Contributors: Knobbe Martens
Federal Circuit Determines Time-Barred Petitioner Joined to an IPR Has Appellate Standing
In Mylan Pharmaceuticals Inc. v. Research Corporation Tech., Appeal Nos. 2017-2088, -2089, -2091, the Federal Circuit held that a party joined to an inter partes review has the right to appeal the Board’s final written decision even if the initial petitioner does not appeal.
Research Corp. Technologies (“RCT”) sued Mylan Pharmaceuticals, Breckenridge Pharmaceuticals, and Alembic Pharmaceuticals (collectively, “Appellants”) for patent infringement in 2013. In 2015, another entity, Argentum Pharmaceuticals, petitioned for inter partes review of RCT’s patent. The Board instituted Argentum’s petition on two of the eight petitioned grounds. Three days after institution, Appellants each filed their own petitions for IPR with concurrent motions for joinder, which is permitted because Section 315(b) states that the one year time bar for IPRs does not apply to requests for joinder. The Board instituted Appellants’ petitions and joined each proceeding with the Argentum proceeding. The Board concluded that none of the challenged claims had been shown to be unpatentable. Appellants appealed, but Argentum did not. The Federal Circuit affirmed the Board’s decision.
RCT challenged whether Appellants had standing to appeal. The Federal Circuit looked to the plain text of Section 315(c), which provides that the Board may join as a party any person who properly files a petition. Next, the Court looked to Section 319, which provides that “[a]ny party to the inter partes review shall have the right to be a party to the appeal.” Thus, the Board had discretion to join Appellants as parties. Once they were joined as parties, they had a statutory right to appeal under 35 U.S.C. § 319.
Additionally, during the rebuttal phase of oral argument, Appellants requested that the court remand in view of the Supreme Court’s decision in SAS Institute, Inc. v. Iancu, 138 S. Ct. 1348 (2018). Even though briefing was complete before SAS issued, the Federal Circuit held that Appellants had waived the issue by waiting six months and presenting it in the rebuttal phase of oral argument.
Federal Circuit Declines to Consider En Banc Whether Venue Can Be Established by Servers in Third-Party Facilities
In In Re: Google LLC, Appeal No. 2018-152, the Federal Circuit elected not to review en banc the issue of whether servers or similar equipment in third-party facilities constitute a regular and established place of business for purposes of determining whether venue is proper under 28 U.S.C. § 1400(b).
SEVEN Networks, LLC sued Google for patent infringement in the Eastern District of Texas. The district court denied Google’s motion to dismiss for improper venue. SEVEN alleged that venue was proper because Google committed acts of infringement in the district, and that Google’s servers, stored in a third-party ISP’s facility, constituted a regular and established place of business. Google petitioned the Federal Circuit for a writ of mandamus directing the district court to dismiss or transfer the case for improper venue. In an unpublished decision, the Federal Circuit found mandamus inappropriate because “it is not known if the district court’s ruling involves the kind of broad and fundamental legal questions relevant to § 1400(b),” and “it would be appropriate to allow the issue to percolate in the district courts so as to more clearly define the importance, scope, and nature of the issue for us to review.” Google unsuccessfully petitioned for a rehearing en banc.
In dissenting from the denial of rehearing, Judge Reyna asserted that mandamus review is part of an appellate court’s “bedrock supervisory duty,” which includes a duty to further the goals of uniformity and predictability – “the cornerstones of a well-functioning patent system.” The dissent analogized this case to In re Cray Inc., 871 F.3d 1355 (Fed. Cir. 2017), where the Federal Circuit granted mandamus to ensure § 1400(b) was not given an expansive construction after TC Heartland LLC v. Kraft Foods Grp. Brands LLC, 137 S. Ct. 1514 (2017). The dissent also pointed to other district court decisions which evidenced growing uncertainty and disagreement among the district court judges as to whether conducting business virtually through servers and similar equipment satisfied the requirements for venue under § 1400(b). The dissent cautioned that the district court’s holding could potentially reestablish nationwide venue for many companies that own and control computer hardware nationwide. Thus, the dissent viewed it as more prudent to answer this venue question now, rather than wait and allow dozens of cases to proceed through motion practice, discovery, claim construction, or even trial before potentially being thrown out by a reversal of a ruling on a motion to dismiss for improper venue.
Federal Circuit Affirms Dismissal, Finds Diagnostic Claims Are Not Patent-Eligible Under § 101
In Athena Diagnostics, Inc. v. Mayo Collaborative Services, Appeal No. 2017-2508, the Federal Circuit ruled that claims reciting only conventional steps to detect a natural law are patent-ineligible under § 101.
Athena Diagnostics (“Athena”) sued Mayo Collaborative Services (“Mayo”) for infringing a patent related to methods for diagnosing neurological disorders by detecting antibodies to MuSK, a membrane protein. The inventors of the patent discovered the association between MuSK antibodies and neurological disorders, and the asserted claims recited steps to detect the antibodies to MuSK. Mayo moved to dismiss, arguing that the asserted claims of the patent are invalid under § 101. The district court granted Mayo’s motion, concluding that the claims were invalid under § 101 for claiming ineligible subject matter.
The Federal Circuit affirmed. The Federal Circuit followed the two-part test set forth by the Supreme Court. First, the Federal Circuit held that the claims were directed to a law of nature, which is the correlation between the presence of naturally-occurring MuSK autoantibodies in bodily fluid and MuSK-related neurological diseases. The Federal Circuit stated that the claimed advance was only in the discovery of a natural law and that the additional recited steps only apply conventional techniques to detect that natural-law correlation. The Federal Circuit also pointed out that the specification of the patent described the claimed steps for observing the natural law as conventional. For the second step, the Federal Circuit held that the claims did not provide an inventive concept sufficient to transform an unpatentable law of nature into a patent-eligible application of the law. The Federal Circuit stated that the steps of the claims not drawn to the law of nature only required standard techniques to be applied in a standard way, as described in the specification. Thus, the Federal Circuit held that the district court correctly concluded that the claims at issue were directed to a natural law and lacked an inventive concept.
Judge Newman dissented, writing that the decision improperly “enlarge[s] the inconsistencies and exacerbate[s] the judge-made disincentives to development of new diagnostic methods.” Judge Newman stated that eligibility should be determined for the claim considered as a whole, and considered as a whole, the claims were directed to new multi-step methods of diagnosing a neurological disorder, not a law of nature.
Article III Standing Is Required to Appeal an IPR Decision
In Momenta Pharmaceuticals, Inc. v. Bristol-Myers Squibb Company, Appeal No. 2017-1694, the Federal Circuit held that an injury-in-fact is required to establish Article III standing for judicial review of agency action, even if a statute permits such review.
Momenta Pharmaceuticals, Inc. (“Momenta”) requested inter partes review (“IPR”) of a patent owned by Bristol-Myers Squibb Company (“BMS”). The patent covers a product that BMS markets under the brand name Orencia®. At the time Momenta petitioned for IPR, it was reportedly attempting to develop a biosimilar counterpart to the Orencia® product. The PTAB sustained patentability of the claims. Momenta appealed to the Federal Circuit.
The Federal Circuit dismissed Momenta’s appeal for lack of standing and mootness. BMS argued that Momenta lacked standing because its proposed product had failed clinical trials and had been withdrawn. Momenta responded that it had not abandoned its intent to produce the biosimilar, and that it was injured by the IPR estoppel statute. However, press releases and SEC filings from Momenta revealed that it had terminated its participation in the development program for the biosimilar. The Federal Circuit held that because of this termination, Momenta had failed to show “an invasion of a legally protected interest” that was “actual or imminent, not conjectural or hypothetical.” Further, IPR estoppel did not create an injury-in-fact because Momenta was no longer engaged in any activity that would give rise to a possible infringement suit. Thus, Momenta lacked standing to appeal. The Federal Circuit also determined that the appeal was moot, because Momenta ceased the potential infringement and thus ended the potential for injury. Therefore, the Federal Circuit dismissed the appeal.
Federal Circuit Reverses Claim Construction that Improperly Imported Process Limitation into Product Claim
In Continental Circuits LLC v. Intel Corporation, Appeal No. 2018-1076, the Federal Circuit reversed a claim construction which read a process limitation into a product claim where the patentee did not clearly and unmistakably disavow claim scope and also did not make clear that the process was an essential part of the claimed invention.
Continental sued Intel for patent infringement, asserting claims to a dielectric material. The district court read a limitation into the claims to require that the dielectric material be made via a repeated etching process. Based on this construction, the parties stipulated to non-infringement and the court entered judgment accordingly. Continental appealed, challenging only the district court’s claim construction.
On appeal, the Federal Circuit agreed with Continental that the district court erred in limiting the claims to require a repeated etching process. The Federal Circuit noted that the plain language of the claims was not limited to a repeated etching process. The Federal Circuit concluded that the statements in the specification did not rise to the level of a clear and unmistakable disclaimer or disavowal of claim scope. The statements in the specification simply described a preferred method and did not amount to a clear disavowal. Similarly, with respect to the prosecution history, the Federal Circuit found that an expert’s declaration responding to indefiniteness and written description rejections was not a clear disavowal. Statements on a particular claim term to overcome indefiniteness and lack of written description is not the same as a disavowal. The Federal Circuit also noted that because it was not clear that the repeated etching process was “an essential part of the claimed invention,” it was improper to read the process limitation into the product claims. The Federal Circuit vacated the judgment of non-infringement and remanded for further proceedings.
Federal Circuit Reverses Summary Judgment of Lack of Written Description Where There Was Material Dispute as to Whether Inventors Possessed an Alternate Embodiment Briefly Discussed in the Specification
In CenTrak, Inc. v. Sonitor Technologies, Inc., Appeal No. 2017-2510, the Federal Circuit reversed summary judgment of lack of written description where the complexity and predictability of a claimed embodiment were disputed. Additionally, the Federal Circuit explained that a final assembler can be liable for making an infringing product even if it does not make each individual component element.
CenTrak sued Sonitor for infringement of its patent relating to systems for locating and identifying portable devices using ultrasonic base stations, and Sonitor moved for summary judgment of invalidity for lack of written description and non-infringement. The district court granted summary judgment of invalidity for lack of written description, finding that the specification primarily disclosed a system based on infrared (“IR”) technology and merely contemplated the claimed ultrasound-based system. Likewise, the district court granted summary judgment of non-infringement, finding that Sonitor did not “make” an infringing assembly by performing installations. CenTrak appealed.
The Federal Circuit found genuine issues of material fact and thus reversed and remanded the district court’s grant of summary judgment of invalidity and non-infringement. The specification’s relative lack of attention to its ultrasonic embodiment compared to its IR embodiment did not show that the inventors failed to constructively reduce to practice a system with ultrasonic components. Further, the district court erred in failing to credit testimony from CenTrak’s expert and a named inventor that the differences between IR and ultrasound were incidental to carrying out the claimed invention. Regarding infringement by final assembly, the Federal Circuit explained that a final assembler can be liable for making an infringing combination even if it does not make each individual component element. Because the record contained evidence that Sonitor oversaw the installation of the infringing product and configured the final product, the district court erred in ruling that there was no genuine issue of material fact.
Representation of an Indirect Subsidiary of a Parent Corporation Can Create a Conflict of Interest for Representation of a Party Adverse to a Different Indirect Subsidiary
In Dr. Falk Pharma GmbH v. Generico, LLC, Appeal No. 2017-2312, the Federal Circuit held that a firm’s representation of an indirect subsidiary of a parent corporation created a disqualifying, concurrent conflict of interest for representation of a party adverse to a different indirect subsidiary of the parent corporation, in view of the Rules of Professional Conduct, and the signed engagement letter between the law firm and the parent corporation.
Katten Muchin Rosenman LLP represents Bausch & Lomb Inc. in an ongoing trademark litigation. Mylan is involved in several ongoing actions against Valeant and Salix, including three appeals before the Federal Circuit. While these actions were still pending, Mylan’s counsel left their firm and joined Katten. Bausch and Salix are both indirect subsidiaries of Valeant. Following Mylan’s counsel’s move, Valeant and Salix moved the Federal Circuit to disqualify Katten as counsel for Mylan based on its concurrent representation of Valeant’s indirect subsidiary, Bausch.
The Federal Circuit, applying regional circuit law and the Model Rules of Professional Conduct, found that Katten’s representation of Bausch constituted a concurrent conflict of interest, and granted the motion to disqualify. Although representation of a corporation does not necessarily impart a conflict to all its corporate affiliates, the Federal Circuit clarified that an affiliate can be considered a client by either express agreement or when affiliates are so interrelated that representation of one constitutes representation of all. The Federal Circuit found that Katten’s Engagement Letter with Bausch, and the Outside Counsel Guidelines incorporated therein, created an ongoing attorney-client relationship between Katten, Valeant, and its subsidiaries Salix and Bausch. Furthermore, the Federal Circuit adopted the Second Circuit’s factors when considering corporate interrelatedness, and found that Valeant, Bausch and Salix have sufficient operational commonality and sufficient financial dependence to give rise to a corporate affiliate conflict. Finally, the Federal Circuit rejected Katten’s reliance on an ethical wall as doing too little, too late. Thus, the Federal Circuit granted the motion to disqualify Katten.
Federal Circuit Affirms Principle that Assessment of Factual Sufficiency of a Complaint Must Ordinarily be Undertaken Without Resort to Matters Outside the Pleadings
In Coda Development v. Goodyear Tire & Rubber, Appeal No. 2018-1028, the Federal Circuit held that the district court committed a procedural error that led it to improperly conclude that the Plaintiffs’ claims for correction of inventorship were not plausible.
Coda’s pleading alleged that its CEO, Mr. Hrabel, invented a certain self-inflating tire (“SIT”) technology. Coda entered an NDA with Goodyear, and the parties met twice to discuss the technology. Following the meetings, Goodyear stopped communicating with Coda. Goodyear then filed its own patent application directed to SIT technology, without naming Mr. Hrabel as an inventor. Coda and Hrabel sued to correct inventorship of the SIT patents and for trade secret misappropriation. Goodyear moved to dismiss under Rule 12(b)(6). Goodyear argued that Plaintiffs failed to plead facts supporting Hrabel’s conception of the claimed inventions. Goodyear also argued that Plaintiffs’ trade-secret claim was time-barred because Plaintiffs should have known of Goodyear’s published patent application more than four years before filing suit. And for the first time in its reply brief, Goodyear pointed to a previously published article by Hrabel and argued that the article disclosed everything that Hrabel claimed to have invented. The district court denied Plaintiffs’ motion to strike the article and without explanation denied Plaintiffs’ request to file a sur-reply to address the article. The district court determined Plaintiffs’ correction of inventorship claims were implausible and dismissed them. The district court also dismissed Plaintiffs’ trade secret claim as time-barred. Plaintiffs moved to amend the judgement under FRCP 59(e) and also for leave to file an amended complaint with additional factual allegations, but the district court denied the motions stating that the factual details should have been in the original complaint.
The Federal Circuit vacated the decision and remanded. On correction of inventorship, the Federal Circuit held that the pleaded facts plausibly stated a claim. The Federal Circuit also held that the district court improperly considered the 2008 Hrabel article without either converting Goodyear’s motion into one for summary judgement or giving Plaintiffs an opportunity to respond. While a district court may judicially notice matters outside the pleadings on a Rule 12(b)(6) motion, the facts may not be subject to reasonable dispute. Whether the 2008 Hrabel article actually disclosed novel trade secrets was a reasonably disputed factual issue. The Federal Circuit also held that the district court erred in dismissing the trade-secret-misappropriation claim. The issue of whether Plaintiffs should have discovered their claim earlier was a fact-specific inquiry that could not be resolved at the pleading stage. The Federal Circuit also commented that leave to amend should be freely given, and that denying Plaintiffs an opportunity to amend in this case was troubling and improper.
A State Entity Waives Sovereign Immunity Against Counterclaims and Defenses to Patent Infringement by Filing a Patent Infringement Suit
In University of Florida Research Foundation, Inc. v. General Electric Co. et al., Appeal No. 2018-1284, the Federal Circuit held that when Plaintiff, a state entity, sued for patent infringement, it waived sovereign immunity as to all defenses, including subject-matter eligibility under Section 101.
The University of Florida Research Foundation (“UFRF”) sued General Electric (“GE”) for patent infringement. GE asserted the claims were directed towards ineligible subject matter under Section 101. UFRF argued that it had not waived sovereign immunity and that the claims were patent eligible under Section 101. The district court ruled for GE on both issues. UFRF appealed to the Federal Circuit.
The Federal Circuit held that suing for patent infringement waived sovereign immunity for all relevant defenses and counterclaims. The only issue was whether a Section 101 challenge is a defense to patent infringement. UFRF argued that Section 282(b) sets forth all defenses to patent infringement and does not include a Section 101 challenge. The Federal Circuit has previously held otherwise, but UFRF argued that the Supreme Court’s holding in SCA Hygiene effectively overruled those cases. The Federal Circuit disagreed because SCA Hygiene concerned laches and did not affect a Section 101 defense. Regardless, both the Federal Circuit and the Supreme Court have long treated Section 101 challenges as a defense to patent infringement. Thus, UFRF waived sovereign immunity as to the Section 101 challenge by suing for patent infringement.
On the merits, the Federal Circuit determined that the claims were directed to an abstract idea of “collecting, analyzing, manipulating, and displaying data.” The court characterized the patent as “a quintessential ‘do it on a computer’ patent” that acknowledged each of the claimed steps had previously been performed manually. The court also determined the claims did no more than “simply instruct the practitioner to implement the abstract idea . . . on a generic computer.” Thus, the Federal Circuit held the claims ineligible under Section 101.