattern of vexatious litigation. Nonetheless, the district court found that the case was not exceptional and denied ShoppersChoice’s motion for attorney fees.
The Federal Circuit reversed and remanded. The Federal Circuit found that the district court clearly erred by failing to address ECT’s manner of litigation and the broader context of its lawsuit against ShoppersChoice. The Federal Circuit also held it was error for the district court not to consider the objective unreasonableness of ECT’s infringement claim, particularly in view of the record before it which included a different district court’s opinion that no reasonable patent litigant would have believed that the asserted patent was viable.
Unconstitutionally Appointed Judges Cannot Decide Ex Parte Appeals
In In Re Boloro Global Limited, Appeal No. 19-2349, the Federal Circuit claims that when administrative patent judges are unconstitutionally appointed, their decisions in ex parte appeals must be vacated.
The PTAB issued decisions in ex parte appeals that affirmed an examiner’s rejection of Boloro Global Limited’s patent applications. Boloro appealed.
On appeal, the PTO Director conceded that administrative patent judges (APJs) were not constitutionally appointed when the PTAB issued its final decisions in the subject ex parte appeals. To determine the proper remedy for this constitutional violation, the Court looked to its decisions in Arthrex, Inc. v. Smith & Nephew, Inc., 941 F.3d 1320 (Fed. Cir. 2019), and VirnetX Inc. v. Cisco Sys., Inc., No. 2019-1671, 2020 WL 2462797 (Fed. Cir. May 13, 2020). In Arthrex and VirnetX, the Federal Circuit held that when APJs are not constitutionally appointed, their decisions in inter partes review and in appeals from inter partes reexamination must be vacated and the matters must be remanded for a new hearing and decision from a different panel of APJs. The Director urged against extending that remedy to ex parte proceedings, arguing that the Director could have ordered that Boloro’s patents be issued but did not, consistent with the PTAB’s subsequent decisions.
The Federal Circuit disagreed with the Director, finding no principled reason to depart from the remedy applied in Arthrex and VirnetX. Thus, the Court vacated the PTAB’s decision and remanded for proceedings consistent with the decision in Arthrex.
PTAB Cannot Shortcut the Two-Step Obviousness Analysis
In Fitbit, Inc. v. Valencell, Inc., Appeal No. 19-1048, the Federal Circuit claims that notwithstanding its rejection of the Petitioner’s proposed claim construction, the PTAB may not end an obviousness inquiry without evaluating patentability in view of the asserted obviousness grounds.
Apple Inc. petitioned for IPR of a patent owned by Valencell. The Board instituted review of claims 1, 2, and 6–13 but denied review of claims 3–5. Fitbit subsequently petitioned for IPR for claims 1, 2, and 6–13 and moved for joinder with Apple’s IPR, which the Board granted. After the PTAB trial but before the Final Written Decision, the Board re-instituted the Apple/Fitbit IPR to add claims 3–5 pursuant to the Supreme Court’s holding in SAS Institute, Inc. v. Iancu, 138 S. Ct. 1348 (2018). The Board proceeded to conclude that claims 1, 2, and 6–13 were unpatentable and claims 3–5 were not unpatentable. The Board determined that claim 3 was not unpatentable based on the rejection of Fitbit’s proposed claim construction. The Board also determined that claims 4 and 5 were not unpatentable because the meaning of the claims was “subject to reasonable debate” due to a claim term lacking antecedent basis.
The Federal Circuit held that Fitbit’s rights as a joined party included the right to appeal, that the Board’s claim construction was not in error, and that the Board erred in making patentability determinations for claims 3–5 without considering the asserted grounds of obviousness. Valencell argued on appeal that Fitbit did not have standing to appeal the Board’s decision as to claims 3–5 because Fitbit’s petition omitted them. The Federal Circuit rejected Valencell’s argument, reasoning that such circumstances do not override Fitbit’s statutory right of appeal under 35 U.S.C. § 315 as a joined party. The Federal Circuit next affirmed the claim construction the Board adopted. However, the Federal Circuit found that the Board erred in its determination as to claim 3 by stopping its analysis after completing only the claim construction step. Because the Board failed to review the patentability of claim 3, as construed, on the asserted grounds of obviousness, the Federal Circuit vacated the Board’s decision with respect to claim 3 and remanded for a determination of patentability. Lastly, the Federal Circuit addressed the Board’s decision that claims 4 and 5 were not unpatentable. The Federal Circuit rejected the Board’s determination that there was reasonable debate as to the meaning of the claims due to the lack of antecedent basis, explaining that the correct antecedent basis of the claim term was clarified by referencing the prosecution history. The Federal Circuit highlighted that the Parties did not dispute the correct antecedent basis, but the Board declined to adopt this shared view. The Federal Circuit concluded that the Board’s treatment of this error as the basis of patentability was not a reasonable resolution and failed to comport with the Agency’s assignment under the AIA to resolve the merits of patentability. Accordingly, the Federal Circuit also vacated the Board’s decision that claims 4 and 5 were not unpatentable and remanded for a determination on the merits of patentability of corrected claims 4 and 5 on the asserted grounds of obviousness.
Highlighting the Risks of Overbroad Motions to Seal
In Uniloc 2017 LLC, Uniloc USA, Inc., Uniloc Luxembourg S.A. v. Apple, Inc., Electronic Frontier Foundation, Appeal No. 19-1922, the Federal Circuit claims that motions to seal must be narrowly tailored and well supported to overcome the presumption of public access to court filings.
Uniloc moved to seal a large amount of allegedly confidential information referenced in several Apple motions to dismiss. The material sought to be sealed included citations to case law, quotations from published opinions, and twenty three exhibits that included matters of public record. The District Court denied the motions to seal, stating that Uniloc had not provided compelling reasons to overcome the public’s right to the information. Uniloc’s motions were not “narrowly tailored” and requested an “astonishing” amount of material be sealed.
The Federal Circuit affirmed in part and vacated in part. The Federal Circuit divided the information Uniloc sought to seal into two categories: 1) Uniloc’s own purportedly confidential information; and 2) the purportedly confidential information of the third party licensees. On Uniloc’s allegedly confidential information, the district court did not abuse its discretion because Uniloc “fell woefully short” of the local rule requirement to narrowly tailor its request and Uniloc provided only “perfunctory assertions” that the documents required sealing. On third party licenses, the Federal Circuit vacated and remanded because the district court did not properly assess whether the public’s right of access outweighed the confidentiality interest of the third parties.
Publication Does Not Necessarily Defeat Joint Inventorship
In Dana-Farber Cancer Institute v. Ono Pharmaceutical Co., Ltd., Appeal No. 19-2050, the Federal Circuit claims that an individual who contributes “significant building blocks” to an invention may still be an inventor even if the individual publishes the information prior to conception of the claimed subject matter.
Dana-Farber Cancer Institute brought suit against Ono alleging that Dr. Freeman and Dr. Wood should be added as inventors to an Ono patent naming Dr. Honjo as the inventor. Over the years, Freeman, Wood, and Honjo had met and exchanged information relevant to the subject matter of the patent. However, Freeman and Wood did not participate in certain experiments leading to conception. Freeman and Wood had also separately published information relating to their research and filed a provisional patent application that did not list Honjo as an inventor. Nevertheless, the district court concluded that Freeman and Wood should be added as inventors. Ono appealed.
Ono argued the contributions of Freeman and Wood (1) were irrelevant because they published their work prior to conception, and (2) were not a significant contribution to the claims. The Federal Circuit rejected Ono’s first argument because “publication of a portion of a complex invention does not necessarily defeat joint inventorship of that invention.” The Federal Circuit rejected Ono’s second argument because the contributions of Freeman and Wood were “significant building blocks” upon which the patents were built. Thus, the Federal Circuit affirmed.
A Patentee Cannot Circumvent the Marking Requirement by Proving Separate Infringement of Method Claims
In Packet Intelligence LLC v. Netscout Systems, Inc., Appeal No. 19-2041, the Federal Circuit claims that the defendant’s infringement of method claims through internal use and testing was insufficient to support pre-suit damages that were based on sales of products that infringed separate apparatus claims.
Packet Intelligence sued NetScout for infringement of one patent containing apparatus claims and two patents containing method claims. The claims of all three patents generally recited examining packets sent over a computer network, identifying the “conversational flow” to which the packets belonged, and creating a new entry in a database if the packets belonged to new conversational flow. The jury found NetScout infringed and awarded pre-suit and post-suit damages. In a separate bench trial, the court rejected NetScout’s § 101 defense. NetScout appealed.
The Federal Circuit held that Packet Intelligence failed to satisfy the marking requirement of Section 287(a). NetScout met its initial burden of identifying an unmarked product and Packet Intelligence failed to show that product did not practice the asserted apparatus claims. Packet Intelligence argued pre-suit damages could nonetheless be affirmed based on NetScout’s direct infringement of separate method claims through internal use and testing. While there was sufficient evidence those activities infringed the method claims, there was no evidence of damages based on those activities. Thus, the Federal Circuit reversed the pre-suit damages award.
As for § 101, the Federal Circuit found the claims were not directed to an abstract idea under Alice step one. The court reasoned that the claims met a challenge unique to computer networks of monitoring disjointed flow of packets in a network. Judge Reyna dissented, arguing that the purported solution of classifying network traffic according to conversational flows is conceptual, not technological, in the absence of a specific means of achieving that classification.
Post-Investigation Invalidity Challenge Is Not a Changed Condition Permitting Rescission of an ITC Exclusion Order
In Mayborn Group, Ltd., Mayborn Usa, Inc. v. International Trade Commisision, Appeal No. 19-2077, the Federal Circuit claims that an invalidity challenge raised after the close of an ITC investigation is not a changed condition under 19 U.S.C. § 1337(k)(1) for which the ITC has authority to rescind a general exclusion order.
The ITC issued a general exclusion order (“GEO”) blocking importation of beverage containers covered by the Complainant’s patent. Mayborn was not a party to the investigation, but later petitioned the ITC for rescission of the GEO, raising invalidity challenges to the patent under 35 U.S.C. §§ 102 and 103. The ITC denied Mayborn’s petition for rescission on the grounds that an invalidity challenge was not a changed condition sufficient for rescission and that it lacked statutory authority to consider such challenges outside an open investigation. Mayborn appealed.
The Federal Circuit held the ITC correctly denied Mayborn’s petition for rescission on two independent grounds. First, under statute, the ITC may only adjudicate patent validity when an invalidity defense is raised by a respondent in the course of an investigation or enforcement proceeding, and Mayborn was not a party to any such proceeding. Second, the Federal Circuit held that, unlike a subsequent judgment of invalidity, the mere raising of an invalidity defense is not a “changed condition” under 19 U.S.C. § 1337(k)(1), and thus, not a proper basis for a petitioner to seek rescission or modification of a GEO. Finally, while the Federal Circuit acknowledged a public interest in issues of patent validity, that public interest did not present a changed condition permitting the ITC to rescind the GEO.
The Federal Circuit affirmed the ITC’s denial of Mayborn’s petition for rescission of the GEO.
Substitute Claims in IPRs Are Subject to Section 101 Challenges
In Uniloc 2017 LLC v. Hulu, LLC, Appeal No. 19-1686, the Federal Circuit claims that the Board did not exceed its statutory authority in an inter partes review proceeding by rejecting proposed substitute claims for lack of patent-eligible subject matter under 35 U.S.C. § 101.
Hulu, LLC and others (collectively, “Hulu”) petitioned for inter partes review (IPR) of a patent owned by Uniloc 2017 LLC. The Patent Trial and Appeal Board instituted the IPR and issued a final written decision finding some of Uniloc’s claims unpatentable over the prior art. During the IPR, Uniloc filed a motion to amend, requesting that the Board enter substitute claims if it found the patent’s independent claims unpatentable. Hulu opposed the motion and argued that the substitute claims were patent-ineligible under § 101. Uniloc replied that the § 101 challenge was barred by the IPR statutes, but did not respond to the substance of Hulu’s § 101 arguments. The Board denied Uniloc’s motion, finding the substitute claims unpatentable based solely on § 101. Uniloc appealed.
The Federal Circuit affirmed. The majority held that the IPR statutes permit the Board to review substitute claims more extensively than original claims (which are reviewed under §§ 102 and 103 only). The statutes require that all substitute claims be “patentable”—meaning that such claims must satisfy § 101.
Judge O’Malley dissented, asserting that the term “patentability” in the IPR statutes refers specifically to patentability under §§ 102 and 103, not § 101. The dissent also noted that substitute claims must be narrower than original claims, and if an original claim satisfied § 101, a narrowed claim would too. Thus, substitute claims could not raise any new problem of patentability under § 101 that did not exist in the original claims.
Eleventh Amendment Protects States from Involuntary Joinder in Patent Suits
In Gensetix, Inc. v. Baylor College Of Medicine, Appeal No. 19-1424, the Federal Circuit claims that a state can invoke sovereign immunity under the Eleventh Amendment to protect against involuntary joinder from patent suits.
Gensetix is an exclusive licensee of a patent owned by the University of Texas (“UT”). Gensetix filed a patent suit against Baylor. UT refused to join the patent suit, so Gensetix joined UT under Rule 19 as a required party. In response, UT filed a motion to dismiss itself from the suit, arguing sovereign immunity from the Eleventh Amendment prohibited UT from being involuntarily joined. The district court agreed with UT and dismissed UT from the suit. The district court later dismissed the entire case, finding UT was an indispensable party and that the case could not proceed in UT’s absence. Gensetix appealed.
On appeal, Gensetix claimed that sovereign immunity does not preclude involuntary joinder of a sovereign under Rule 19. Gensetix argued that the Eleventh Amendment protects sovereigns against suits, but it does not prevent sovereigns from being joined as a plaintiff. Gensetix further argued that UT had an obligation to join the suit because of the license agreement between Gensetix and UT. In response, UT claimed sovereign immunity protections extend to joinder under Rule 19. UT further contended that, although it had entered into a license agreement with Gensetix, this agreement did not waive its sovereign immunity.
The Federal Circuit agreed with UT and held sovereign immunity protections extend to joinder. The Federal Circuit noted that the Eleventh Amendment is not limited to cases brought “against” a state. Rather, the purpose of the Eleventh Amendment is to prevent States from being brought into court against their will. Thus, even though no party brought a claim against UT, sovereign immunity still applied. The Federal Circuity further held UT was not obligated to join the suit because of the license agreement, noting that the license agreement expressly stated that UT was not waiving its sovereign immunity.
While the Federal Circuit affirmed the district court’s decision to dismiss UT, the Federal Circuit reversed the district court’s determination that the case could not proceed in UT’s absence. The Federal Circuit noted, among other things, that there was no risk of multiple suits under the agreement and that Gensetix had no recourse to assert the patent rights in UT’s absence. The Federal Circuit remanded for further proceedings.
Judge Newman dissented in part, arguing that UT did not have immunity under the Eleventh Amendment in this instance. In particular, Judge Newman argued that UT had a contractual obligation under the license agreement to join the suit.
Judge Taranto dissented in part, arguing that the case must be dismissed, as UT was an indispensable party and the case could not continue without UT.
Proprietary Rights in a Mark Not Required for Standing at the TTAB
In Australian Therapeutic v. Naked Tm, LLC, Appeal No. 19-1567, the Federal Circuit claims that standing to challenge a registered mark at the TTAB does not depend on the challenger’s proprietary right to a similar mark.
Australian Therapeutic Supplies Pty. Ltd. (“Australian”) first adopted the mark NAKED for condoms in early 2000 in Australia. In 2003, Australian began selling condoms featuring its unregistered mark to customers in the United States. Naked TM, LLC (“Naked”) owns a registration for the mark NAKED for condoms, which was filed September 22, 2003. In 2005, Australian contacted Naked and claimed rights in its unregistered mark, and Australian and Naked subsequently engaged in settlement negotiations. Naked asserted the parties reached an agreement. Australian disagreed. In 2006, Australian filed a petition to cancel Naked’s mark. In response, Naked asserted Australian lacked standing to seek cancellation. In 2018, following a trial, the Board issued a decision that concluded Australian lacked standing because, in the Board’s view, the parties entered into an informal agreement during their negotiations that Australian would not use or register its unregistered mark in the United States. As such, the Board held Australian could not establish a real interest in the cancellation or a reasonable basis to believe it would suffer harm from Naked’s registration.
The Federal Circuit reviewed the issue of standing de novo, and reversed. The court reasoned that there was no requirement that a petitioner demonstrate a proprietary right in its own mark to demonstrate a cause of action before the Board. Thus, Australian contracting away its right to use and register an unregistered mark did not preclude it from challenging Naked’s mark at the Board. The court noted that, while an agreement could ultimately bar Australian from proving actual damage, § 1064 requires only a belief of damage. The court next considered whether Australian had demonstrated a sufficiently reasonable belief of damage to establish standing. The court explained that a petitioner may make such a showing by producing and selling merchandise bearing the registered mark or being refused registration in view of the registered mark. The court observed that Australian twice filed for—and was refused over Naked’s registration—registration of its unregistered mark and further demonstrated advertising and sales of its product in the United States. Even if these sales were de minimis, the court explained, there is no minimum threshold of commercial activity necessary to petition the Board for cancellation of a mark. As such, the court held the Board erred by determining Australian lacked standing to petition for cancellation of Naked’s registered mark.
Judge Wallach dissented. While Judge Wallach agreed with the majority that no proprietary interest is required to have standing to challenge a mark, he disagreed that Australian demonstrated the legitimate commercial interest required to seek cancellation. In Judge Wallach’s view, even if Australian had demonstrated a commercial interest in Naked’s mark, the Board’s factual findings established Australian had contracted away, via settlement, any legitimate commercial interest and thus any reasonable belief in damages.
Patent Owner Arguments Do Not Limit the Scope of the Board’s Final Written Decision
In Fanduel, Inc. v. Interactive Games Llc, Appeal No. 19-1393, the Federal Circuit claims that the Board does not violate the Administrative Procedure Act (APA) if it institutes trial and then reconsiders the substantive merits of petitioner’s theories even in the absence of challenge by the patent owner.
FanDuel petitioned for inter partes review of a patent owned by Interactive Games, arguing that the claimed gambling system was obvious in view of a webpage and other prior art. The Board instituted IPR. Leading up to the final written decision, the sole dispute focused upon the webpage’s prior art status rather than the substantive merits of obviousness. In the final written decision, however, the Board rejected FanDuel’s argument for obviousness on its substantive merits rather than addressing the webpage’s prior art status.
On appeal, FanDuel argued that the Board violated the APA when, without notice, the Board revisited the substantive merits of FanDuel’s obviousness theory instead of addressing the sole dispute over prior art status. The Federal Circuit disagreed. The court first noted that there is nothing inherently inconsistent about instituting trial and then determining that petitioner did not prove its theory by preponderant evidence. The court then emphasized that a patent owner is not required to rebut (or even respond to) the substantive merits of petitioner’s invalidity theory because such a requirement would be tantamount to impermissibly shifting the burden to the patent owner to defend its claim’s patentability. Thus, the court reasoned that the Board is not bound by its views at institution and may reconsider them even if no additional argument or evidence is made of record after institution. Here, the court determined that FanDuel’s petition framed the issues for the final written decision, FanDuel had notice of these issues, and the patent owner’s choice to not challenge the merits of the obviousness theory in FanDuel’s petition did not limit the issues for the Board to determine. The Federal Circuit then affirmed the Board’s non-obviousness determination, noting that the Board did not have to defer to FanDuel’s unrebutted expert opinion.
Judge Dyk joined the majority in rejecting FanDuel’s argument that the Board violated the APA. However, Judge Dyk dissented from affirming the Board’s non-obviousness determination, asserting error in the Board’s requirement that FanDuel supply a specific motivation to use a claimed look-up table and ordered list when that choice would have been a simple alternative design choice to a skilled artisan.
Preliminary Injunction Denied Because of Failure to Draft Precise Terms that Capture the Intent of the Parties
In Takeda Pharmaceuticals U.S.A., Inc. v. Mylan Pharmaceuticals Inc., Appeal No. 20-1407, the Federal Circuit claims that the scope of a contract term may not be interpreted to render a provision or term meaningless.
In 2016, Takeda Pharmaceuticals U.S.A., Inc. (“Takeda”) filed suit against Mylan Pharmaceuticals Inc. (“Mylan”) for patent infringement based on Mylan’s submission of an Abbreviated New Drug Application (“ANDA”) for a generic version of the drug colchicine. The parties resolved the litigation through a Settlement Agreement and License Agreement (“License Agreement”). The License Agreement allowed Mylan to begin selling its generic colchicine product upon certain events, including “the date that is [a time period] after the date of a Final Court Decision holding that all unexpired claims of the Licensed Patents that were asserted and adjudicated against a third party are either (i) not infringed or (ii) any combination of not infringed and invalid or unenforceable.” Concurrent with its litigation against Mylan, Takeda also pursued patent claims against a third party (“Hikma”) based on its colchicine product. Initially, Takeda asserted eight of the Licensed Patents against Hikma, but voluntarily dismissed with prejudice five of the patents. In December of 2018, the district court granted summary judgment of non-infringement in favor of Hikma on all asserted claims in the three remaining Licensed Patents. The district court entered final judgment of non-infringement and Takeda did not appeal. In October 2019, Mylan notified Takeda of its intent to begin selling its generic colchicine product, per the Licensing Agreement. Mylan subsequently launched its product in November, 2019. Shortly thereafter Takeda filed suit alleging breach of contract and patent infringement related to the Mylan’s marketing and selling of its generic colchicine product. Takeda also filed a motion for a preliminary injunction, seeking to enjoin Mylan from commercially manufacturing, offering to sell, or selling the generic colchicine product. Takeda argued that the Hikma decision did not trigger the provision of the License Agreement allowing Mylan to begin selling its product because the district court only ruled on the three patents still at issue, not the five that were dismissed with prejudice. The district rejected this argument, explaining that the language in the License Agreement was “asserted and adjudicated” not “asserted or adjudicated,” as Takeda’s argument suggested. The district court further explained that, practically speaking, interpreting the clause as Takeda proposed would prevent Mylan from ever relying on the clause because Takeda could always withdraw one patent, or even one claim, to avoid triggering it. Accordingly, the district denied Takeda’s motion for a preliminary injunction, finding that the Takeda failed to show that it was likely to succeed on the merits or that it will suffer irreparable harm. Takeda appealed.
On appeal, Takeda argued the district court erred because its interpretation of the contract language reads out the term “all,” giving effect only to the term “adjudicated.” Takeda argued that because not all claims that were asserted in the case, specifically the five patents that were dismissed, were held invalid, unenforceable, or not infringed, the clause was not triggered. Takeda further argued that the intent of the clause was to limit changes with respect to generic colchicine products, which did not include Hikma’s branded colchicine product. The Federal Circuit rejected Takeda’s arguments. The plain language of the agreement requires a Final Court Decision for all claims that were both asserted and adjudicated. Takeda’s proposed interpretation would render the “adjudication” requirement meaningless. The Federal Circuit further rejected Takeda’s attempt to limit the clause to generic colchicine products as that language is entirely absent from the language of the provision. The Federal Circuit concluded that, when the License Agreement is correctly construed, there can be no dispute that the launch clause was triggered, and agreed with the district court that Takeda was unlikely to succeed on the merits. The Federal Circuit also agreed with the district court that Takeda failed to show that it would be irreparably harmed. Takeda relied exclusively on a clause in the License Agreement stipulating to irreparable harm in the event of a breach. Because the Federal Circuit concluded that it is unlikely that Takeda can show a breach, it found the irreparable harm clause not useful for establishing irreparable harm in the case. Accordingly, the Federal Circuit affirmed the district court’s denial of Takeda’s request for a preliminary injunction.
Judge Newman dissented, arguing that, because the court should effectuate the parties’ intent when interpreting the contract, it would not be reasonable to hold that Takeda would have agreed to this interpretation of the contract.
The Definition of “Half-Liquid” is Half Baked
In Ibsa Institut Biochimique, S.A. v. Teva Pharmaceuticals USA, Inc., Appeal No. 19-2400, the Federal Circuit Summary claims a term may be indefinite when the proposed construction is not supported by the record and the meaning is not reasonably ascertainable from the record.
Teva Pharmaceuticals USA, Inc. sought to market a generic version of a drug sold by IBSA Institut Biochimique, S.A., Altergon, S.A., and IBSA Pharma Inc. (collectively “IBSA”). In response, IBSA sued Teva for infringement of its U.S. Patent No. 7,723,390 (the ’390 patent) in the U.S. District Court for the District of Delaware. The district court found the ’390 patent invalid because the claimed term “half-liquid” was indefinite. IBSA appealed.
Reviewing determinations about legal standards and intrinsic evidence de novo and factual findings based on extrinsic evidence for clear error, the Federal Circuit affirmed the district court’s decision. In particular, the Federal Circuit could not construe “half-liquid” to mean “semi-liquid,” as IBSA had advocated. First, the Federal Circuit determined that the meaning of “half-liquid” was not reasonably clear from the claims. Next, turning to the specification, the Federal Circuit found that language listing “half-liquid” separately from gels and pastes indicated that a “half-liquid” was not necessarily a gel or paste. IBSA’s construction, however, encompassed gels and pastes as “half-liquids.” Looking next at the prosecution history, the Federal Circuit explained that, while an Italian patent – to which the ’390 patent claimed priority – used the word “semiliquido” or “semi-liquid” similarly to the ’390 patent’s use of “half-liquid,” the terms could not have the same meaning in the ’390 patent. The ’390 patent used both the term “half-liquid” and the term “semi-liquid” in its claims. Moreover, differences in language between the certified translation of the Italian application and the ’390 patent suggested that the discrepancy in usage was intentional, implying that the different word choice of “half-liquid” and “semi-liquid” results in a different scope. Finally, turning to extrinsic evidence, the Federal Circuit highlighted the inability of IBSA’s expert witness to define “half-liquid” and the term’s absence from technical dictionaries. Accordingly, the Federal Circuit found no clear error in the district court’s determination that the record did not supply “half-liquid” with a definite meaning and affirmed the judgment.
Improvements to Operation of an Apparatus were Not Abstract
In Xy, LLC v. Trans Ova Genetics, LLC, Appeal No. 19-1789, the Federal Circuit claims directed to improving a method of operating an apparatus may be patent-eligible subject matter.
In 2016, XY brought suit against Trans Ova alleging infringement of seven patents. At the time the suit was filed, an appeal was still pending on a 2012 lawsuit against Trans Ova in which XY had asserted infringement of different patents directed to a similar technology. Trans Ova moved for judgment on the pleadings that the asserted claims were ineligible under § 101, and moved to dismiss three of the asserted patents, arguing that the 2016 infringement allegations for those patents were barred by claim preclusion based on XY’s 2012 lawsuit. The district court granted judgment on the pleadings, holding that the claims were directed to an abstract idea and lacked an inventive concept. The district court also granted the motion to dismiss, finding the claims to be precluded. XY appealed.
The Federal Circuit found that the district court erred by holding the claims abstract and directed to a “mathematical equation that permits rotating multi-dimensional data.” Instead, the Federal Circuit held that the claims improved the method of operating an apparatus to classify and sort particles in two populations in real time, and included a detailed recitation of the means for doing so. The Federal Circuit further explained that, although the claims employed formulas to improve classification and separation of particles, the formulas operated to achieve the improved result of the claimed method only when combined with the specific improvements to the operation of the apparatus (i.e., use of specific detectors and other method limitations). Having determined that the asserted claims were not directed to an abstract idea, the Federal Circuit did not reach Alice step two. Accordingly, the Federal Circuit reversed the district court’s judgment of patent ineligibility.
The Federal Circuit also held that the district court erred in finding claim preclusion. The district court concluded claim preclusion applied because the patents issued before the filing of the 2012 lawsuit, addressed the same or substantially the same subject matter as the previously filed claims, and were directed to a previously accused product or process. The Federal Circuit rejected the district court’s findings, explaining that to determine whether the scope of the 2012 and 2016 lawsuits were “materially the same,” the district court was required to compare the scope of the patent claims asserted in 2016 with the scope of the patent claims asserted in 2012. The Federal Circuit then declined Trans Ova’s invitation to perform this comparison in the first instance. The Federal Circuit vacated the district court’s dismissal and remanded for further proceedings.
PTAB Must Evidence Decision Path During IPR Proceedings
In Alacritech, Inc. v. Intel Corp., Cavium, LLC, Dell, Inc., Appeal No. 19-1467, the Federal Circiut claims that the PTAB’s obviousness determination must meet the Administrative Procedure Act’s requirements to be upheld on appeal.
Intel Corp., et al. petitioned for inter partes review (“IPR”) of a patent owned by Alacritech, Inc. Intel asserted that the challenged claims would have been obvious over the prior art. In a pair of final written decisions, the Patent Trial and Appeal Board (“Board”) found the challenged claims unpatentable as obvious. Alacritech appealed.
On appeal, Alacritech argued that the Board’s analysis was inadequate to support its findings that the asserted prior art taught or suggested the limitations in the patent claims. The Federal Circuit agreed with Alacritech, vacating and remanding the Board’s obviousness determination, while affirming the Board’s decision in all other respects. The Federal Circuit reviewed the adequacy of the Board’s obviousness finding under the Administrative Procedure Act (“APA”) requirement that the Board’s decisions be supported by adequate reasoning and evidence. The Federal Circuit emphasized that the Board’s findings need not be perfect, but must be “reasonably discernable.” Here, the Federal Circuit found the Board dedicated only two paragraphs to the parties’ arguments and, in doing so, “misapprehend[ed] both the scope of the claims and the parties’ arguments.” The Federal Circuit also rejected Intel’s argument that it should prevail because the Board adopted its argument and rejected Alacritech’s arguments. Rather, because the Board’s decision appeared to be untethered to either party’s position, the Federal Circuit declined to infer that the Board had adopted Intel’s position.
Natural Law and Nothing More
In American Axle & Manufacturing v. Neapco Holdings LLC., Appeal No. 18-1763, the Federal Circuit Claims directed to a law of nature, without more, may not be patent eligible.
American Axle & Manufacturing (“AAM”) sued Neapco Holding, LLC for patent infringement for AAM’s patents for improved prop shafts. Both parties filed cross motions for summary judgment on the patent eligibility of independent claims 1 and 22. In evaluating the motions, the district court found that AAM’s claims merely apply Hooke’s Law, an algorithm that describes the relationship between an object’s mass, its stiffness, and the frequency at which the object subsequently vibrates. The District Court therefore held that the claims were not patent eligible under § 101 and granted Neapco’s motion for summary judgment.
AAM appealed the district court’s decision that its claims were ineligible. On review, the Federal Circuit affirmed the district court as to Claim 22, but vacated and remanded the decision as to Claim 1. The Federal Circuit found that Claim 22 defined a goal and achieved that goal through application of a natural law. The Federal Circuit rejected AAM’s argument that it had invented an improved method of tuning because neither established processes nor improved processes for implementing the underlying natural law were claimed. The Federal Circuit concluded in its Alice step 2 analysis that nothing in Claim 22 qualified as an “inventive concept,” because the stated “inventive concept” was nothing more than an assertion that the desired results were an advance. As for Claim 1, the Federal Circuit found that the Claim encompassed tuning variables other than those in Hooke’s Law. In addition, Claim 1 required the additional step of positioning the components in order to effect the claimed method. As a result, the Federal Circuit could not conclude that the Claim was merely directed to Hooke’s Law, and nothing more, and vacated and remanded the decision on Claim 1 for the district court to evaluate this alternative eligibility theory.
Judge Moore dissented, arguing that the Federal Court’s analysis collapsed the two-part Alice/Mayo test into a single step, and expanded the exclusionary power of § 101 well beyond what it was intended to do. The dissent contended that AAM’s claims were not directed to natural law, but rather to a method of manufacturing a drive shaft that merely involved use of a natural law. Judge Moore also argued that the majority created a new test—the nothing more test—for claims directed to a natural law. Finally, Judge Moore argued that even if the majority’s analysis of Alice step 1 was correct, Claim 22 recited a number of inventive concepts articulated in the claims themselves and should have been found patent-eligible in step 2 of the analysis.