The Board’s Final Written Decision Must Address All Grounds for Unpatentability Raised in a Petition for Inter Partes Review
In Adidas AG v. Nike, Inc., Appeal Nos. 2018-1180, 2018-1181, the Federal Circuit held that the Supreme Court’s decision in SAS Institute Inc. v. Iancu requires the Board to address all grounds for unpatentability raised in the IPR petition in its final written decision.
Adidas petitioned for inter partes review (IPR) of two patents owned by Nike. Each petition challenged the validity of the asserted claims on the same two grounds. Although both grounds asserted that the claims were obvious, the two grounds were based on two different reference combinations. The Board instituted IPR on all challenged claims, but on only one of the grounds. The Board’s final written decisions found all claims patentable over the prior art relied upon in the instituted ground raised in the petition. However, the final written decisions did not address the patentability of the challenged claims in view of the uninstituted ground. Adidas appealed.
During the pendency of the appeal, the Supreme Court decided SAS Institute, Inc. v. Iancu, which held that IPRs “must proceed ‘in accordance with in or conformance to the petition.” In view of this holding, Adidas filed a motion for remand to the Board for consideration of the second, uninstituted ground. Nike opposed the motion, arguing that SAS only requires the Board to address all challenged claims, not all grounds for unpatentability.
The Federal Circuit found that the SAS decision requires consideration of all the grounds originally raised in the petition if the proceedings are instituted. The Court noted that SAS held “[n]othing suggests the Director enjoys a license to depart from the petition and institute a different inter partes review of his own design.” The panel found that there was “no reason to treat this case differently” from the Federal Circuit’s other recent holdings which require the Board’s final written decision to address all claims raised in an IPR petition. Accordingly, the Court remanded the case to the Board to “promptly issue a final written decision as to all grounds raised in Adidas’s petitions.”
The Entire Market Value Rule of Damages Requires a Patentee to Prove the Unpatented Features Did Not Influence Consumer Demand
In Power Integrations, Inc. v. Fairchild Semiconductor, Appeal Nos. 2016-2691, 2017-1875, the Federal Circuit held that in order to rely on the entire market value rule to calculate damages, a patentee must prove that the unpatented features in the accused product did not influence consumer demand.
Power Integrations sued Fairchild for infringement of two patents. In the district court, the jury found that Fairchild infringed the patents at issue, and awarded damages of roughly $140 million. The damages verdict rested on testimony relying solely on the entire market value rule. Fairchild appealed, challenging the infringement decisions and the damages award.
The Federal Circuit first affirmed the district court’s judgments of infringement, but vacated the award of damages. With respect to damages, the Federal Circuit reiterated that the entire market value rule allows for the recovery of damages based on the value of an entire multi-feature apparatus only when the patented feature constitutes the basis for consumer demand. Conversely, when a product contains other valuable features, the patentee must prove that those other features did not influence purchasing decisions. Here, the Federal Circuit found that the accused products had other valuable features and that Power Integrations did not meet its burden to show that these features did not affect consumer demand. Thus, the Federal Circuit vacated the award of damages and remanded the case for further proceedings.
Experimental Use to Determine if the Invention Works for its Intended Purpose Does Not Constitute Public Use
In Polara Engineering Inc v. Campbell Company, Appeal Nos. 2017-1974, 2017-2033, the Federal Circuit held that the public-use bar is not triggered by experimental use that tests the claimed features to determine if the invention works for its intended purpose, and that a district court must fully explain its decision to enhance damages following a willful infringement finding.
Polara sued Campbell for infringement of a patent directed towards push-button crosswalk stations. Campbell argued the patent was invalid because Polara had tested prototypes prior to the critical date at public intersections. The jury found the asserted claims were not invalid and that Campbell had willfully infringed. The district court denied Campbell’s post-trial motion for judgment as a matter of law and granted Polara’s motion to enhance damages. Campbell appealed.
The Federal Circuit held that there was substantial evidence to support the jury’s finding of experimental use. The public-use bar is triggered where, prior to the critical date, the invention is in public use and ready for patenting. The bar is not triggered where an inventor tests the claimed features to determine if the invention works for its intended purpose, even if the testing occurs in public. Here, the Federal Circuit found that Polara needed to test the claimed features of the devices at actual crosswalks of different configurations to ensure they were safe.
The Federal Circuit also held that substantial evidence supported the jury’s finding of willful infringement. However, the district court erred by not adequately explaining its decision to enhance damages. The district court did not even mention the public-use defense, which the Federal Circuit held was a “close question.” Thus, the district court erred by either not considering the public-use defense or determining that the defense was so weak it was not worth mentioning. The Federal Circuit reversed and remanded with instructions to provide a more complete explanation of its decision on whether to enhance damages, including a discussion of the public-use defense.
Voluntary Dismissal of Trade Secret Claims Under Texas Law To Pursue Claims Under Another State’s Law Does Not Make Defendant a “Prevailing Party” Under the Texas Theft Liability Act
In Raytheon Company v. Indigo Systems Corporation, FLIR Systems Incorporated, Appeal Nos. 2016-1945, 2016-2050, the Federal Circuit found that the Texas Theft Liability Act (TTLA), which awards attorney’s fees to the prevailing party, does not permit recovery of attorney’s fees for the dismissal of claims under Texas law in favor of proceeding under California law because it was not done to avoid an adverse ruling.
Raytheon sued Indigo Systems and FLIR Systems (collectively, “Indigo”) in the Eastern District of Texas alleging trade-secret misappropriation under both Texas and California law. After the Federal Circuit remanded the case, Raytheon amended its complaint and asserted all 31 trade secret claims under California law only. The jury ruled in Indigo’s favor on all trade secret claims and the district court entered a final judgement in favor of Indigo. Raytheon moved for judgement as a matter of law with regard to two trade secrets and requested a new trial, while Indigo filed a motion for attorney fees under the Texas Theft Liability Act (TTLA). All motions were denied and both parties appealed.
The Federal Circuit found that while two of Raytheon’s methods for producing equipment for infrared technology were trade secrets, the record held substantial evidence to demonstrate that Indigo did not misappropriate the trade secrets. Since Raytheon failed to establish its entitlement to judgement as a matter of law on its trade-secret misappropriation claim, it also failed to establish its entitlement to a new trial.
Despite upholding the ruling in favor of Indigo, the Federal Circuit still refused Indigo’s request for attorney’s fees under the TTLA. Under the TTLA, the prevailing party is entitled to court costs and reasonable and necessary attorney fees. In order to recover the fees, however, the claimant must establish: (1) it actually prevailed on the merits of a TTLA claim, (2) the other party dismissed the TTLA claim with prejudice, or (3) the other party dismissed the TTLA claim without prejudice to avoid an adverse ruling on the merits. The Federal Circuit first determined that Indigo was not a prevailing party under the TTLA claim because the trade secret claims were decided under California law. The Federal Circuit then found that even though Raytheon dismissed the TTLA claims without prejudice, it did not do so to avoid an adverse ruling. Further, all parties understood that Raytheon was going to pursue its trade secret laws under either California or Texas law and Raytheon made its decision after additional discovery. Accordingly, the Federal Circuit affirmed the district court’s denial of attorney fees.
Materials Identified in Federal Register and Available Online for Two Months Before the Critical Date of the Patent-at-Issue Were Printed Publications under 102(b)
In Jazz Pharmaceuticals, Inc. v. Amneal Pharmaceuticals, LLC, Appeal Nos. 2017-1671, -1673, -1674, -1675, -1676, -1677, -2075, the Federal Circuit found references were sufficiently accessible to the public to constitute printed-publication prior art, even though they were not searchable or indexed, because the materials were located on a publicly available website, specific instructions on how to access the materials were provided, the materials were available for at least two months before the critical date of the patents at issue, and there was no reasonable expectation that the materials would remain confidential.
Amneal Pharmaceuticals, LLC (“Amneal”) requested Inter Partes Review of several patents owned by Jazz Pharmaceuticals, Inc. (“Jazz”). The patents at issue were directed to a drug distribution system for tracking sensitive drug prescriptions (i.e. drugs that can be abused). A FDA advisory committee meeting on risk management issues associated with one of Jazz’s sensitive drugs was announced in a Federal Register Notice. The notice included a hyperlink to the FDA website where meeting minutes, transcripts, slides and other materials were posted. Jazz argued that these materials were not sufficiently accessible to the public to constitute prior art. The PTAB disagreed and determined that the materials were publicly accessible because a person of ordinary skill in the art would have been familiar with the Federal Register, motivated to look for notices related to drug distribution, safety, or abuse prevention, and capable of locating the notice and the materials. The Board determined that certain claims in Jazz’s patents at issue were obvious and relied on the materials on the FDA website as prior art. Jazz appealed.
The Federal Circuit affirmed the Board’s decision. The Federal Circuit found that the materials were publicly accessible to persons of ordinary skill in the art. The FDA announced the meeting through a notice in the Federal Register. The meeting was open to the public. The notice included a hyperlink to the FDA website where materials were posted before the meeting and the meeting minutes, transcripts, and slides were posted after the meeting. The notice provided specific instructions on how to access the meeting materials on the website. Further, the materials were available on the website for at least two months before the critical date of the patents at issue, and the materials were distributed via public-domain sources so there was no expectation that the materials would remain confidential. Jazz argued that the materials were not indexed or searchable; however, the Federal Circuit held that 102(b) does not require indexing or searchability for a reference to qualify as a printed publication. Moreover, the Federal Circuit found that the Federal Register is indexed. Additionally, the Federal Circuit found that the Board did not need to find that specific persons actually received or examined the materials. The Federal Circuit held that substantial evidence supported the Board’s finding that the materials were publicly accessible to persons of ordinary skill in the art exercising reasonable diligence before the critical date of the patents in suit, and therefore qualified as printed publications under 102(b).
Federal Circuit Finds Aveed Composition Not Inherently Disclosed by Prior Art Reference that Describes a Composition’s Performance but Not the Formulation
In Endo Pharmaceuticals Solutions v. Custopharm Inc., Appeal No. 2017-1719, the Federal Circuit held that a prior art reference does not inherently disclose the elements of a claim limitation if the prior art describes the performance of the elements but does not include a complete description of the elements.
Custopharm Inc.’s (“Custopharm”) predecessor-in-interest submitted an Abbreviated New Drug Application for FDA approval to market a generic version of Endo Pharmaceuticals Solutions, Inc.’s (“Endo”) drug Aveed®, a testosterone undecanoate (TU) intramuscular injection. Bayer owns the two patents listed in the Orange Book for Aveed®. Endo and Bayer sued Custopharm for infringement of the two patents. Plaintiffs asserted only two claims, one from each patent, and Custopharm stipulated to infringement. The district court held a four day bench trial on invalidity, and the district court determined that the asserted claims were not invalid as obvious. Custopharm appealed.
The patents-in-suit disclosed three primary elements: (1) 750 mg dosage of TU; (2) a 40% castor oil and 60% benzyl benzoate vehicle; and (3) a specific injection schedule. First, regarding the 750 mg dosage of TU, Custopharm noted that the American Association of Clinical Endocrinologists (AACE) Guidelines stated that patients in prior art clinical studies were being overdosed based on its identified normal testosterone levels. Therefore, Custopharm argued a skilled artisan would have been motivated to reduce the dosages identified in prior art. The Federal Circuit rejected this argument because the FDA Guidelines were “the most prevalently applied guidelines in clinical practice” and, under those guidelines, the testosterone levels in the prior art clinical studies would have been deemed normal. Indeed, the prior art clinical studies and the patents-in-suit cited the FDA Guidelines. Also, the Court reasoned that Custopharm’s overdose theory “improperly assumes that the only solution to overdosed patients is to reduce dosage rather than extending the injection intervals.”
As to the second element, Custopharm argued that the vehicle formulation was inherently disclosed because the prior art provides a “detailed recitation” of the composition’s pharmacokinetic performance, and it was later revealed that the same formulation identified in the patents-in-suit was used by the authors of the prior art. Custopharm argued that a skilled artisan could derive the formulation based on its pharmacokinetic performance. The Federal Circuit rejected this argument, and noted that “Custopharm’s own opening brief does not argue that the pharmacokinetic performance . . . can only be attributed to the claimed vehicle formulation.” Further, there were many potential co-solvents in the prior art so it would not have been obvious that the prior art authors chose this particular formulation.
As to the third element, Custopharm argued that a skilled artisan would have recognized that patients injected with 1000 mg TU as disclosed in the prior art were being overdosed and, therefore, the claimed injection schedule would have been obvious. The Federal Circuit rejected this argument, in part, because it was predicated on Custopharm’s already rejected overdose theory.
Use of “i.e.” in Specification Signals Intent to Define a Word
In TF3 Limited v. Tre Milano, LLC, Appeal No. 2016-2285, the Federal Circuit held that a claim construction was not reasonable where it extended the breadth of the claims beyond what was described in the specification.
Tre Milano requested Inter Partes Review of a patent owned by TF3. The patent at issue describes a hair styling device that automates curling. Tre Milano argued that the claims at issue were anticipated by two references describing hair curling devices. Based on the PTAB’s broad construction of certain claim terms, the PTAB found the claims at issue to be anticipated.
The Federal Circuit reversed the PTAB’s decision and noted that a claim construction under the broadest reasonable interpretation standard is not reasonable where it contradicts the specification. The Federal Circuit found error with the Board’s assertion that the abbreviation “i.e.” in the specification did not denote a limitation. The Federal Circuit reiterated that the usage of “i.e.” “signals an intent to define the word to which it refers.” The Federal Circuit found that the claim construction adopted by the Board impermissibly broadened the claims to read on the prior art and was contrary to the clear description in the specification. The Federal Circuit found that the PTAB’s determination of anticipation was based on an improper enlargement of the claims. The device described in the patent at issue was in fact different from the hair styling devices in the prior art.
Federal Circuit Rejects Limitation Imported from Specification Where There Was No Evidence that Limitation Was Important, Essential, or Critical to the Invention
In Blackbird Tech LLC v. ELB Electronics, Inc., Appeal No. 2017-1703, the Federal Circuit held that a limitation in the specification should not be imported into a claim when there is no evidence that the limitation is important, essential or critical.
Blackbird Tech LLC (“Blackbird”) sued ELB Electronics (“ELB”) for infringement of a patent directed to retrofitting existing light fixtures. The district court construed the term “attachment surface” to require the “attachment surface” to be secured to the ballast cover in the existing light fixture. Following claim construction, Blackbird stipulated to noninfringement, the district court entered judgment in favor of ELB, and Blackbird appealed.
The Federal Circuit found that the plain language of the claim does not require the “attachment surface” to be secured to the ballast cover. Although the specification disclosed an embodiment securing the “attachment surface” to the ballast cover, there was no evidence that such a limitation was important, essential, or critical to the invention. Importantly, a limitation requiring that the attachment surface be secured to the ballast cover was removed during prosecution, indicating to a person of skill that a fastening mechanism securing the “attachment surface” to the ballast cover is not required by the claim. Moreover, the Federal Circuit explained that, as an apparatus claim, reciting how the lighting apparatus is installed to achieve its “retrofit” is not necessary. Accordingly, the Federal Circuit adopted Blackbird’s construction, vacated the district court’s entry of judgment of noninfringement, and remanded for further proceedings.
Judge Reyna dissented, reasoning that in the context of the specification and limiting preamble, the claim implicitly requires that the “attachment surface” be secured to the ballast cover to achieve the retrofit function. Moreover, Judge Reyna argued that the majority’s construction may render the patent invalid for lack of written description and enablement.
Tribal Sovereign Immunity Does Not Shield Patents from Inter Partes Review
In Saint Regis Mohawk Tribe v. Mylan Pharmaceuticals Inc., Appeal Nos. 2018-1638, -1640, -1641, -1642, -1643, the Federal Circuit held that tribal sovereign immunity does not shield patents owned by Indian tribes from inter partes review.
Generic drug manufacturers petitioned for IPR of Allergan’s patents relating to the dry-eye treatment Restasis. The Board instituted the IPR, but before the scheduled hearing, Allergan assigned the Restasis patents to the Saint Regis Mohawk Tribe. The Tribe moved to terminate the IPR on the basis of sovereign immunity, and Allergan moved to withdraw from the proceedings. The Board denied both motions, and the Tribe and Allergan appealed.
The Federal Circuit affirmed. The Court noted that immunity generally does not apply where the federal government acts through an agency to engage in an investigative action or to pursue an adjudicatory agency action. However, in view of the Supreme Court’s decision in Federal Maritime Commission v. South Carolina State Ports Authority, the Court recognized that immunity may apply in adjudicative proceedings brought against a sovereign by a private party, where such proceedings are virtually indistinguishable from civil litigation.
The Court held that tribal sovereign immunity cannot be asserted in an IPR because an IPR is more like an agency enforcement action than a civil suit brought by a private party. First, the Director, a federal official, has broad discretion to decide whether to institute review. Thus a private party cannot unilaterally hale a sovereign before the Board. Second, once an IPR has been initiated, the Board may continue review even if the petitioner chooses not to participate, and the Board may participate in an appeal even if the petitioner drops out. Third, there are substantial differences between IPR procedure and the Federal Rules of Civil Procedure. Fourth, an IPR serves the same basic purposes as an inter partes reexamination, and the Tribe acknowledged during oral argument that sovereign immunity would not apply to inter partes reexamination.
Federal Circuit Finds Claims Directed to Displaying Information in Non-Overlapping Way to Be Patent Ineligible
In Interval Licensing LLC v. AOL, Inc., Appeal Nos. 2016-2502, -2506, -2507, the Federal Circuit held that patent claims were directed to an abstract idea where they broadly recited a result without defining how the result is achieved other than through implementation of generic computer functions.
In an earlier Federal Circuit decision, the Court vacated a judgment of noninfringement on four asserted patent claims. On remand, the district court held that those four claims were directed to patent-ineligible subject matter under § 101. On a second appeal, the Federal Circuit affirmed. The claims were directed to an abstract idea: presenting two sets of information, in a non-overlapping way, on a display screen. The claims were result-centric. The patent did not explain how the claimed functionality was to be accomplished. The claimed instructions were recited at a high level of generality and did not impose meaningful limitations that would improve a computer as a tool.
Judge Plager concurred in the decision “given the current state of the law.” But he wrote separately to dissent from the court’s continued application of what he called an “incoherent body of doctrine” that “renders it near impossible to know with any certainty whether the invention is or is not patent eligible.”
Specifications Must Enable All Claim Permutations to Be Valid for Enablement
In Trustees Of Boston University v. Everlight Electronics Co., Appeal Nos. 2016-2576, -2577, -2578, -2579, -2580, -2581, -2582, -2591, -2592, -2593, -2594, -2595, the Federal Circuit held that a patent claim having multiple permutations was not enabled because one permutation was not enabled.
Boston University (“BU”) sued Everlight and others for allegedly infringing a BU patent. The patent related to the preparation of certain films used to make blue LEDs. The court construed the claim at issue to encompass six permutations for how various layers could be formed. Defendants argued the claim was not enabled because the specification did not adequately teach one permutation. The jury found the patent valid and infringed and the district court denied Defendant’s motion for judgment as a matter of law. Defendants appealed.
The Federal Circuit reversed and held the claim at issue was invalid for lack of enablement. The Federal Circuit acknowledged the parties’ agreement that five of the six claim permutations were enabled and that the specification need not “expressly spell out every possible iteration of every claim.” However, the Federal Circuit held that, “[t]o be enabling, the specification… must teach those skilled in the art how to make and use the full scope of the claimed invention without ‘undue experimentation.’” The Federal Circuit found that the sixth permutation was either impossible or would have required undue experimentation. Thus, the Federal Circuit held the claim was invalid for lack of enablement because enabling five out of six permutations was not sufficient.
Weak Secondary Considerations May Be Insufficient to Overcome Strong Showings of Obviousness
In ZUP, LLC. v. Nash Manufacturing, Inc., Appeal No. 2017-1601, the Federal Circuit held that the weak showing of secondary considerations presented by the patent holder was insufficient to create a genuine dispute of fact sufficient to overcome the strong showing of obviousness.
ZUP sued Nash for infringement of a patent related to a water recreation board. Nash moved for summary judgment, arguing that the patent was obvious over the prior art. The district court found the prior art disclosed all of the claimed elements, and one skilled in the art would have been motivated to combine them to improve rider stability when changing positions on the board. The district court dismissed ZUP’s evidence of secondary considerations as too weak. Thus, the district court granted Nash’s motion and ZUP appealed.
The Federal Circuit affirmed. The Federal Circuit concluded there was no genuine dispute as to motivation to combine because the prior art disclosed all of the claimed elements and a consistent desire for riders to change positions. As a result, one skilled in the art would be motivated to combine the elements to make it easier to change positions. There was also no genuine dispute as to secondary considerations because the differences between the claimed invention and the prior art were minimal and others had already achieved the goal of “helping users maneuver between positions on a water recreational board.” Thus, the Federal Circuit held the “weak evidence of secondary considerations presented here simply cannot overcome the strong showing of obviousness.”
Judge Newman dissented, arguing that a prima facie obviousness determination must be based on all four Graham factors. Judge Newman argued that the majority improperly based its prima facie determination on the first three Graham factors and then treated the fourth factor (secondary considerations) solely as rebuttal evidence.
USPTO Is Not Entitled to Attorneys’ Fees when Decisions Are Challenged Pursuant to 35 U.S.C. § 145
In NantKwest v. IANCU, Appeal No. 2016-1794, the Federal Circuit held en banc that 35 U.S.C. § 145 does not require applicants to pay the attorneys’ fees of the United States Patent and Trademark Office (“USPTO”) when challenging an adverse decision of the USPTO in district court.
NantKwest filed a complaint against the Director of the United States Patent and Trademark Office (“USPTO”) in the U.S. District Court for the Eastern District of Virginia challenging, pursuant to 35 U.S.C. § 145 (“Section 145”), the USPTO’s rejection of its patent application. After prevailing on the merits, the USPTO filed a motion for reimbursement of the “expenses of the proceedings,” including attorney’s fees. The USPTO made this request pursuant to the final sentence of Section 145, which reads “[a]ll the expenses of the proceedings shall be paid by the applicant.” The district court denied the USPTO’s motion with respect to attorneys’ fees, citing the American Rule, which provides that each party pay its own attorney’s fees regardless of result. The USPTO appealed the denial of its motion to recover attorneys’ fees, and a divided panel of the Federal Circuit reversed the district court’s judgment, finding that the language of Section 145 justified a deviation from the American Rule. The Federal Circuit voted sua sponte to hear the appeal en banc and vacated the panel’s judgment.
The Federal Circuit found that the American Rule necessarily applies because Supreme Court precedent dictates that the American Rule is the starting point whenever a party seeks to shift fees from one side to the other in adversarial litigation. Having concluded that the American Rule applies, the Federal Circuit also found that Section 145 lacked the specific and explicit congressional authorization regarding attorneys’ fees required to displace the American Rule.
Accordingly, the Federal Circuit affirmed the district court’s denial of the USPTO’s motion to recover attorney’s fees.