Source: https://www.mwe.com/insights/ip-update-august-2019/
Timestamp: 2020-04-06 12:47:35
Document Index: 113376983

Matched Legal Cases: ['§ 101', '§ 101', '§ 101', '§ 101', '§ 101', '§ 143', '§ 1400', '§ 1400', '§ 285']

IP Update, Vol. 22, No. 8 - McDermott Will & Emery
Fractured Federal Circuit Maintains Ineligibility of Di...
For Simple, Predictable Tech, Undisclosed Variations Ma...
Incomplete Hybridization: Lack of Enablement Found Wher...
Mismatch Between Claims and Specification Leads to Inva...
Accessibility, Not Access, Is Proper Legal Touchstone f...
Retroactive Application of IPRs to Pre-AIA Patents Is N...
Clear Disavowal in Specification Can’t Be Remedied by...
Doctrine of Equivalents – It’s Over Before It Begin...
Narrow Claim Construction Is Out of Sync with Broad Int...
Unique Procedural Posture Leads to No Sanctions in Friv...
Timeframe of Willful Infringement a Factor when Conside...
Uncorroborated Inventor Testimony Cannot Establish Earl...
Keep on Truckin’: Aesthetic Functionality Has No Part...
PTAB: Lawyers Permitted to Confer with Witnesses to Pre...
That’s All He Wrote: Copyright Owners No Longer Enjoy...
Intellectual Property Intellectual Property Antitrust Technology Intellectual Property Life Sciences
Intellectual Property Patent Litigation Trademark Counseling
PATENTS / SECTION 101 (ELIGIBILITY)
The US Court of Appeals for the Federal Circuit found claims directed to using data from a check to credit a merchant’s account before scanning the check to be subject matter ineligible under 35 USC § 101 as reciting an abstract idea. Solutran, Inc. v. Elavon, Inc., Case Nos. 19-1345, -1460 (Fed. Cir. July 30, 2019) (Chen, J).
Solutran owns a patent directed to a system and method for processing paper checks. The patent explains that in the past, the payee would transport the check to her own bank to be read and processed, then the payee’s bank would transport the check to the payor’s bank, where it was again read and processed. At this point, the payor’s bank would debit the payor’s account and transfer the money to the payee’s bank, which would credit the payee’s account. Solutran’s invention purports to improve on this process by providing a system and method of electronically processing checks in which (1) “data from the checks is captured at the point of purchase,” (2) “this data is used to promptly process a deposit to the merchant’s account,” (3) the paper checks are moved elsewhere “for scanning and image capture,” and (4) “the image of the check is matched up to the data file.” Solutran alleged that the claimed method was an improvement over the prior art because it allowed merchants to get their accounts credited sooner, without having to wait for the check scanning step.
Solutran sued U.S. Bank alleging infringement of its patent. After answering, U.S. Bank filed a motion for summary judgment, arguing that the claims were directed to the abstract idea of delaying and outsourcing the scanning of paper checks. The district court denied the motion, finding that the claims were not directed to an abstract idea. In reaching its decision, the district court was persuaded by a Patent Trial and Appeal Board (PTAB) decision in a previous covered business method review of the patent at issue. The PTAB case focused on obviousness (the eligibility issue having been determined at institution), and the Federal Circuit affirmed the PTAB on the obviousness issue. In the instant case, the district court relied on the PTAB’s reasoning that the basic, core concept of the claim is a method of processing paper checks, which is more akin to a physical process than an abstract idea. The district court also found that the claims recited an inventive concept under step two of Alice and that the claims passed muster under the machine-or-transformation test. U.S. Bank appealed.
The Federal Circuit reversed, concluding that “the claims are directed to the abstract idea of crediting a merchant’s account as early as possible while electronically processing a check.” In particular, the Court relied on Content Extraction v. Wells Fargo (IP Update, Vol. 18, No. 1) in finding that the claims “recite basic steps of electronic check processing.” The Court rejected Solutran’s argument that the claims as a whole were not directed to an abstract idea, finding that the only advance recited in the claims was crediting the merchant’s account before the paper check is scanned. The Court found this feature to be an abstract idea. The Court also noted that Solutran had admitted that the claims did not include a technical improvement to capture check information in order to create a digital file or electronically credit a bank account, and also did not improve how a check is scanned. In view of this, the Court found that the claims were written at a “distinctly high level of generality.”
The Federal Circuit also found that even when viewed as a whole, the claims did not improve the functioning of the computer itself or effect an improvement in any other technology or technical field. The Court concluded that the claims did not pass the machine-or-transformation test, and noted that the claims did not amount to an inventive concept because they used “a general-purpose computer and scanner to perform conventional activities in the way they always have.”
PATENTS / SUBJECT MATTER ELIGIBILITY (DIAGNOSTIC METHOD)
In an opinion evidencing the split in opinion regarding the patent eligibility of diagnostic methods, the US Court of Appeals for the Federal Circuit denied a petition for panel rehearing or rehearing en banc, leaving in place a panel opinion affirming the district court’s conclusion that the claims at issue were invalid as ineligible. Athena Diagnostics, Inc. v. Mayo Collaborative Servs., LLC, Case No. 17-2508 (Fed. Cir. Feb. 6, 2019) (per curiam) (Lourie, J, joined by Reyna and Chen, JJ, concurring) (Hughes, J, joined by Prost, CJ, and Taranto, J, concurring) (Dyk, J, joined by Hughes and Chen, JJ, concurring in part) (Chen, J, concurring) (Moore, J, joined by O’Malley, Wallach and Stoll, JJ, dissenting) (Newman, J, joined by Wallach, J, dissenting) (Stoll, J, joined by Wallach, J, dissenting) (O’Malley, J, dissenting).
In the panel opinion, Judge Lourie, writing for the majority, found the claims directed to the natural law of a correlation between the presence of certain antibodies and a particular disease, and found that the claims did not include additional elements transforming the nature of the claim into a patent-eligible application (IP Update, Vol. 22, No. 2). Judge Newman dissented. In her view, the claims as a whole were not directed to the natural law, but to a specific application.
Judge Lourie concurred in the denial because, in his view, the Federal Circuit is bound by the Supreme Court of the United States’ decision in Mayo (IP Update, Vol. 15, No. 3). On a clean slate, Judge Lourie would only exclude generalized natural laws, such as E=mc2 or Boyle’s Law, from patent eligibility. But in Mayo, the Supreme Court ruled that claims directed to the relationship between the concentration of metabolites and the likelihood that a drug dose would be ineffective were directed to a law of nature, and Judge Lourie found the claims at hand similar to the claims in Mayo. Judge Lourie noted that new method of treatment claims and unconventional arrangements of known laboratory techniques can evade Mayo’s prohibition.
Judge Dyk also concurred, explaining that while the Mayo/Alice framework has successfully screened out many claims directed to abstract ideas, the framework has been less successful in cases where the issue involved natural laws. In Judge Dyk’s view, § 101 does serve an important function in addressing the risk that a patent on a natural law would significantly impede future innovation. For example, a patent on the concept of searching for genetic abnormalities and determining their relationship to disease would be rightly patent ineligible. However, in Mayo, the Supreme Court found a specific correlation to be patent ineligible, and the claims at hand were similarly patent ineligible under the Mayo framework. Nevertheless, Judge Dyk noted that the more recent Myriad decision contains language suggesting that diagnostic patents could be patent eligible. Judge Dyk further explained that, in his view, the utility requirement of § 101, properly applied, prevents overbroad conceptual claiming.
In his concurrence, Judge Chen explained that there is a tension between Mayo and Diehr, because Diehr’s analysis requires examining the claim as a whole. Judge Chen explained that the Mayo analysis is more akin to the analysis in Flook, where the claim is examined on an element-by-element basis to find a novel “inventive concept.” Although Flook was not overruled, Diehr (as the later opinion) was understood to be the guiding precedent, and Mayo has upset 30 years of settled expectations.
In dissent, Judge Moore began by noting that all judges on the Federal Circuit agree that the claims at hand should be eligible for patent protection and only disagree as to whether Mayo precludes patent eligibility. Judge Moore noted that since Mayo, the Federal Circuit has found all diagnostic claims patent ineligible, effectively turning Mayo into a per se rule, which the Supreme Court has cautioned against. Judge Moore would distinguish Mayo based on the generality of the claims. In Mayo, the claims covered all processes that make use of a correlation between a drug dosage and a metabolite, while in the case at hand, the claims are directed to a specific method of diagnosis for a specific disease.
Judge Newman dissented as well. She believes the Federal Circuit has mistakenly enlarged the Mayo decision to bar all diagnostic claims. Judge Newman stressed the importance of diagnostic methods in the medical field and the lack of a logical basis for the disparate treatment between diagnostic and treatment claims.
In a final dissent, Judge O’Malley explained that the confusion and disagreement over § 101 have been engendered by the Supreme Court’s instruction to read into § 101 an “inventive concept” requirement, which Congress expressly abrogated when it amended the Patent Act in 1952.
PATENTS / AIA / PRIOR ART (PUBLIC ACCESSIBILITY)
PATENTS / AIA / FIFTH AMENDMENT (TAKING) CHALLENGE
The US Court of Appeals for the Federal Circuit addressed for the first time whether the retroactive application of inter partes review (IPR) proceedings to pre-America Invents Act (AIA) patents is an unconstitutional taking under the Fifth Amendment, and concluded that it is not. Celgene Corp. v. Peter, Case Nos. 18-1167, -1168, -1169 (Fed. Cir. July 30, 2019) (Prost, CJ).
Coalition for Affordable Drugs VI LLC (CFAD) filed four IPR petitions challenging the validity of two patents owned by Celgene that cover methods and improved methods for safely distributing teratogenic or other potentially hazardous drugs while avoiding exposure to a fetus to avoid adverse side effects. In each of its final written decisions, the Patent Trial and Appeal Board (PTAB) concluded that CFAD had shown by a preponderance of the evidence that all claims of each patent were unpatentable as obvious over the instituted grounds. Celgene appealed.
Celgene argued that the PTAB erred in finding all claims of both patents obvious, and that the retroactive application of IPRs to patents filed before September 16, 2012, when the relevant provisions of the AIA went into effect, is an unconstitutional taking. CFAD did not participate in the appeal, and the director of the US Patent and Trademark Office (PTO) intervened pursuant to 35 USC § 143.
The Federal Circuit affirmed the PTAB’s decisions, holding all claims of both patents obvious over the asserted prior art.
Turning to the constitutional issue of whether the retroactive application of IPRs to pre-AIA patents is an unconstitutional taking, the Court first concluded that its discretion was appropriately exercised to hear Celgene’s constitutional challenge for the first time on appeal even though Celgene did not raise it before the PTAB. The Federal Circuit explained that resolving the constitutional issue was purely a question of law that was sufficiently briefed for its review, and further, that interests of justice warranted addressing the retroactivity question given the growing number of retroactivity challenges following the Supreme Court of the United States’ 2018 Oil States decision (IP Update, Vol. 21, No. 5).
Turning next to the merits of Celgene’s constitutional challenge, the Federal Circuit held that the retroactive application of IPRs to pre-AIA patents is not an unconstitutional taking. The Court rejected Celgene’s regulatory takings theory arguing that subjecting its pre-AIA patents to IPR, a procedure that did not exist at the time its patents issued, unfairly interfered with its reasonable investment-backed expectations without just compensation. In so doing, the Court reasoned that “for the last forty years, patents have also been subject to reconsideration and possible cancellation by the PTO,” and “IPRs do not differ significantly enough from preexisting PTO mechanisms for reevaluating the validity of issued patents to constitute a Fifth Amendment taking.” Although Celgene identified a number of differences between ex parte and inter partes reexamination predecessors and IPRs, the Federal Circuit stated that those differences did not outweigh the far more significant similarities of purpose and substance to effectuate an unconstitutional taking.
PATENTS / CLAIM CONSTRUCTION / CLEAR DISAVOWAL
Clear Disavowal in Specification Can’t Be Remedied by Non-Material Change in Claims
Addressing an appeal from four related actions concerning Orange Book patents covering Suboxone® sublingual film, the US Court of Appeals for the Federal Circuit affirmed the district court’s judgments that certain generic manufacturers did not infringe a patent because the specification limited the scope of the claims by disparaging a particular embodiment. Indivior Inc. et al. v. Dr. Reddy’s Laboratories, S.A. et al., Case Nos. 17-2587, 18-1010, -1058, -1062, -1114, -1115, -1176, -1177 (Fed. Cir. July 12, 2019) (Lourie, J) (Mayer, J, dissenting).
Indivior markets and holds the new drug application for Suboxone film, an opioid addiction treatment that combines the opioid buprenorphine and the opioid antagonist naloxone. Suboxone film is applied below a patient’s tongue, where it rapidly dissolves to release the active ingredients. Indivior owns patents that generally relate to methods of producing films that have drug content uniformity using controlled drying techniques that avoid the rippling problems produced by conventional drying methods. The specification distinguished Indivior’s invention from conventional drying methods, which apply hot air to the top of the film, thus producing non-uniform films.
Several generic drug companies filed abbreviated new drug applications (ANDAs) to market generic versions of Suboxone film. Indivior then brought several actions for patent infringement against the generic drug manufacturers, including Dr. Reddy’s Laboratories (DRL), Watson and Alvogen, accusing them of infringing Indivior’s patents. After conducting four bench trials, the district court found that two patents were not invalid, that DRL did not infringe those two patents and that Alvogen did not infringe one of those patents. In finding noninfringement, the district court relied on the patentee’s disclaimer and construed the drying limitation to mean “dried without solely employing conventional convection air drying from the top,” finding that this limitation, as construed, was not met by the accused films. The generic drug manufacturers appealed the validity finding, and Indivior cross-appealed the noninfringement findings against DRL and Alvogen.
On appeal, the Federal Circuit found that the district court correctly construed the drying limitation because the patent specification disclaims conventional top air drying. In doing so, the Court cited the patent specification’s express statements regarding what the applicant regarded the invention to be, its repeated disparagement of conventional top drying methods, and the patent applicant’s characterization of the invention during prosecution. The Court further noted that it had previously concluded that the same language in the specification in a related patent limited the scope of the claims, even though the patentee had specifically amended the claims to remove the words “dried” and “drying.”
Affirming that the patent specification unmistakably disclaimed conventional top air-drying, the Federal Circuit concluded that DRL’s and Alvogen’s ANDA products did not infringe.
The majority also concluded that the generic companies had failed to prove that any of the asserted patents were invalid by clear and convincing evidence, finding that the claims were neither indefinite nor obvious.
In his dissent, Judge Mayer argued that a person of skill in the art “would have readily recognized that switching the location of the heat source from the top to the bottom would likely ameliorate the problem of films that were overly dry on the top and overly wet on the bottom. Indeed, any person having basic familiarity with a kitchen oven would certainly appreciate that, since hot air rises, heating an item from the bottom rather than the top facilitates uniform baking.” Quoting KSR, Mayer stated that “[g]ranting patent protection to advances that would occur in the ordinary course without real innovation retards progress,” and that “‘[r]igid preventative rules that deny factfinders recourse to common sense’ have no place in the obviousness analysis.”
Practice Note: A specification can limit the scope of a claim (regardless of the specific claim language used) where it repeatedly disparages a particular embodiment. Here, the specification disparaged conventional top air drying, explaining that it did not produce uniform films, which were the central object of the claimed invention. Such statements, especially when coupled with examples of disparaging comparisons, may preclude a patentee from claiming the full scope of the invention if a court finds that the disclaimer is unequivocal and clear. Moreover, such disparagement may also affect related applications in the same family.
The US Court of Appeals for the Federal Circuit affirmed a dismissal based on the defendant’s failure to state a claim motion, concluding that under principles of prosecution history estoppel, the patent owner could not establish infringement under the doctrine of equivalents based on prosecution history estoppel. Amgen Inc. v. Coherus Biosciences Inc., Case No. 18-1993 (Fed. Cir. July 29, 2019) (Stoll, J).
Amgen sued Coherus for infringement of a patent directed to a method of purifying recombinant proteins using hydrophobic interaction chromatography (HIC) after Coherus filed an abbreviated biologic license application indicating its intent to manufacture and market a biosimilar version of Amgen’s pegfilgrastim product Neulasta. Each claim of Amgen’s patent requires an elution buffer chosen from one of three buffer combinations. Because Coherus’ purification method used an elution buffer that was different from the three indicated buffer combinations in Amgen’s patent, Amgen alleged infringement under the doctrine of equivalents.
Coherus filed a motion to dismiss, arguing that Amgen was precluded from asserting infringement under the doctrine of equivalents because Amgen surrendered combinations of salts that were different from those three recited in the claims during prosecution of the application for the asserted patent. Specifically, Coherus argued that Amgen differentiated its claims from the Holtz prior art reference, which disclosed several salts for improving hydrophobic interactions in chromatography. Coherus further asserted that Amgen argued during prosecution that Holtz (1) did not recite any particular combination of salts, (2) did not recite the particular combinations of salts in the pending claims, and (3) did not disclose increasing dynamic capacity, which is the amount of protein that can be added to the column at once. During prosecution, Amgen also provided a declaration from an inventor specifying that the three specific combinations of salts in the asserted patent had the characteristic of allowing for substantial increases in dynamic capacity, and the declaration did not discuss any other salt combinations. The district court granted Coherus’s motion, finding that Amgen distinguished its claims from Holtz by pointing out that Holtz did not disclose “one of the particular recited combinations of salts,” and this resulted in prosecution history estoppel, which precluded infringement under the doctrine of equivalents. Amgen appealed.
The Federal Circuit affirmed, finding that “Amgen clearly and unmistakably surrendered salt combinations other than the particular combinations recited in the claims.” The Court further noted that when multiple bases are presented during prosecution by which to distinguish an application from prior art, each is a sufficient basis for prosecution history estoppel as long as the bases were not used in combination to distinguish from prior art. The Court also noted that it does not matter if an assertion made by the applicant during prosecution was actually required for a patent to issue; if the applicant made the assertion, that is a sufficient basis for estoppel.
Practice Note: Care must be taken in overcoming prior art during prosecution. Each basis asserted by the applicant in distinguishing from prior art creates an opportunity for a prosecution history estoppel.
Again addressing the question of appellate standing for inter partes review (IPR) decisions, the US Court of Appeals for the Federal Circuit held that an IPR petitioner did not show a sufficient injury to confer Article III appellate standing where challenged claims that had not been asserted against the petitioner survived IPR. General Electric Co. v. United Techs. Corp., Case No. 17-2497 (Fed. Cir. July 10, 2019) (Reyna, J).
In early 2016, General Electric (GE) filed an IPR petition against a United Technologies patent directed to a geared-fan engine design. GE went on to file 31 other IPR petitions against United Technologies patents over the next three years without any pending district court litigation or other attempt by United Technologies to enforce its patents. In the IPR in issue here, the Patent Trial and Appeal Board instituted review on GE’s petition but ultimately refused to find five of the challenged patent claims unpatentable. GE appealed.
On appeal, the threshold question was whether GE had standing to appeal the decision despite not being accused or threatened with infringement by United Technologies. GE first asserted competitive harm due to an instance where Boeing requested that GE and its competitors submit proposed engine designs and GE chose not to submit a design for a geared-fan engine. The Federal Circuit found this argument unpersuasive because GE did not contend that it decided against submitting a geared-fan engine because of the challenged patent and because GE did not even say whether it lost that bid. The Court also noted that GE’s status as a competitor to United Technologies was insufficient due to its previous decision on competitor standing in AVX Corp. v. Presidio Components, Inc. (IP Update, Vol. 22, No. 6).
GE separately argued that it had sustained an economic loss due to the increased research and development costs in designing around the challenged patent. The Federal Circuit found this assertion unpersuasive because GE did not articulate any specific costs that it had incurred or explain how any increased research and development costs were related to designing around the challenged patent. The Court consequently dismissed the appeal for lack of Art. III standing.
Judge Hughes wrote a concurring opinion agreeing that the dismissal was required by the Court’s competitor standing decision in AVX Corp. but arguing that that decision was mistaken. Judge Hughes concluded that he would have found standing in this case if he was not bound by that earlier decision.
PATENTS / VENUE / FRIVOLOUS APPEAL
Reaffirming that the plaintiff in a patent case has the burden of establishing that venue is proper, the US Court of Appeals for the Federal Circuit affirmed a district court’s dismissal. The Court ultimately denied the defendant’s request for sanctions, however, because the question of which party bears the burden relating to venue had not been decided when the appeal was filed. Westech Aerosol Corporation v. 3M Company, GTA-NHT, Inc. DBA Northstar Chemical, Case No. 18-1699 (Fed. Cir. July 5, 2019) (Reyna, J).
In January 2017, Westech filed a patent infringement suit in the Western District of Washington against 3M and Northstar Chemical. 3M moved to dismiss for failure to state a claim, prompting Westech to file an amended complaint. In May 2017, after Westech filed an amended complaint that 3M also moved to dismiss, the Supreme Court of the United States issued its decision in TC Heartland (IP Update, Vol. 20, No. 5), finding that for purposes of the patent venue statute, 28 USC § 1400(b), a corporation “resides” only in the state where it is incorporated.
Following TC Heartland, 3M amended its motion to dismiss, arguing that venue was improper because neither 3M nor Northstar had a regular and established place of business in the Western District of Washington. In response, Westech conceded that the amended complaint did not assert facts that supported venue under TC Heartland, and thus sought leave to amend its complaint. Westech filed a second amended complaint. However, instead of pleading any facts to support proper venue, Westech simply parroted the language of § 1400(b). 3M once again moved to dismiss for improper venue, just before the Federal Circuit issued its decision in In re: Cray Inc. (IP Update, Vol. 20, No. 9), which held that for purposes of venue, a defendant must have a physical place in the district that serves as a regular and established place of business. The district court found that venue was improper because there was no factual basis showing that 3M or Northstar had a regular and established place of business in the district. Westech appealed.
The Federal Circuit found that Westech failed to show that venue was proper in the Western District of Washington. The Court noted that under In re: ZTE (USA) Inc. (IP Update, Vol. 21, No. 6), Westech has the burden of establishing that venue is proper, and under Cray, the regular and established place of business must be physically present in the district. The Court found that Westech failed to plead any facts showing that 3M had a regular and established place of business in the Western District of Washington.
After Westech had filed its opening brief on appeal, 3M moved for sanctions, arguing that Westech’s appeal was frivolous because the district court’s judgment was plainly correct and because Westech disregarded both Cray and ZTE in its appeal brief. The Federal Circuit found that the appeal was not frivolous “as filed” because ZTE issued after Westech filed its opening brief. The Court found that the appeal was frivolous “as argued,” however, because Westech ignored Cray and ZTE despite being aware of both decisions during the pendency of the appeal. While the Court noted that Westech’s behavior on appeal bordered on sanctionable, the Court found that sanctions were unwarranted because the question of who shoulders the burden of establishing venue had not yet been answered at the time Westech filed the appeal.
PATENTS / WILLFULNESS / EXCEPTIONAL CASE
The US Court of Appeals for the Federal Circuit modified its original decision in SRI International, Inc. v. Cisco Systems, Inc., vacating the district court’s award of attorneys’ fees because it was based on a now vacated willful infringement finding, and remanding for further consideration. SRI International, Inc. v. Cisco Systems, Inc., Case No. 17-2223 (Fed. Cir. modified July 12, 2019) (Stoll, J) (Lourie, J, dissenting).
In its original opinion issued in March 2019 (IP Update, Vol. 22, No. 4), a divided Federal Circuit panel affirmed a district court decision finding that a claimed method in SRI’s patent for monitoring and analyzing a computer network was directed to an improvement in computer capability, was not abstract and thus was patent eligible. The Court also found that the district court did not abuse its discretion in finding that this case was exceptional under § 285. Specifically, the district court awarded SRI the attorneys’ fees, concluding that fees were warranted because Cisco “maintain[ed] 19 invalidity theories until the eve of trial but only present[ed] two at trial,” and because the jury found that Cisco willfully infringed SRI’s patent before and after May 2012. After the original opinion issued, Cisco filed a petition for panel rehearing.
The Federal Circuit granted in part and denied in part the petition for rehearing, withdrawing the original opinion and replacing it with a modified opinion. In connection with willfulness, the Court found that the record was insufficient to establish that Cisco’s conduct prior to Mary 2012 rose to the level of wanton, malicious and bad-faith behavior required for willful infringement. The Court noted that Cisco only became aware of SRI’s patent in May 2012 when SRI sent its notice letter, and thus concluded that Cisco could not have willfully infringed before May 2012. Because the district court’s award of attorneys’ fees was based on the now vacated willfulness finding, the Court vacated the attorneys’ fees award and remanded the case for further consideration regarding willfulness.
PATENTS / AIA / PRIOR ART / EVIDENCE OF EARLIER CONCEPTION
The US Court of Appeals for the Federal Circuit affirmed a Patent Trial and Appeal Board (PTAB) determination that the patent owner could not establish an earlier date of invention based on evidence originating from the inventors that was not independently corroborated, and thus affirmed that the patents-in-suit were unpatentable as obvious over the prior art. Kolcraft Enterprises, Inc. v. Graco Children’s Products, Inc., Case Nos. 18-1259, -1260 (Fed. Cir. July 2, 2019) (Prost, CJ).
Graco Children’s Products filed a petition for inter partes review challenging two Kolcraft design patents related to playpens as—among other things—unpatentable over a particular prior art reference. In its patent owner response, Kolcraft sought to antedate the prior art based on a redacted inventors’ declaration with attached exhibits (Inventor Declaration) and on the inventors’ deposition testimony. Notably, the redactions included the alleged dates of conception and reduction to practice. During deposition, one of the inventors testified that the redacted dates “were based on metadata associated with the computer files containing the exhibits.” One day before the oral hearing, Kolcraft filed an unredacted version of the Inventor Declaration. During the hearing, Kolcraft admitted that the unredacted Inventor Declaration was not part of the evidentiary record.
The PTAB found that Kolcraft had failed to demonstrate that it was entitled to an earlier conception date. The PTAB explained that the redacted Inventor Declaration and accompanying exhibits were “undated and find identification, if at all, only via the conclusory and uncorroborated testimony of the inventors.” Further, the PTAB determined that Kolcraft had waived its reliance on the inventors’ deposition testimony regarding prior conception because it raised that issue for the first time during the hearing. Having determined that Kolcraft could not establish prior conception, the PTAB determined that the patents-in-suit were obvious over the prior art reference. Kolcraft appealed.
Noting that the case “turns on the corroboration of inventor testimony,” the Federal Circuit reiterated its holding in Apator Miitors v. Kamstrup (Fed. Cir. 1996) that “[i]nventor testimony of conception must be corroborated by other, independent information.” Turning to the Inventor Declaration and the inventors’ deposition testimony, the Court explained that both “originated with the inventors of the [patents-in-suit]” themselves.” The Court also determined that the PTAB’s refusal to consider the unredacted Inventor Declaration and inventor deposition testimony was “immaterial” because both pieces of evidence “are supported solely by the inventors themselves.” Similarly, the Court explained that the alleged dates of the exhibits accompanying the Inventor Declaration were supported only by the inventors’ testimony. Thus, the Court concluded that “[t]here is no evidence in the record independently corroborating the inventors’ alleged conception prior to [the prior art].”
The Federal Circuit also rejected Kolcraft’s argument that the metadata associated with the exhibits established an earlier conception date. The Court noted that the metadata was not part of the record, and that the only other evidence addressing the metadata was the inventors’ deposition testimony, “which [wa]s insufficient to corroborate inventor testimony of prior conception.”
Thus, the Federal Circuit found that substantial evidence supported the PTAB’s finding that Kolcraft had not established a conception date prior to the asserted prior art.
Practice Note: Documentary evidence authored by an inventor will not corroborate an inventor’s testimony regarding prior conception. When necessary, parties should affirmatively take necessary steps to make any metadata part of the record before relying on it.
PATENTS / DESIGN PATENTS / AESTHETIC FUNCTIONALITY
Addressing the issue of the functional requirements of design patents, the US Court of Appeals for the Federal Circuit refused to invalidate design patents on truck parts on the basis of aesthetic functionality. Automotive Body Parts Association v. Ford Global Technologies, LLC, Case No. 18-1614 (Fed. Cir. July 23, 2019) (Stoll, J).
At issue were Ford’s design patents on its F-150 truck hood and headlamp. Ford accused members of the Automotive Body Parts Association (ABPA) of infringing on its patents. The ABPA sued Ford, seeking a declaratory judgment that the design patents were invalid or unenforceable. The district court entered summary judgment in favor of Ford, noting that the ABPA was essentially asking the court to eliminate design patents on auto parts. The ABPA appealed.
The Federal Circuit first addressed the ABPA’s invalidity argument. The ABPA argued that consumers seeking replacement parts prefer hoods and headlamps that restore the original appearance of their vehicles and that there is a functional benefit to designs that are aesthetically compatible with those vehicles. The Court disagreed, holding that “for a particular design to match other parts of a whole, the aesthetic appeal of a design to consumers is inadequate to render that design functional.” To hold that designs that derive commercial value from their aesthetic appeal are functional would gut the very principles of a design patent, the Court noted.
The ABPA next argued that the Federal Circuit should apply “aesthetic functionality” from trademark law, which provides that purely aesthetic features can only be protected if they are non-functional. The Court again rejected the ABPA’s argument, pointing out that trademarks and design patents serve different purposes and have different governing law. Trademarks ensure brand awareness, whereas design patents expressly grant exclusive rights to the owners to a particular aesthetic for a limited period.
Next, the ABPA asked the Court to limit Ford’s ability to enforce its design patents to only the initial market for the sale of the F-150, and not the aftermarket for replacement parts. The ABPA reasoned that consumers have different concerns in different contexts and care less about the design when selecting a replacement part. The Court dismissed those argument as unpersuasive, unsupported and contrary to an abundant record of evidence.
AIA / PTAB PROCEDURE
Addressing the scope of Patent Trial and Appeal Board (PTAB) guidelines that prohibit lawyers from conferring with their witness during cross-examination, the PTAB designated as precedential a 2014 decision permitting lawyers to confer with their witness after cross-examination ends and before any recross begins. Focal Therapeutics Inc. v. SenoRx, Inc., Case No. IPR2014-1593 (PTAB July 21, 2014) (Bonilla, APJ) (designated precedential July 10, 2019). According to the decision, a lawyer is permitted to confer with her witness to prepare a redirect.
The PTAB’s Patent Trial Practice Guide sets forth certain Testimony Guidelines. Among other rules, the Guidelines prohibit lawyers from conferring with their witnesses during cross-examination. The Guidelines state in the relevant part:
The question presented to the PTAB was simple: when does cross-examination conclude? Does it span the entire time of the deposition to include cross-examination, redirect and recross, or does it conclude with the end of the initial of cross-examination?
The PTAB determined that “cross-examination” includes cross-examination and recross, but it does not include the entire deposition. The prohibition on conferring with a witness does not exist between the conclusion of cross-examination and the start of recross. As a result, lawyers are permitted to confer with the witness to prepare a redirect examination.
Practice Note: The Guidelines permit the parties to come to their own agreement regarding the conduct of depositions, including whether to permit conferring with witnesses before redirect.
TRADEMARKS / INDEMNIFICATION / ADVERTISING INJURY
Addressing for the first time the issue of whether a presumption of irreparable harm should apply in copyright infringement cases, the US Court of Appeals for the Third Circuit held that it did not, aligning the rule for copyright cases with the existing rule in patent cases. The Court vacated a permanent injunction and remanded for further proceedings. TD Bank N.A. v. Hill, Case No. 16-2897 (3d Cir. July 1, 2019) (Krause, J) (Cowen, J, concurring in part and dissenting in part).
At the end of his more-than-30-year tenure as CEO of Commerce Bank, Vernon W. Hill, II, co-authored a book about his experiences. Commerce hired the co-author and entered into a publishing agreement that defined Commerce as the “author” and “exclusive owner of all rights conveyed in the manuscript.” Additionally, Hill signed a letter to the publishing company in which Commerce was defined as the “author” of the work, and which stated that Hill “unconditionally guarantee[d] that the Work is a work made for hire within the meaning of the United States Copyright Law.” The manuscript, however, was never published, as Hill left Commerce in 2007 just a few months before it was purchased by TD Bank.
In 2012, Hill released a book focused largely on his post-Commerce business ventures, but which allegedly incorporated parts of the 2007 manuscript. When Hill’s book came to TD Bank’s attention, it applied to register the 2007 manuscript with the US Copyright Office and sued Hill for copyright infringement.
The district court granted summary judgment for TD Bank, finding that per Hill’s signed letter, Commerce owned the copyright as a work for hire. A year later, after TD Bank presented evidence that Hill was continuing to promote his book, the district court issued a permanent injunction enjoining Hill from publishing, marketing, distributing or selling the 2012 book. Hill appealed.
The Third Circuit agreed with the district court that TD Bank owned the copyright, but for different reasons. The Third Circuit reasoned that TD Bank was the owner of the copyright not through the work-for-hire doctrine, but because the agreement operated as an assignment
The Third Circuit vacated the permanent injunction, however, holding that eBay Inc. v. MercExchange, LLC (which rejected the presumption of irreparable harm in patent infringement cases) also applied to copyright infringement cases: “[A] court considering the propriety of a copyright injunction should no longer place a ‘thumb on the scales’ in favor of injunctive relief. . . . Irreparable harm in copyright cases ‘must be proven, not presumed.’”
Four factors are commonly used to evaluate whether a permanent injunction should be granted:
Whether the moving party will suffer irreparable injury
Whether there is an adequate remedy available at law for that injury
The Third Circuit found that three of the four factors favored Hill, and the outlying factor (the balance of hardships) was equal.
The Court held that Hill’s continued infringement, which “depriv[ed] [TD Bank] of the ‘right to not use the copyright’” was insufficient for irreparable harm: “Holding that a violation of ‘the right to not use the copyright’ necessarily amounts to irreparable harm would not only resurrect the presumption of irreparable harm, but make it irrebuttable.”
With respect to the second factor, the Court held that monetary relief was still sufficient even where, “as here, an accused infringer distributes an infringing product for free and the copyright holder makes no use of a work.”
Additionally, the public interest factor weighed in Hill’s favor since TD Bank admitted that it had no intention of publishing or licensing the copyrighted work, and the injunction prevented the public from access to Hill’s book. Moreover, the injunction “inflicted a far more subtle and insidious harm . . . by placing Hill in jeopardy of a contempt finding for sharing anything that ‘sounds too much like himself.’”
Judge Cowen concurred with the majority’s decision to vacate the permanent injunction, but dissented from its conclusion that TD Bank owned the copyright, arguing that TD Bank had waived the assignment issue and Hill’s letter failed “to convey an unmistakable intent to effect a present transfer” of his interest in the manuscript.