Source: https://www.mwe.com/insights/ip-update-may-2014/
Timestamp: 2020-01-22 04:53:27
Document Index: 83894469

Matched Legal Cases: ['CJEU ', '§ 285', '§ 285', '§ 285', '§ 285', '§ 285', '§285', '§ 285', '§ 285', '§ 285', '§ 145', '§ 145', '§ 145', '§ 145', '§ 134', '§ 141', '§ 145', '§ 306', '§ 145', '§ 306', '§ 306', '§ 112', '§ 271', '§ 337', '§ 507', '§ 507', '§ 507', '§ 507', '§ 106']

IP Update, Vol. 17, No. 5 - McDermott Will & Emery
Unanimous Supreme Court: “Exceptional” Patent Cases...
Federal Circuit to Judge Posner: eBay Analysis Is a Mus...
Patent Owner Practicing the Patent Not Necessary to Sec...
Federal Circuit Grants Emergency Stay of Preliminary In...
Gilead Warns: Examine Patent Portfolios for Double Pate...
A Combination of References Need Only Provide a “Reas...
Combining Two Drugs Is Not Always Obvious
Suppliers May DJ an NPE, But It Won’t Be Easy
Design Patents Go to the Dogs: District Court Not Requi...
What Is "a Patient?"
Eastern District of Texas Can’t Keep Every Case Filed...
Balancing Venue, Transfer Factors at the Federal Circui...
Pre-AIA Statute Did Not Give Patent Owner in an Ex Part...
Federal Circuit to Review Consideration of Induced Infr...
Supreme Court Keeps Raging Bull Copyright Suit in the R...
Copyright Statute of Limitation Trigged on Actual or Co...
Banana Lady Performance Not Copyrightable
Ninth Circuit Affirms Plaintiff’s Lack of Standing fo...
The CJEU Takes Tough Stance on Downloading from Unlawfu...
Director’s Decision on Inter Partes Review Institutio...
Only an Owner of a Patent Can Appeal Final Decisions fr...
It Is “Quite Clear” that USPTO’s Decision Not To ...
Patents / Exceptional Case (§ 285)
In two decisions authored by Justice Sotomayor issued on the same day, a unanimous* Supreme Court of the United States reversed two opinions of the U.S. Court of Appeals for the Federal Circuit relating to a district court’s ability to award fees to a prevailing party in patent litigation for an “exceptional case” and the standard of review to be applied by the Federal Circuit in reviewing a district court’s opinion on whether a case is “exceptional.” Octane Fitness, LLC v. ICON Health & Fitness, Inc., Case No. 12–1184 (Supr. Ct., Apr. 29, 2014) (Sotomayor, Justice.) and Highmark, Inc. v. Allcare Health Management System, Inc., Case No. 12-1163 (Supr. Ct., Apr. 29, 2014) (Sotomayor, Justice.).
In the Octane Fitness case, the Supreme Court construed the text of 35 U.S.C. § 285 and rejected the prevailing framework for evaluating whether a case is “exceptional” under § 285 as unduly restrictive. The Supreme Court explained that, in accordance with its ordinary meaning, an “exceptional” case is simply one that “stands out from others with respect to the substantive strength of a party’s litigating position … or the unreasonable manner in which the case was litigated,” to be determined at the district court’s discretion under the totality of the circumstances based on a preponderance of the evidence.
In the companion Highmark case, the Supreme Court held that in view of its ruling in Octane Fitness, a district court’s finding of an “exceptional case” should be reviewed for an abuse of discretion, not de novo.
In Octane Fitness, the respondent, ICON, owned a patent relating to elliptical exercise equipment and sued its competitor, Octane Fitness, claiming that Octane Fitness’ elliptical machines infringed claims of the asserted patent. After the district court granted Octane Fitness’s motion for summary judgment that its products did not infringe ICON’s patent claims, Octane moved for attorneys’ fees under § 285. The district court applied the Brooks Furniture standard for determining whether the case was “exceptional.”
In Brooks Furniture, the Federal Circuit held that a case may be deemed “exceptional” under § 285 only in two limited circumstances: when there has been some material, inappropriate conduct, or when the litigation is both brought in subjective bad faith and is objectively baseless. The district court found that Octane Fitness could show neither that ICON’s claim was objectively baseless nor that ICON had brought it in subjective bad faith. Rather the district court found that ICON’s unsuccessful claims were neither “frivolous” nor “objectively baseless” and found no subjective bad faith on ICON’s part. On appeal, the Federal Circuit rejected Octane Fitness’ argument that the district court had “applied an overly restrictive standard in refusing to find the case exceptional under §285”and declined to “revisit the settled [Brooks Furniture] standard for exceptionality.” The Supreme Court granted certiorari to review the Brooks Furniture standard (IP Update, Vol. 16, No. 10).
In reviewing the history of § 285, the Supreme Court explained that prior to 1946, the Patent Act did not authorize the awarding of attorneys’ fees to the prevailing party in patent litigation. Under the so-called “American Rule,” each litigant paid for its own attorneys’ fees whether it won or lost the case. In 1946, Congress added a fee-shifting provision to the Patent Act, which provided that a court “may in its discretion award reasonable attorney’s fees to the prevailing party upon the entry of judgment in any patent case.” Still later, as part of the Patent Act of 1952, the provision in the 1948 Act was amended and re-codified as § 285, still in effect today: “The court in exceptional cases may award reasonable attorney fees to the prevailing party” (emphasis added).
As Justice Sotomayor explained, the addition of the word “exceptional” was not intended to change the scope of the 1946 amendment. The Supreme Court found that the text of the 1952 statute was “patently clear,” and stated that the only constraint on a district court’s discretion to award attorneys’ fees in patent litigation is that the power is reserved for “exceptional” cases. Because the Patent Act does not define “exceptional,” the Supreme Court assigned the term its ordinary meaning, looking to dictionaries and analogous statutes, and concluded that an “exceptional” case is “simply one that stands out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated.” The Supreme Court also concluded that district courts may determine whether a case is “exceptional” in a case-by-case exercise of their discretion considering the totality of the circumstances.
The Supreme Court concluded that “[s]ection 285 demands a simple discretionary inquiry; it imposes no specific evidentiary burden, much less such a high one.” In an aspect of the ruling that many will find as key, the court stated that the proof of an exceptional case is to be judged under the preponderance of the evidence standard, thereby exposing the parties to “share the risk of error in roughly equal fashion.”
Justice Sotomayor explained that, traditionally, decisions based on “questions of law” are “reviewable de novo.” decisions based on “questions of fact” are “reviewable for clear error and decisions based on “matters of discretion” are “reviewable for ‘abuse of discretion’.” The Court explained that the text of the statute “emphasizes the fact that the determination is for the district court,” which “suggests some deference to the district court upon appeal.” The Supreme Court explained that the district court “is better positioned” to decide whether a case is exceptional because it lives with the case over a prolonged period of time, and that the question of exceptionality is “multifarious and novel,” not susceptible to “useful generalization” of the sort that de novo review provides and “likely to profit from the experience that an abuse-of-discretion rule will permit to develop.”
Practice Note: Approximately one week after its decision in Octane Fitness and Highmark, the Supreme Court granted cert in Kobe Properties v. Checkpoint Systems, Case No. 13-788 (Supr. Ct., May 5, 2014) a case where the Federal Circuit had reversed a $6.6 million award of attorneys’ fees to a successful defendant (IP Update, Vol. 16, No. 5). In reversing the district court’s attorneys’ fee award, the Federal Circuit noted that “the requirements of § 285 were not met” because the suit was not “objectively baseless.” In granting cert, the Supreme Court vacated the Federal Circuit’s decision in Checkpoint Systems and remanded the case “for further consideration” in light of its decisions in Octane Fitness and Highmark. On May 14, 2014, in Side Update Solutions v. Accord North America, Case No. 13-1498, the Federal Circuit issued a non-precedential order remanding the case to the district court for further proceedings in light of Octane Fitness.
In a closely watched case involving a high-profile circuit court judge sitting (by designation) at trial and raising the hot button issue of whether the holder of a fair, reasonable and non-discriminatory terms, or FRAND-encumbered standard essential patent (SEP) was in essence barred from seeking injunctive relief, the U.S. Court of Appeals for the Federal Circuit (in a case that attracted a dozen amici briefs) affirmed Judge Posner’s ruling that the holder of the FRAND-encumbered patent in this case was not entitled to injunctive relief, but insisted that an eBay analysis is nevertheless required. Apple, Inc. et al. v. Motorola, Inc., et al., Case No. 12-1548; -1549 (Fed. Cir., April 25, 2014) (Reyna, J.) (Rader, C.J., dissenting-in-part) (Prost, J., concurring-in-part; dissenting-in-part).
With regard to one of the Apple patents in suit, the Federal Circuit explained that Judge Posner committed an error as to certain means-plus-function claim limitations. The patent is directed to controlling a touchscreen device with finger gestures. The claims recited reading a user’s finger gestures using “heuristics” (rules) to determine commands for the device: a vertical screen scrolling heuristic for determining that the one or more finger contacts correspond to a one-dimensional vertical screen scrolling command rather than a two-dimensional screen translation command based on an angle of initial movement of a finger contact with respect to the touch-screen display.
In connection with a different Apple patent, the district court excluded Apple’s damages expert’s testimony because that expert had relied on the testimony of Apple’s technical expert in forming his opinions. The district court’s concern was that one Apple expert relying on another Apple expert created unfair bias. The Federal Circuit reversed, finding that, “[e]xperts routinely rely upon other experts hired by the party they represent for expertise outside of their field.” Any bias in the damages calculations should be addressed by the jury, i.e.,deciding what weight should be given to such testimony and the testimony of the other expert relied on. “To the extent bias exists, cross-examination and the testimony of an opposing expert may be used to expose it. … The issue is one of evidentiary weight and not admissibility.”
Turning to Motorola’s request for injunction, the Federal Circuit affirmed the district court’s grant of summary judgment against Motorola. However, the Federal Circuit noted that the district court erred to the extent it applied a per se rule finding no injunction would lie for any FRAND-encumbered SEP. As the Court explained, such a rule ignores the analysis mandated by eBay, explaining that even a FRAND-encumbered SEP may possibly be the basis for an injunction under eBay, such as where the “infringer unilaterally refuses a FRAND royalty or unreasonably delays negotiations to the same effect.” However, the Court recognized that such occurrences would likely be rare.
Addressing whether a plaintiff that does not practice the asserted patent and did not itself invent the patent was entitled to a preliminary injunction against a competitor, the U.S. Court of Appeals for the Federal Circuit vacated a lower court’s order denying preliminary injunction and remanded, finding that a district court erred in its interpretation of the claims at-issue and that there was a likelihood of success on the merits on the issue of infringement. Trebro Mfg., Inc. v. FireFly Equipment, LLC, Case No. 13-1437 (Fed. Cir., Apr. 9, 2014) (Rader, C.J.)
Federal Circuit Grants Emergency Stay of Preliminary Injunction for Critical Medical Products *Web Only*
Less than one week after a district court granted a preliminary injunction, banning some U.S. sales of some of CoreValve’s heart valve system, the U.S. Court of Appeals for the Federal Circuit granted an emergency stay pending appeal. Edwards Lifesciences AG v. CoreValve, Inc., Case No. 14-1409 (Fed. Cir., Apr. 21, 2014 (per curiam) (Rader, C.J.) (Newman, J., dissenting). The decision postponed enforcement of Chief Judge Sleet’s order granting in part Edwards Lifesciences’ motion for a preliminary injunction against CoreValve’s products that allegedly infringe an Edwards Lifesciences catheter patent.
Addressing invalidation of a patent for obviousness-type double patenting, the U.S. Court of Appeals for the Federal Circuit vacated and remanded a district court’s decision, finding that a later-issued, but first-expiring patent could invalidate a first-issued, but later-expiring patent if both patents are commonly owned and do not have a common priority claim. Gilead Sciences, Inc. v. Natco Pharma Ltd., Case No. 13-1418 (Fed. Cir., Apr. 22, 2014) (Chen, J.) (Rader, C.J., dissenting).
Gilead owns two patents directed to antiviral compounds and methods for their use. Gilead sued Natco Pharma (Natco) for infringement of the first of the two patents after Natco filed an Abbreviated New Drug Application (ANDA). Natco responded by arguing that this first patent was invalid for obviousness-type double patenting based on the second of the two patents (which was not even asserted by Gilead in the case).
In granting summary judgment against Natco, the district court relied on other district court cases finding that “a later-issued but earlier-expiring patent” cannot “serve as a double-patenting reference against an earlier-issued but later expiring patent.” Natco appealed.
On appeal, the Federal Circuit considered whether the non-asserted second patent–which issued after but expires before the first patent–can qualify as a double patenting reference against the first patent.
In its analysis, the Federal Circuit noted that both patents were issued to the same inventors and were commonly owned by Gilead, the first patent had a later priority date than the second patent and the first patent did not have a terminal disclaimer. However, the Federal Circuit also concluded that the second patent claimed an invention of which the first patent’s claims were obvious variants and was only issued because–due to a double patenting rejection–a terminal disclaimer was filed by the patentee to disclaim any patent term of the second patent that would have extended beyond that of the first patent.
The Federal Circuit considered various public policy concerns, including the potential for patentee gamesmanship during prosecution to try to obtain additional patent term exclusivity for obvious variants of their inventions. The Federal Circuit determined that the comparison of Gilead’s patent expiration dates should control, not merely the issuance dates. Accordingly, the Court moved away from traditional double patenting analysis that focuses on patent issuance because, as in this case, an earlier-issuing patent may not expire before a later-issued patent under the Uruguay Round Agreement Act. The Federal Circuit found that the first patent, although issued first and without a double patenting rejection, could later be invalidated for obviousness-type double patenting based on the later-issuing, non-asserted second patent.
Chief Judge Rader dissented, arguing that an expansion of the judicially created doctrine of obviousness-type double patenting was not warranted in this case. He argued that the majority overstated policy concerns to justify their decision and that, instead, the Federal Circuit should have exercised judicial restraint to avoid unforeseen consequences under the new first-inventor-to-file framework of the America Invents Act.
Addressing the validity of a dosing regimen patent in Abbreviated New Drug Application (ANDA) litigation, the U.S. Court of Appeals for the Federal Circuit affirmed a lower court’s summary judgment of invalidity of two patents, finding that a combination of prior art references does not need to describe the efficacy of a specific dosage regimen, only that there is a reasonable expectation of success. Hoffmann La-Roche Inc. v. Apotex Inc., Case No. 13-1128 (Fed. Cir., Apr. 11, 2014) (Bryson, J.) (Newman, J., dissenting).
After Apotex made an ANDA filing, Hoffmann La-Roche (Roche) sued for infringement of patents directed to methods of treating osteoporosis. Roche then moved for a preliminary injunction. The district court denied the motion, finding that Roche had failed to prove it was likely to succeed on the merits in view of Apotex obviousness defense. Roche appealed, and the Federal Circuit affirmed the denial of preliminary injunction.
While that appeal was pending, the district court granted summary judgment of invalidity based on obviousness. The lower court found that once-monthly oral dosing was established in the prior art and that the dosage level of 150 mg per month was suggested in a combination of several prior art references, or at least indicated as obvious to try. The district court found that Roche’s evidence of objective considerations of non-obviousness was insufficient to defeat Apotex motion for summary judgment. Roche appealed again.
The Federal Circuit reviewed the issue of obviousness of the dosage limitations and concluded that the prior art taught the desirability of a relatively infrequent dosing schedule. The Court rejected Roche’s argument that the art taught away from once-monthly dosing because it was widely believed as of the date of the invention that a bisphosphonate regimen with a dose-free interval longer than one or two weeks would not be effective. Roche argued that the prior art did not conclusively prove efficacy at the claimed once monthly dose. The Federal Circuit found, however, explained that Roche was trying to apply the wrong standard and that “conclusive proof of efficacy [at the claimed dosing interval] is not necessary to show obviousness.” Rather, all that is required is a reasonable expectation of success.
The Federal Circuit concluded that, in accordance with the total-dose concept, efficacy depends on the total oral dose given rather than the dosing schedule and that this taught by the prior art, which provided substantial guidance as to the total dose. One need only scale up a known-effective dose from a shorter interval regimen, stated the Court. The Federal Circuit confirmed that the evidence showed the total-dose concept can be used as an effective rule of thumb by a person of ordinary skill deciding how to scale to an efficacious intermittent dose.
Roche argued that there were disputed issues of fact as to whether the claimed dosage level and frequency were safe, noting a prior art study showed a higher incidence of diarrhea and number of dropouts with a daily 5 mg dose (which scales up to about 150 mg/month). However, the Federal Circuit stated the study taught that the side effect profile seemed to be safe. The Court found that there was no genuine issue of fact suggesting that the references taught away from the monthly 150 mg dose.
Roche also argued that the record showed that the 150 mg once-a-month dose was more effective than the 2.5 mg daily dose and that the superior effectiveness of the 150 mg and the drug’s nonlinear bioavailability at the claimed dosage level were unexpected. While the evidence supported superior efficacy at 150 mg monthly dose, as compared to 2.5 mg daily dose, the Federal Circuit found that the evidence did not rebut a strong showing that the prior art disclosed monthly dosing and provided a reason to set that dose at 150 mg. The Court also found that prior art suggested that there was a reasonable expectation of success with the 150 mg monthly dose. Using the same reasoning the nonlinear bioavailability of the drug did not rebut the prima facie showing of obviousness of a once month 150 mg dose. Specifically, Roche did not show that the increased level of bioavailability was responsible for improved osteoporosis treatment efficacy at the higher dose.
Judge Newman dissented, arguing that there is no suggestion in the prior art of record (showing a wide range of dosages and conditions) that showed or suggested the claimed combination of a single 150 mg once-a-month dose, nor the effectiveness and safety of this combination. Judge Newman stated that the majority adopted the argument that 150 mg is 30 times the daily dose of 5mg, but ignored the fact that the FDA refused to approve the 5 mg dose due to its toxic side-effects, a fact that lead away from the obviousness of a single dose 30 times larger.
The Federal Circuit upheld the ruling. Undisputed evidence showed that the prior art did not suggest using the claimed combination for hypertension. Moreover, the Court observed that the record showed there were hundreds if not thousands of potential ACE and calcium channel blocker combinations, and prior art did not suggest which might work. The Court indicated that under those circumstances, Glenmark’s “obvious to try” argument failed.
Addressing declaratory judgment jurisdiction based infringement allegations against customers, the U.S. Court of Appeals for the Federal Circuit affirmed in part and reversed in part the district court’s finding of jurisdiction. Microsoft v. DataTern, Inc., Case No. 2-13-1184, consolidated with SAP AG and SAP America, Inc. v. DataTern, Inc., Case No. 2013-1185 (Fed. Cir., Apr. 4, 2014) (Moore, J.) (Rader, C.J., dissenting-in-part).
DataTern sued Microsoft and SAP customers in Texas, providing claim charts alleging infringement by use of Microsoft and SAP software. Several of the customers demanded indemnification. Microsoft and SAP filed declaratory judgment actions in the U.S. District Court for the Southern District of New York, which DataTern moved to dismiss for lack of subject matter jurisdiction. After the district court denied DataTern’s motion to dismiss, DataTern appealed.
The Federal Circuit rejected the argument that where there is no duty to indemnify, jurisdiction existed “solely because [Microsoft and SAP] customers have been sued for direct infringement.” The Court went on to hold that even if an obligation to indemnify existed, Microsoft and SAP would not be entitled to bring a separate declaratory judgment action in a different jurisdiction but would have to act to indemnify in the existing (customer) action. The Court was careful to note that “[w]e do not address whether Appellees would be entitled to file a declaratory judgment action if they were obligated to indemnify a customer who had not already been sued by DataTern.”
The Court also rejected the argument that the customer lawsuits automatically gave rise to jurisdiction over induced infringement allegations. To establish a substantial case or controversy concerning inducement, the patentee must make sufficient allegations to establish a reasonable potential that the accused inducer took an affirmative act to encourage infringement with the knowledge that the induced acts constituted patent infringement.
The Federal Circuit analyzed the customer claim charts to parse where DataTern based its allegation of direct customer infringement on instructions from Microsoft and SAP in user manuals and documentation. In those instances, where the claim charts specifically indicated that Microsoft and SAP had provided the instructions, the Federal Circuit found DJ jurisdiction. This resulted in DJ jurisdiction for Microsoft in one of two patents and for SAP on both patents.
The Federal Circuit rejected the district court’s reliance on DataTern’s counterclaims, for DJ jurisdiction, or DataTern’s allegations that referenced refusal to grant a covenant not to sue—finding these were post complaint facts that cannot support jurisdiction at the time of the filing of the complaint.
Microsoft also argued that DataTern’s aggressive litigation strategy, including suing more than 100 entities for infringement of the patents-in-suit, supported the existence of a substantial controversy. The Federal Circuit was “sympathetic” to the argument, but noted that DataTern’s litigation strategy focused on suing software users, not suppliers, and that there was no record evidence that Microsoft encouraged the acts that DataTern alleges result in direct infringement.
Judge Rader dissented in part and would have held that the totality of the circumstances supported declaratory judgment jurisdiction over both patents. He argued that the majority improperly reviewed each alleged fact in isolation. Rader argued that Microsoft’s lawsuit would resolve DataTern’s claims in the most efficient manner in a single focused lawsuit. DataTern and other patent licensing plaintiffs “would like to find a way to keep Microsoft and other major corporations on the sidelines while seeking numerous settlements with their customers who cannot afford the cost of a major lawsuit.”
Practice Note: Suppliers may have some opening to bring a declaratory judgment action to resolve cases against their customers, but the facts have to align. In all likelihood Judge Rader is correct and NPEs will use this opinion to carefully avoid supplying the facts needed for declaratory judgment jurisdiction. As noted by the dissent, the majority decision was of “special importance because it shows DataTern and its successors a way to achieve that lucrative objective.”
Patents / Design Patent Invalidity
Addressing the nature of analyzing primary and secondary references for purposes of determining whether a design patent is obvious, the U.S. Court of Appeals for the Federal Circuit affirmed a district court’s summary judgment of invalidity with respect to two ornamental designs of sports jerseys intended to be worn by dogs, finding that the district court did not err by failing to provide an express verbal description of the claimed design. MRC Innovations, Inc. v. Hunter Mfg., LLP, Case No. 13-1433 (Fed. Cir., Apr. 2, 2014) (Prost, J.).
Mark Cohen, the principal shareholder of MRC, is the named inventor on two design patents relating to football and baseball jerseys for dogs. Prior to the suit, Hunter Manufacturing purchased dog jerseys from Cohen and his companies. When Cohen informed Hunter that he would no longer sell to Hunter over payment issues, Hunter sought and found alternative suppliers. Soon after, Cohen, through MRC, sued Hunter for design patent infringement. The district court found the two design patents invalid as obvious on Hunter’s motion for summary judgment. MRC appealed.
The Federal Circuit considered whether the claimed design would have been obvious to a designer of ordinary skill, an inquiry which entails combining a primary reference with secondary references. Primary references must be a single reference with “basically the same” characteristics of the claimed design. Determining whether a reference is basically the same requires consideration of the visual impression of the patented design as a whole and may be determined “almost instinctively” by a judge. Citing to its decision in High Point (IP Update, Vol. 16, No. 10), the Court explained that in evaluating a primary reference, the district court must describe the claimed design in words so the parties and appellate courts can determine the district court’s reasoning. The Federal Circuit concluded, however, that this description does not have to be express if the district court is clear in defining the relevant design characteristics.
Here, the Federal Circuit found that the district court’s identification of five similarities and three differences between the claimed design and primary reference was sufficient to paint a clear picture of the claimed design. The Court also agreed that the claimed design created “basically the same” overall visual impression as the primary reference.
The Federal Circuit also addressed MRC’s argument that the district court failed to explain why a designer would combine the primary and secondary references. The Court found that the mere similarity in appearance itself provides the suggestion to combine. Further, the Court found that because all the references were dog jerseys, they fulfilled the requirement that the references be “so related.” The Court rejected MRC’s argument that even if the combination was proper, it did not contain the presence of additional ornamental surge stitching running down the rear of the jersey, finding that this feature was de minimis and would have been obvious in light of the references.
The Federal Circuit further agreed that MRC’s secondary considerations relating to commercial success, copying and acceptance by others did not alter the analysis. MRC failed to provide sufficient evidence and did not demonstrate a nexus between the claimed design and the secondary considerations.
On appeal from summary judgment, the U.S. Court of Appeals for the Federal Circuit construed “a patient” to mean “a population of patients,” overturning the district court’s construction and vacating the infringement ruling. Braintree Labs, Inc. v. Novel Labs, Inc. The dissent would have held the term to mean “one or more patients,” as the district court had determined. Case No. 13-1438 (Fed. Cir., Apr. 22, 2014) (Prost, J.) (Moore, J., dissenting).
Patents / Litigation Forum
Balancing Venue, Transfer Factors at the Federal Circuit
The U.S. Court of Appeals for the Federal Circuit denied two writs of mandamus filed by defendants requesting the Federal Circuit to direct district courts to transfer patent litigations to other districts. As these were mandamus actions, and the cases were filed in the U.S. District Court for the Eastern District of Texas, the burden on the petitioners was to show that under Federal Circuit test in TS Tech and applying the eight-factor test, the district court’s denial of transfer was so patently erroneous as to amount to a clear abuse of discretion.
In In re Altair Engineering, Inc., Case No. 14-120 (Fed. Cir., Ap. 23, 2014) (Lourie, J.) (non-precedential), the petitioner, Altair, sought a writ of mandamus directing the U.S. District Court for the Eastern District of Texas to transfer its case to the U.S. District Court for the Eastern District of Michigan. While the district court found that the sources of proof factor weighed slightly in favor of transfer, the court denied transfer because there were three then-pending cases in the Eastern District of Texas that involved the same patent and plaintiffs. Accordingly, the Federal Circuit found that the district court properly denied transfer based on the judicial economy of maintaining all four related actions in the same court.
In In re Groupon, Inc., Case No. 14-118 (Fed. Cir., Apr. 23, 2014) (Lourie, J.) (non-precedential), the petitioner, Groupon, sought a writ of mandamus directing the U.S. District Court for the Eastern District of Texas to transfer its case to the U.S. District Court for the Northern District of Illinois. Groupon argued that the bulk of the witnesses were in the Northern District of Illinois and the transferee venue had a stronger local interest. The district court found that the sources of proof factor did not weigh in favor of transfer because plaintiff was headquartered in the Eastern District of Texas, the patented invention was developed in the Eastern District of Texas and multiple witnesses (both plaintiff’s witnesses and third-party witnesses) were located in the Eastern District of Texas. The Federal Circuit found that the district court did not abuse its discretion given that only one more non-party witness was located in the transferee venue than in E.D. Tex.
Pre-AIA Statute Did Not Give Patent Owner in an Ex Parte Reexamination the Right to Bring an Action in District Court *Web Only*
Addressing whether a patent owner involved in a pre-America Invents Act (AIA) ex parte reexamination, could challenge an adverse reexamination decision in a district court action under 35 U.S.C. § 145, the U.S. Court of Appeals for the Federal Circuit affirmed a district court’s ruling that it lacked subject matter jurisdiction, finding that § 145 does not authorize a patent owner, in a pre-AIA ex parte reexamination, to bring suit in a district court challenging the Board’s action. In re Teles AG Informationstechnologien, Case No. 12-1297 (Fed. Cir., Apr. 4 2014) (Dyk, J.).
Teles owned a patent directed to a method for transmitting data in a telecommunications network and switch for implementing said method. In 2007, prior to the enactment of the AIA, a third party submitted a petition for ex parte reexamination. During reexamination, the examiner rejected the claims as being obvious over a combination of prior art references. Teles appealed the rejection to the Board of Patent Appeals and Interferences (the Board). The Board affirmed the examiner’s rejection. Teles sought review of the Board’s decision in the United States District Court for the District of Columbia pursuant to § 145. The district court dismissed the case for lack of subject matter jurisdiction, noting that Teles was a patent owner, not a patent applicant, and at the same time transferred the case to the Federal Circuit. Teles appealed.
Turning to the legislative history of § 145, the Federal Circuit noted the statue was amended in 1999 to state that an applicant dissatisfied with the decision of the Board may, unless appeal has been taken to the Federal Circuit, have remedy by civil action against the Director in the United States District Court for the District Court of Columbia. The Court also noted that, at that same time, Congress (for the first time) amended § 134 to distinguish between “a patent applicant,” “a patent owner,” and “a third party.” Congress also amended § 141 to state “[a] patent owner in any reexamination proceeding dissatisfied with the final decision in an appeal to the Board… under section 134 may appeal the decision only to the United States Court of Appeals for the Federal Circuit.” The Federal Circuit concluded these amendments on their face precluded a patent owner from appealing the Board’s decision to the district court under § 145. Only the Federal Circuit is a proper venue for such an appeal.
The Federal Circuit rejected Teles’ argument that an action to district court by the patent owner was permitted because such an action was not an “appeal.” The Court further rejected the argument that an action in district court was available to a patent owner because another pre-AIA statute, § 306, stated that a patent owner had recourse under § 145 in district court, finding that the § 306 language was a drafting error. Finally, the Federal Circuit noted that during the legislative history of the AIA, Congress recognized the error in § 306 and corrected it in the implementation of the AIA.
The Federal Circuit then turned to the Board’s rejection of Teles’s claims as being obvious. The Court rejected Teles’ argument that the Board’s decision rests on an incorrect claim interpretation. In interpreting the claims, the Board construed the claim recitation “means to produce the control signal” under § 112 ¶ 6 and further agreed with the examiner that the function of producing the control signal requires monitoring factors related to demands of quality. The Board refused to limit those factors to only a bandwidth quality as suggested by Teles.
Teles argued that Board’s claim construction is incorrect in view of the inventive concept defined by the inventor (monitoring the bandwidth of a particular transfer). To this end, Teles argued that the Supreme Court’s decision in Mayo requires that the “inventive concept” of the application be used in the claim construction. The Federal Circuit disagreed, explaining that the Supreme Court in Mayo referred to “inventive concept” only in analyzing whether the claims are directed toward a patentable subject matter and not whether the claims are novel and nonobvious.
Patents / En Banc Alert
Federal Circuit to Review Consideration of Induced Infringement at the ITC En Banc *Web Only*
The U.S. Court of Appeals for the Federal Circuit has granted en banc review in the case of Suprema, Inc. v. International Trade Commission in order to consider whether the ITC has jurisdiction to consider allegations of induced infringement under 35 U.S.C. § 271(b) in situations where there is no direct infringement until after importation. Suprema, Inc. v. International Trade Commission, Case No. 12-1170 (Fed. Cir., May 13, 2014) (non-precedential order).
In the panel decision (IP Update, Vol. 16, No. 12), the Federal Circuit ruled that an exclusion order based on a violation of § 337 may not be predicated on a theory of inducement where direct infringement does not occur until after importation.
Patents / SEP Licensing (EU)
Copyrights / Latches
Sarah Bro | Paul Devinsky
The U.S. Supreme Court of the United States, in a 6-3 ruling, resolved a conflict among the circuits courts, holding that the equitable defense of laches cannot be invoked to preclude a claim for damages that is brought within the Copyright Act’s three-year statute of limitation window under § 507(b). Justice Ginsburg’s majority opinion was joined by Justices Thomas, Alito, Sotomayor and Kagan. The Supreme Court’s analysis focused on the “gap-filling, not legislation-overriding” purpose of laches and addressed the U.S. Court of Appeals for the Ninth Circuit’s failure to recognize that the copyright statute of limitations “itself takes account of delay” because a successful plaintiff can obtain retrospective relief only three years back from the time of suit for each new instance of infringement. Justice Breyer wrote a dissent joined by Chief Justice Roberts and Justice Kennedy. Petrella v. Metro-Goldwyn-Mayer, Inc. et. al., U.S. Case No. 12-1315 (Supr. Ct., May 19, 2014) (Ginsburg, Justice) (Breyer, Justice, dissenting).
Citing the 18-year delay between the 1991 renewal of the copyright and Petrella’s commencement of the suit in 2009, MGM moved for summary judgment based on the equitable doctrine of laches. The district court granted MGM’s motion, and the 9th Circuit affirmed the laches-based dismissal, finding that MGM was prejudiced by the delay and noting that Petrella had delayed her claims because the film hadn’t made money in the years prior to the suit.
In the end, the Supreme Court held that the lower courts erred in treating laches as a complete bar to Petrella’s copyright infringement suit. Finding that Petrella’s suit was commenced within the bounds of § 507(b), the Court found that Petrella properly notified MGM of her claims before it invested millions of dollars in creating a new edition of Raging Bull and that allowing Petrella’s suit to go forward would put at risk only a fraction of the income that MGM had earned during that period. Moreover, any remedies in this case would not require the destruction of the film nor any hardship on innocent third parties, such as consumers who had purchased copies of the film.
In his dissent, Justice Breyer argued that the majority’s holding disables the federal courts from addressing laches as an equitable doctrine, regardless of a plaintiff’s delay in bringing a copyright suit. In particular, the dissent focused on the challenges that were created for MGM due to Petrella’s delay in bringing suit, such as the deaths of certain key witnesses and the amount of marketing dollars that MGM spent developing and marketing a new edition of the film.
Addressing the issue of accrual of a claim for copyright infringement, the U.S. Court of Appeals for the Second Circuit upheld the lower court’s denial of summary judgment for the defendants, concluding that the statute of limitations under the Copyright Act did not bar the plaintiff’s infringement claims because copyright infringement claims do not accrue until actual or constructive discovery of the infringement. Psihoyos v. John Wiley & Sons, Inc., Case Nos. 12-4874; -5069 (2d Cir., Apr. 4, 2014) (Lohier, J.).
In November 2010, John Wiley & Sons, Inc. (Wiley) discovered its unauthorized use of a pair of photographs taken by professional photographer Louis Psihoyos in several of its textbooks and sought a retroactive licensing arrangement with him. Upon Psihoyos request for full disclosure, Wiley admitted to unauthorized use of two additional photographs. In March 2010, Psihoyos sued Wiley for copyright infringement for publication of eight of his photographs in textbooks from 2005 to 2009. Wiley moved for summary judgment, arguing that many of Psihoyos’s claims were barred by the three-year statute of limitations because they arose from alleged infringements that occurred more than three years prior to the suit.
Section 507(b) of the Copyright Action requires civil actions for copyright infringement to be commenced within three years after the claim accrues. The district court concluded that an infringement claim does not “accrue” until the copyright holder discovers, or with due diligence should have discovered, the infringement (the so‐called “discovery rule”). The court determined that Psihoyos’s infringement claims were not barred by the statute of limitations because Psihoyos did not discover the infringements until 2010, well within three years of filing suit, despite exercising reasonable diligence. Wiley appealed.
The 2d Circuit cited its previous use of discovery rule for copyright claims under § 507(b) and rejected Wiley’s attempts to distinguish those cases on the ground that they involved co‐ownership claims. Wiley urged the Court to adopt an “injury rule” in case of copyright infringement actions relying on TRW, where the Supreme Court had reversed a decision of the U.S. Court of Appeal for the Ninth Circuit, which had employed the discovery rule as a default unless Congress had expressly legislated otherwise. TRW concerned the Fair Credit Reporting Act (FCRA), which provides that the statute of limitations runs from “the date on which the liability arises.” Holding that the text and structure of FCRA evince Congress’ intent to preclude judicial implication of a “discovery” rule for FCRA claims, the Supreme Court concluded that the most natural reading of the FCRA is that Congress implicitly excluded a general discovery rule by explicitly including a more limited one.
The 2d Circuit refused to apply different accrual rules for ownership and infringement claims, both of which are governed by § 507(b). Rather, the 2d Circuit agreed with other circuits which have considered the issue of claim accrual in the context of infringement claims and have found that the text, structure, legislative history and underlying policies of the Copyright Act comport with the use of discovery rule, not the injury rule.
The U.S. Court of Appeals for the Seventh Circuit affirmed the district court’s decision dismissing a copyright infringement claim and holding that the organizers of an event at which plaintiff performed a singing telegram dressed in a banana costume did not infringe or induce infringement of plaintiff’s asserted copyrights because immediately after her performance the organizers told the attendees that photographs of the performance may only be taken for personal use, as permitted by plaintiff. Conrad v. AM Community Credit Union, Case No. 13-2899 (7th Cir., Apr. 14, 2014) (Posner, J.).
The plaintiff, Catherine Conrad (aka the Banana Lady), a singing telegram performer, was hired by the defendant to sing at a trade association event, dressed in a banana costume. Conrad told the arrangers that the members of the audience were not allowed to take photographs or videos of her performance except for their personal use. The arrangers of the event in turn informed the attendees. Photos and videos were taken and the Banana Lady filed suit, alleging infringement of her copyright in her performance.
After the district court dismissed the copyright infringement claim, ruling that Conrad had failed to state a claim, Conrad appealed.
The 7th Circuit affirmed the district court’s decision, concluding that among the deficiencies with Conrad’s infringement claim was that “the performance itself was not copyrighted or even copyrightable, not being fixed in any tangible medium of expression.” Nevertheless, the court proceeded with its analysis stating that “photos and videos made by members of the audience could conceivably have been either reproduction of, or works derivative of the protectable elements of Conrad’s performance, such as the costume.” If so, Conrad would have the exclusive right to create or license reproductions of and derivative works from works that she had validly copyrighted, 17 U.S.C. 106(1), (2). In addition, the Copyright act forbids unauthorized recording of a musical performance, 17 U.S.C. 1101(a), and unauthorized display of copyrighted musical or choreographic work, § 106(5). However, Conrad did not allege that any of those rights had been violated. Also Conrad sued the organizers, not the individual attendees. The organizers could only be liable for inducing infringement, i.e., if they had encouraged the attendees to infringe Conrad’s copyrights. But the organizers had done the opposite by informing attendees not to use videos and photographs they took for anything other than personal use.
The court noted however that although Conrad claimed to have a registered copyright in her banana suit, they doubted that a banana suit could be copyrighted as they were “surprised to discover” that banana suits are a common consumer product.
The court also urged the district court to stop Conrad’s abuses. Conrad’s “abuse of the legal process by incessant filing of frivolous lawsuits” should be stopped, and the court suggested that the lower courts “consider enjoining her from filing further suits until she pays her litigation debts.”
Copyrights / EU Copyright Directive
Is this answer affected by the availability of TPMs?
Inter Partes Review / Institution
Inter Partes Review / Appellate Standing
Appellant Michael Vaillancourt appealed from a PTAB ruling dismissing his request for rehearing of the Board’s earlier decision to affirm the examiner rejections of the claims in an inter partes reexamination. Vaillancourt was the owner of the patent when Becton Dickinson & Company requested an inter partes reexamination. The reexamination resulted in rejections of claims of the patent. Vaillancourt appealed the rejections to the Board. Approximately one year later, while the reexamination appeal was still pending, Vaillancourt assigned “the entire right, title and interest in the patent “including full and exclusive rights to sue upon and otherwise enforce” to VLV. VLV initiated a lawsuit against Becton Dickinson for infringement of the patent. Although Vaillancourt was the sole owner of VLV, it was indisputable that he was no longer an owner of the patent. Eventually, the PTAB affirmed all of the examiner’s rejections. Despite the fact that he was no longer the owner of the patent, Vaillancourt requested a rehearing with the PTAB in his own name. The PTAB denied Vaillancourt’s request to alter the prior affirmance of the examiner’s rejections. Vaillancourt appealed, identifying himself in the notice of appeal as both the patent owner and appellant.
Inter Partes Review / Subject Matter Jurisdiction
Addressing whether a district court has subject matter jurisdiction over a decision to deny an inter partes review made by the United States Patent and Trademark Office (PTO) Patent Trial and Appeal Board (PTAB), the U.S. District Court for the Eastern District of Virginia granted the PTO’s motion to dismiss for lack of subject matter jurisdiction, finding that the language of the pertinent statute is “quite clear” that a determination not to institute an IPR is final and nonappealable. Dominion Dealer Solutions, LLC v. Lee, Civil Action No. 3:13CV699 (E.D. Va., Apr. 18, 2014) (Payne, J.).
Plaintiff Dominion Dealer Solutions (Dominion) was sued in a California district court by AutoAlert, Inc. for allegedly infringing five patents. In response, Dominion filed petitions seeking IPR for those five patents. Dominion also filed a motion to stay the patent infringement litigation in the California district court in view of the pending IPR petitions. The stay was granted “pending final exhaustion of all pending IPR proceedings, including any appeals.” Subsequently, the PTAB denied Dominion’s petitions for IPR. Dominion filed requests for rehearing on its petitions, which were also denied.
Dominion then filed an action in a Virginia district court under the Administrative Procedures Act (APA), alleging that the PTAB’s decisions were arbitrary, capricious, an abuse of discretion and contrary to law. The PTO filed a motion to dismiss for lack of subject matter jurisdiction.
In resolving the PTO’s motion, the Virginia district court interpreted two statutes: the portion of the APA that the Supreme Court has stated “confers a general cause of action” to object judicial review of agency action, and the portion of the Leahy-Smith America Invents Act (AIA) that governs the institution of inter partes review by the PTO.
While recognizing that the APA generally provides the ability to obtain judicial review of agency action, the court noted that the APA does set forth several limitations on the grant of judicial review. One such limitation is when other statutes preclude judicial review. Determining whether and to what extent a particular statute precludes judicial review, courts look at the express language of the statute, as well as the structure of the statutory scheme, its objections, its legislative history and the nature of the administrative action involved. The court found that there is a strong presumption under the APA that Congress intended to permit judicial review of agency actions.
The Virginia district court found that the AIA rebutted the strong presumption, and rejected Dominion’s arguments otherwise. The court found that the wording of the AIA—that “[t]he determination by the Director whether to institute an inter partes review under this section shall be final and nonappealable”—was “quite clear.”
The court rejected Dominion’s argument that its case in Virginia district court was not an appeal, in view of the fact that Dominion made the tactical decision to present its complaint as an “appeal” to avoid triggering the end of the stay in the California district court.
The court also rejected Dominion’s argument that the statute did not preclude an appeal to the Virginia district court of the PTAB’s construction of the relevant legal standards. The court noted that this argument was belied by the legislative history of the AIA, which indicates that Congress intended the AIA and the IPR process to decrease the volume of patent litigation in the federal courts and streamline the patent administration process.
The court further rejected Dominion’s argument that the “final and nonappealable” language only precluded decisions to grant IPR and was not applicable to decisions denying IPR. The court again relied upon the express language of the AIA itself, finding Dominion’s position “clearly untenable.”
In the past several months, decisions have been rendered in the first wave of inter partes reviews filed under the American Invents Act (AIA). The early IPR decisions of the Patent Trial and Appeal Board (PTAB) have, in general, not been kind to patent owners, with most challenged claims being cancelled. Now, in two related inter partes review (IPR) proceedings, the PTAB found for the patent owner on all grounds of review. ABB Inc. v. ROY-G-BIV Corp., Cases IPR2013-00036 and IPR2013-00282, IPR2013-00074 and IPR2013-00286 (PTAB, Apr. 11, 2014) (Giannetti, APJ.).
ABB filed two separate petitions for review of each of two ROY-G-BIV owned patents. ROY-G-BIV had earlier asserted each against ABB. The patents are both directed to essentially the same technology: a system for facilitating the creation of hardware-independent motion control software. The patents describe a high-level motion control application programming interface (API) made of functions that are correlated with driver functions associated with controlling a mechanical system that generates movement based on a control signal. The object of the invention is to isolate the application programmer from the complexity of hardware devices, which often have a manufacturer-specific motion control command language and functionality that is highly hardware-dependent.
For each patent, ABB filed its second IPR petition after the Board instituted proceedings for the first petition on only one of the eight proposed grounds and on only a subset of the claims challenged. In each of the second petitions, ABB initially asserted additional multiple grounds of invalidity, but then filed a motion to limit the proceeding to obviousness grounds based on a set of prior art common with the first IPR proceeding. After institution of the related proceeding, each initial IPR included a single obviousness ground based on a set of prior art that was common with the related second IPR. The two IPRs for each patent were then joined.
At trial, ROY-G-BIV attempted to ante-date two of the three references that were common to all grounds. For support, the patent owner submitted testimony of its founder, who was also the chairman, chief technical officer and a named co-inventor on both patents. Due to the lack of independent corroborating evidence regarding both conception and diligence, the Board concluded that the patent owner was unsuccessful and that the two references were properly considered prior art.
However, the patent owner also contended that various limitations of the claims, limitations common to the two patents, were not taught or suggested by the core set of prior art references that ABB relied on. The patent owner relied on expert testimony from the author of one of the three core references, an individual who had engaged in research with and co-authored articles with the author of one of the other primary references. Even though ABB countered with the testimony from two experts, the PTAB ultimately found the testimony of the patent owner’s expert to be most persuasive and determined that key limitations were not taught or suggested by the prior art.
Practice Note: It seems the expert testimony relied on by the patent owner that was found by the Board to be most credible was in part a consequence of the fact that the testimony was from an author of one of the petitioner’s prior art references.
In a decision that provides useful guidance on what constitutes abandonment, the U.S. Court of Appeals for the Seventh Circuit upheld a district court ruling that Google did not infringe on a third party’s alleged rights in the mark ANDROID DATA after the mark had been abandoned based on non-use. Erich Specht, et al., v. Google, Inc., Case No. 11-3317 (7th Cir., Apr 4, 2014) (Rovner, J.).
In 1998, Erich Specht started using the ANDROID DATA trademark in connection with a business that licensed his e-commerce software and offered website hosting and design services, as well as computer consulting services. He filed a trademark application for the ANDROID DATA trademark, and the registration issued in 2002—just as Specht’s business started winding down. After 2002, his use of the ANDROID DATA trademark was extremely limited. Specht kept his phone service for the company until 2003, he kept his website at androiddata.com until 2005, and he only made a handful of attempts to use of the mark after 2005.
During this time, another company, Android, Inc., started developing the Android operating system. Google purchased Android, Inc., in 2005 and released a public beta of the Android software in 2007. After this beta release, use of the Android platform grew, and Google filed an application to register the ANDROID trademark. The U.S. Patent and Trademark Office rejected Google’s application, based on Specht’s prior registration for ANDROID DATA.
Specht then sued Google for federal trademark infringement, federal unfair competition, common law trademark infringement and violation of the Illinois Deceptive Trade Practices Act, all based on Google’s use of the ANDROID trademark. Google responded with counterclaims seeking a declaration that Specht had abandoned the ANDROID DATA mark and asking the district court to cancel the ANDROID DATA trademark registration. On summary judgment decision, the district court found that the ANDROID DATA mark had been abandoned based on non-use without any intent to resume use and cancelled Specht’s trademark registration. Specht appealed.
In affirming the district court, the 7th Circuit explained that use of a trademark is discontinued with no intent to resume use, a trademark owner forfeits its rights and the trademark is considered abandoned. According to the Lanham Act, “[n]onuse for three consecutive years shall be prima facie evidence of abandonment.” Here, the court agreed that Specht’s sporadic use of the ANDROID DATA mark after 2002 did not constitute bona fide trademark use of the mark, and Specht had already abandoned the ANDROID DATA trademark when Google started using ANDROID in commerce in 2007.
The appellate court also confirmed that the district court had the authority to cancel a trademark registration, explaining that where “a registrant’s asserted rights to a mark are shown to be invalid, cancellation is not merely appropriate, it is the best course.”
Practice Note: The decision includes a useful discussion of certain acts that will not constitute trademark use. In particular, Specht’s efforts to sell the assets of his business, his operation of a website bearing the ANDROID DATA trademark (without providing any goods or services) and his “sporadic attempts to solicit business” through an unsuccessful mass mailing and a failed bid to license software to a third party were all insufficient to show continued use of the mark.