All posts by Dennis Crouch

About Dennis Crouch

Law Professor at the University of Missouri School of Law.

I just Googled “Improper Venue Texas”

This post serves as a complement to Prof. Gugliuzza’s new remarks on a parallel case of In re Apple. – DC

by Dennis Crouch

In re Google (Fed. Cir. September 18, 2020) (Google III)

Google’s business pervades the lives of most Americans, including most citizens of the E.D. of Texas.  Google has millions of customers in the district; serves terabytes of data to, from, and within the district; and keeps detailed files on the activities of its citizens. Google also has lots of Texas lawyers.  Google is doing everything it can to move this case out of E.D.Texas.  The reality is though that Google doesn’t mind being in Texas, it just doesn’t want Texas style justice — where patent cases are on a direct path to a jury trial.

28 U.S.C. 1400(b) has a specific test for proper venue. An infringement lawsuit can only be filed in a district where either: (more…)

The Federal Circuit, Judge Shopping, and the Western District of Texas

Guest Post by Prof. Paul R. Gugliuzza (Temple U.)

A rare thing happened at the Federal Circuit today. The court heard oral argument on a petition for a writ of mandamus. The petition was filed by the tech behemoth, Apple, in a patent infringement case filed against it in the Western District of Texas. In the petition, Apple seeks an order sending the case to the Northern District of California under 28 U.S.C. § 1404, which permits transfer “[f]or the convenience of parties and witnesses, in the interest of justice.”

Though transfer petitions are relatively common in patent cases, the Federal Circuit almost always decides them on the briefs alone. That the court scheduled oral argument—in a case arising out of the Western District of Texas, no less—has been interpreted as reflecting concern by the Federal Circuit about the judge shopping occurring in the Western District.

As Jonas Anderson and I showed in a recent Patently-O post and discuss in more detail in a draft article, the Western District’s case assignment rules permit plaintiffs to predict, with absolute certainty, which judge will hear their case. And plaintiffs are overwhelmingly choosing Judge Alan Albright, whose procedural rules and substantive decisions they find quite favorable.

That said, the Federal Circuit’s decision to hold oral argument on Apple’s petition could also reflect the fact that, in the midst of the COVID pandemic, it’s a pretty easy thing to do. For the past six months—and for the foreseeable future—the Federal Circuit has been conducting oral argument entirely by telephone. Indeed, that’s how I was able to listen to today’s arguments, live.

Before getting to a summary of that argument, some background about the case. The plaintiff is, like many plaintiffs in the Western District, a prolific non-practicing entity, Uniloc 2017 LLC. In September 2019, Uniloc sued Apple for infringing a patent on a system for controlling software updates.

Like more than 800 other patent cases over the past two years, Uniloc filed its case in the Waco Division of the Western District of Texas and—like 100% of cases filed in the Waco Division—it was assigned to Judge Albright. Apple sought transfer to the Northern District of California, noting that, out of 24 prior cases Uniloc had filed against it in the Eastern and Western Districts of Texas, 21 had been transferred.

But Judge Albright denied Apple’s motion in an order from the bench in May 2020. As covered here on PatentlyO, it took Judge Albright more than a month to issue an order explaining why he was doing so. When that order eventually issued, it noted, among other things, that Apple has stronger connections to the Western District of Texas than to the Eastern District and that the cases previously transferred out of the Western District (by Judge Lee Yeakel) were distinguishable because Apple’s activities in the Western District had grown significantly over the past couple years.

The Federal Circuit argument, it’s worth noting, wasn’t part of the court’s normal calendar of arguments, which typically take place during the first week of the month. Rather, it was the only case heard by a panel consisting of Chief Judge Prost, Judge Moore, and Judge Hughes.

Mel Bostwick, from Orrick, Herrington & Sutcliffe’s Washington, D.C., office, presented argument for Apple. In her view, the district court made two critical errors in denying transfer: First, it relied too heavily on the progress it had already made in the case as well as its already-scheduled trial date (which, under Judge Albright’s extremely speedy default schedule, is less than 18 months after the initial case management conference).

Second, according to Apple, the district court erred in applying the “cost to willing witnesses” factor in the transfer analysis. Though both Apple and Uniloc identified witnesses in California, Judge Albright, according to Apple, inappropriately discounted the relevance of those witnesses because they were willing to travel. But, Apple contended, the relevant question is the cost of their travel, not their willingness to do so.

Apple faced skeptical questioning from Judge Moore, who was, in fact, the only judge to ask a question of Apple until rebuttal. Judge Moore focused initially on the standard of review. To receive the extraordinary writ of mandamus, a party must show a “clear abuse of discretion” by the district judge. The fact that this case has some factual connection to the Western District—namely, Apple has a campus in Austin and a third party makes accused products in the district—seemed to raise doubts in Judge Moore’s mind about whether any error by the district court met that high bar.

Christian Hurt of the Davis Firm in Longview, Texas argued on behalf of Uniloc. He began by emphasizing the concerns about parties and witnesses located in the Western District that were initially raised by Judge Moore. Apple didn’t dispute, Uniloc noted, that it has an 8,000 employee campus in Austin, technical witnesses work there, and a third-party contractor makes accused products in the district.

Almost all the questions for Uniloc came from Chief Judge Prost. She asked about matters including: the exact location of the witnesses, whether it was clearly an abuse of discretion for the district court to rely on its progress and projected schedule in denying transfer, and whether Apple might have an alternative means of seeking relief, such as through a later mandamus petition or by seeking a stay pending related litigation elsewhere.

Toward the end of Uniloc’s argument, Judge Moore chimed in to ask whether, if the court found the district court had made errors in its transfer analysis, it would be appropriate for the Federal Circuit to vacate the decision and remand the case for further proceedings, rather than ordering transfer—a step the very same panel of Federal Circuit judges basically took in a  recent Western District case filed against the file storage company, Dropbox.

During Apple’s rebuttal argument, Judge Moore asked why transfer to California was warranted given the local interest in the case. Apple, Judge Moore observed, is one of the largest employers in the Western District—a far cry from the Eastern District, where Apple doesn’t even have stores anymore, for fear of aiding patent plaintiffs in establishing venue there. Judge Moore was unconvinced (to put it mildly) by Apple’s assertion that the local interest isn’t the interest of Western District of Texas and its residents, but the interest of “the people who created the accused technology,” in Cupertino.

*          *          *

So, what’s my take? The atmospherics are clearly troubling. There’s no doubt that Judge Albright is successfully courting patentees to file in his courtroom both by explicitly advertising to them and by adopting procedural rules and making substantive decisions that clearly favor them. But those larger dynamics, though they were discussed in Apple’s brief, weren’t even mentioned at oral argument. (Bostwick, Apple’s attorney, seemed to want to go there during rebuttal, but ran out of time.)

In this case, the Federal Circuit might struggle to find a legal justification for ordering transfer, particularly given high standard for mandamus. That said, the Federal Circuit rarely hesitated to transfer cases out of the Eastern District during its heyday as the nation’s patent litigation capital. In several cases, the Federal Circuit used the extraordinary writ of mandamus to engage in what seemed like pure error correction. It’s not out the question that the Federal Circuit would do something similar with the Western District, whether in this case or one of the other nearly 600 filed before Judge Albright this year alone.

Moreover, though the court competition and judge shopping that’s going on in the Western District is troubling, interlocutory appeals like the one Apple is pursuing can be costly and disruptive. That will be even more so if the Federal Circuit makes a habit of simply vacating orders denying transfer and remanding for further consideration, as Judge Moore suggested. The end result would be another round of briefing and argument—and possibly even discovery—on an issue entirely tangential to the merits of the case.

Whatever the outcome, this case between Apple and Uniloc shows how difficult it will be for the Federal Circuit, which can only hear the disputes that come before it, to change the systemic incentives that encourage judges to compete for patent cases and for plaintiffs to shop for those judges. As we suggest in our article, legislation or administrative rules mandating random case assignment and more particularly defining plaintiffs’ venue choices may be the only solution.

Paul Gugliuzza is Professor of Law at Temple University Beasley School of Law

The Public-Private Role of Federal Reserve Banks

Bozeman Financial LLC v. Federal Reserve Bank of Atlanta, et al. (Supreme Court 2020)

The question in this case is whether the Federal Reserve Banks are people.  The Patent Act allows any “person” to file a petition for covered-business-method review (or IPR/PGR). Return Mail, Inc. v. United States Postal Serv., 139 S. Ct. 1853 (2019) held (1) the U.S. Gov’t is not a person under the statute and (2) consequently the USPS (a branch of the US gov’t) is not permitted to petition the USPTO for review of a patent.  The question before the Supreme Court is whether these banks are part of the government.

Whether the regional Federal Reserve Banks—the “operating arms” of the Federal Reserve System, which is the central bank of the United States—are “distinct” from the Federal Government, and qualify as “persons” permitted to seek post-issuance patent review under the America Invents Act, when the Federal Government may not under the Court’s holding in Return Mail, Inc. v. United States Postal Serv., 139 S. Ct. 1853 (2019).

Question presented.

Alexander Hamilton was instrumental in the creation of the First Bank of the United States.  That Bank’s charter ended in 1811, but the foundation served for future national banks and eventually for creation of the Federal Reserve in 1913. The Federal Reserve system includes twelve regional Federal Reserve Banks that are largely controlled by private banking interests. The twelve are self-described “instrumentalities of the United States that, collectively, make up the operating arm of the Federal Reserve System, the central bank of the United States.” (Bank Complaint).  The system as a whole is controlled by the Board of Governors of the Federal Reserve System. The Board members are presidential appointees.

Bill Bozeman’s patents cover what he calls “Universal Positive Pay” for fraud detection and check clearing. Back in 2017, the 12 Federal Reserve Banks (but not the Board) sued Bozeman seeking a declaratory judgment of non-infringement.  The banks then also filed for Covered Business Method (CBM) review of the patents at the USPTO.  The PTO instituted review and concluded that the claims were ineligible under Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 573 U.S. 208 (2014).  In its decision, the Federal Circuit affirmed and also held that the banks are “persons” under the statute because they “are distinct from the government for purposes of the AIA.”

In other contexts, courts have found a very close link between the Banks and the Gov’t.

  • Fed. Reserve Bank of Bos. v. Comm’r of Corps. & Taxation of Com. of Mass., 499 F.2d 60, 62 (1st Cir. 1974) (Bank is a “public governmental body” whose “interests seem indistinguishable from those of the sovereign”)
  • Jet Courier Servs., Inc. v. Fed. Reserve Bank of Atlanta, 713 F.2d 1221 (6th Cir. 1983) (Banks are not “persons” under the Sherman Act because they are part of the Federal Reserve System, “an agency of the federal government.”)
  • Schroder v. Volcker, 864 F.2d 97, 99 (10th Cir. 1988) (no antitrust action against defendants “affiliated with the Federal Reserve System”, including individual banks)
  • United States v. Hollingshead, 672 F.2d 751 (9th Cir. 1982) (Fed Reserve Bank employees are public officials for purposes of anti-bribery statute).
  • Berini v. Fed. Reserve Bank of St. Louis, 420 F. Supp. 2d 1021, 1028 (E.D. Mo. 2005) (“[C]ontrol and supervision of the federal reserve banks is vested in a Board of Governors appointed by the President with the advice and consent of the Senate”)

This case is not huge for the patent system — although there are hundreds of federally-created entities that might be “people.”  In addition, the CBM program has sunset and is unlikely to be revived.

The case is still a big deal as our country discusses the role of socialist governmental policies providing a safety net for Americans. The US system is already ripe with “private” entities designed to serve a public good: Federal Reserve banking system; Fannie Mae; Freddie Mac; Highly regulated utilities (that are given the power of eminent domain); etc.  For over 100 years, this approach has been a form of back-door socialism that becomes palatable because of paperwork showing a separation from government. This case would shine some interesting light on the field with the simple question — Are the Federal Reserve Banks part of the U.S. Government?

Factual Allegations Underlying Eligibility

by Dennis Crouch

Once a patent issues, it is presumed valid. “A patent shall be presumed valid.” 35 U.S.C. 282(a). In patent litigation, this has traditionally meant that a complaint for infringement need not re-establish the patent’s validity. Rather, validity challenges arise as affirmative defenses as part of the answer.

That traditional approach is no longer followed by the courts in the Post-Alice patent eligibility era.  Courts now regularly dismiss patent cases upon finding that the patentee failed to state a claim because the patent is invalid under Section 101.  In response to that potential, patentees are have begun preemptively bulking-up their complaints with factual allegations to support the patent’s validity.

A new petition for writ of certiorari in Whitserve LLC v. Donuts Inc. (2020) highlights this issue.  Back in 2018, Whitserve sued Donuts for infringing the claims of its two patents covering a method for managing due-date reminders for clients of professional-services.  U.S. Patent Nos. 5,895,468 and 6,182,078.  On a R. 12(b)(6) motion, the district court dismissed the complaint – finding that the patent was invalid as a matter of law and that – therefore – the complaint failed to state a legally cognizable claim for relief. On appeal, the Federal Circuit affirmed – explaining again that “patent eligibility can be determined at the Rule 12(b)(6) stage if there are no plausible factual allegations to impede such a resolution.” (Quoting Aatrix).  The suggestion here is that plaintiffs really do need to be making their validity case within the pleadings.

Now, the case is up before the Supreme Court on Whitserve’s recently filed petition. Question presented:

If a patentee makes factual assertions that its claimed invention is directed to patent eligible subject matter under 35 U.S.C. § 101, including assertions that the claimed invention does not consist of well understood, routine, or  conventional activity and that the claimed invention is supported by evidence of commercial success, is a district court permitted to overlook the patentee’s assertions, find that the claimed invention is directed to patent ineligible subject matter, and dismiss the patentee’s complaint under Rule 12(b)(6) given the requirements of Rule 12(b)(6) analyses and the statutory presumption of § 282(a)?


When I read the question presented, I instantly wanted to make some amendments — in particular, I wanted to focus not on bar “factual assertions that” but rather on “non-conclusory factual assertions showing that patent is plausibly eligible.”  My transformation focuses on the plausibility standard from Iqbal and Twombly.  In those cases, the Supreme Court raised the standard for “showing that the pleader is entitled to relief” under R.8(a).  On my second time through, however, I began to really question this approach.

We are talking here about a pleading that attempts to preempt a potential affirmative defense — normally the plaintiff does not even need to plead a response to an affirmative defense.

[E]ven after the defendant has pleaded an affirmative defense, the federal rules impose on the plaintiff no obligation to file a responsive pleading.

Fernandez v. Clean House LLC, 883 F.3d 1296 (10th Cir. 2018).  And, when a Reply to an affirmative defense is ordered, it is sufficient to simply deny the allegations of the defense rather than explain or offer competing factual allegations.  In that situation, the non-conclusory / plausibility standard of Iqbal does not apply.

All this leads me to say that – for 12(b)(6) purposes, even conclusory factual allegations regarding eligibility may be sufficient to overcome a motion to dismiss. Of course, at that point, the court can jump quickly to a R.56 Summary Judgment question — allowing special early discovery on the eligibility issue to see whether there is any evidence to support the allegations.

* Note, the image above comes from a design patent owned by Krispy Kreme parent company HDN Development.

Money to feed the goats: Attorney Fees at the Federal Circuit

by Dennis Crouch

I previously wrote about the case of Bank v. Al Johnson’s Swedish Rest., Docket No. 19-01880 (Fed. Cir. 2019).  The dispute is over whether the USPTO should cancel Al Johnson’s registered trademark for goats on a green roof. To be clear – the mark is not the image of goats on a roof, but instead is an actual building with live goats walking around on the roof. [Goat Cam]

Bank challenged the registration on several grounds, including improper functionality and disparaging (toward the goats and their human friends).  The problem in the case for Bank is that he is not a competitor or customer. Banks is not injured by the mark in any concrete way other than being offended by its existence.

The TTAB dismissed the opposition for lack of standing. That decision was then affirmed on appeal since Bank provided neither a real interest nor a reasonable basis for his belief of damage.  The court noted that the “offense” injury was substantially undermined by Tam.

In its original decision, the Federal Circuit also awarded attorney fees to Swedish Restaurant under Fed. R. App. P. 38:

If a court of appeals determines that an appeal is frivolous, it may, after a separately filed motion or notice from the court and reasonable opportunity to respond, award just damages and single or double costs to the appellee.

Id. The court found that the Banks appeal was frivolous. Banks is an attorney and represented himself in the appeal. Usually pro se parties are given more leeway because of their lack of training and experience in the system. However, an attorney representing himself is not given such leeway:

Even though Mr. Bank appears pro se before us, he is an attorney and bears the commensurate obligations. Accordingly, we grant Swedish Restaurant’s motion for costs and attorney fees, including the costs and fees incurred in relation to the parties’ sanctions motions, and
deny Mr. Bank’s motion for sanctions.

Costs and attorney fees to Swedish Restaurant.

Federal Circuit Original Opinion.

Following the court’s decision, there was some debate on attorney fees. In particular, Swedish Restaurant requested that the court clerk enter the attorney fee award. Banks protested — arguing that attorney fee awards must be calculated and awarded by the court, not the clerk.  The Federal Circuit agreed on that point and today awarded all of Swedish Restaurant’s requested fees of $28,523.00.  (The Clerk separately taxed the costs at $241.54.)





Does your Heart Break for this Patentee?

by Dennis Crouch

The decision in this case is short and non-precedential, but raises an interesting Arthrex issue on Unconstitutional Appointments. 

Snyders Heart Valve LLC v. St. Jude Medical, LLC (Fed. Cir. 2020) (SnydersStJude)

Snyders’ US Patent No. 6,821,297 covers a collapsible artificial heart valve that can be attached through a blood vessel rather than open-heart surgery.

After being sued for infringement, St. Jude filed an IPR petition and won a determination that the claims would-have-been-obvious at the time of the invention. Snyders appealed.

Rather than addressing the merits of the obviousness case, the Federal Circuit has followed its precedent set by Arthrex and has has vacated the PTAB’s judgment because the judges were appointed in an unconstitutional manner. On remand, a reconstituted–and now magically constitutional–PTAB panel will re-do the trial (unless the Supreme Court intervenes before then).

In its argument, Snyders suggested that it should receive some particular treatment from the court because of a potential conflict of interest with Dir. Iancu.  Prior to joining the USPTO, Iancu was in private practice and represented St. Jude in a parallel proceedings.  Although Dir. Iancu has recused himself from the case, Snyders argues that the Director’s conflicts are not so easily erased.  Rather, an attorneys conflicts regularly extend to subordinate employees as well.  Here, the Arthrex remedy comes into play because the court in that case gave more direct authority supervisory to the PTO Director. The following argument comes from Snyders’ brief:

The concept that disqualification of an attorney may extend to that attorney’s subordinate employees is well established. For example, the American Bar Association’s Model Rules of Professional Conduct recognize a conflict where representation of a client is materially limited by an attorney’s personal interest. See Model Rules of Prof’l Conduct R. 1.7(a)(2) (2016). Those rules also recognize that disqualification of an attorney due to a personal conflict may be imputed to fellow employees where the employees would be materially limited due to their loyalty to the attorney.

Snyders Brief.

The Federal Circuit found the argument here “without merit . . . the Deputy Director’s role sufficiently removes any potential taint of the Director’s conflict.”  The Court did not address the particular issue here regarding the heightened supervisory authority of PTAB judges coming-out-of Arthrex.


Racing Tribunals: The Judge, the Jury, and the PTAB

by Dennis Crouch

Thousands of patents claims have been cancelled by the PTAB in inter partes review proceedings.  These are cases where a third party was willing to pay hundreds-of-thousands-of-dollars to cancel a set of claims.  A good number of those patents would have been enforced by a district court. In fact, a good number of those patents have been enforced in Federal Court.

Personal Audio, LLC v. CBS Corporation (Supreme Court 2020) again builds a montage of competing patent tribunals — a district court that enforces and an administrative court that undermines.  This case adds an important third tribunal to the story — the jury.  The disappointing climax is usually the same — spent on the Federal Circuit who sides with the administration.

In this case, the jury sided with Personal Audio — finding the asserted claims of its US8112504 both valid and infringed. (Verdict excerpt below from September 2014).  The jury awarded $1.3 million.

By the time of the jury verdict, the IPR petition filed by the non-profit EFF had already been instituted by the PTAB. Tthe district court allowed post-judgment motions to flounder for months and by April, the PTAB had released its final judgment finding the same claims invalid.  (Note, the PTO no longer institutes IPRs on patents that are close to trial).

The IPR was affirmed on appeal, and the district court relied upon that determination to cancel the jury verdict and enter a final judgment in favor of the Defendant.  The Federal Circuit then affirmed based upon its prior precedent of XY, LLC v. Trans Ova Genetics, 890 F.3d 1282, 1294 (Fed. Cir. 2018); Dow Chemical Co. v. Nova Chemicals Corp. (Canada), 803 F.3d 620, 628 (Fed. Cir. 2015); ePlus, Inc. v. Lawson Software, Inc., 789 F.3d 1349, 1358 (Fed. Cir. 2015); Fresenius USA, Inc. v. Baxter Int’l, Inc., 721 F.3d 1330 (Fed. Cir. 2013).

Now, Personal Audio is up before the U.S. Supreme Court with a few interesting questions. The basic argument is that collateral estoppel (issue preclusion) is not an open-and-shut business. Rather, any time a prior judgment of invalidity is invoked, the “patentee-plaintiff must be permitted to demonstrate, if he can, that he did not have a fair opportunity procedurally, substantively and evidentially to pursue his claim the first time.” Blonder-Tongue Laboratories, Inc. v. U. of Illinois Found., 402 U.S. 313, 332–33 (1971).  The Restatement of Judgments § 29 further walks through a series of reasons and factors for issue preclusion might not apply to a later case.

Blonder-Tongue was a very big case for defendants supporting non-mutual issue preclusion. The point here, though is that it set limits and provided a contextual analysis while the Federal Circuit has moved to an if-then rule-based approach post-IPR.

Here, the patentee argues against estoppel because (1) the PTAB judges were unconstitionally appointed (via Arthrex); and (2) the PTAB determination overturns a prior jury’s finding of facts in a case protected by the 7th Amendment Right to Trial.

The trouble – as usual – is that the claims are pretty bad: Personal Audio’s patent claims a system for distributing “a series of episodes represented by media files via the Internet.”  The new portion appears to be updating a compilation file of currently available episodes.  The list of new episodes (and their links) are downloaded by a client computer that can then use the links to request the actual media files.

The other big difficulty here is a question of when does the jury verdict stick.  Is it worthless until the judge enters final judgment?

The Supreme Court will rule on the petition later this Fall.

AntiBody Fragment: A Description of the Federal Circuit?

by Dennis Crouch

Baxalta Inc. v. Genentech, Inc., 2020 WL 5048435 (Fed. Cir. Aug. 27, 2020)

Although not en banc, this case was picked-up by five different Federal Circuit judges with two separate opinions and one recusal.

Sitting by designation as a D.Del. district court, Judge Dyk sided with the accused infringer Genentech by narrowly construing Baxalta’s US7033590.  Although perhaps most jury members would need some help with definitions, the disputed terms are incredibly basic and fundamental to anyone involved with biotech. Disputed terms:

  • Antibody; and
  • Antibody fragment.

Following claim construction, the parties stipulated to non-infringement.

On appeal, the Judges Moore, Wallach, and Stoll took up the claim construction question.  However, after oral arguments Judge Stoll recused herself and Judge Plager stepped-in.  The new panel rejected Judge Dyk’s claim construction and consequently vacated the non-infringement judgment.

The patent is directed to a treatment for hemophilia and claims “an isolated antibody or antibody fragment” that binds to FactorIXa and increased its procoagulant activity.

Judge Dyk explained that the term antibody might have various potential meanings.  But here, the patentee expressed a narrower definition within its specification with the following statement:

Antibodies are immunoglobulin molecules having a specific amino acid sequence which only bind to antigens that induce their synthesis. . . . Each immunoglobulin molecule consists of two types of polypeptide chains. Each molecule consists of large, identical heavy chains (H chains) and two light, also identical chains (L chains).

‘590 at Col. 5.  Applying this portion of the patent, the district court limited the scope of antibody to molecules having one set of identical H-chains and a set of identical L-chains.

Genentech’s product uses an antibody organized with a variety of H- and L- chains (not all the H-chains are identical to one another). Thus, Judge Dyk’s requirement of identical chains led to the admission of non-infringement.

On appeal, the Federal Circuit took Judge Dyk to task — finding that the patent did not suggest such a narrow definition of the term. Dependent claim 4, for instance, identifies the antibody as being selected from “the group consisting of … a chimeric antibody, a humanized antibody, … [and] a bispecific antibody.”  The court explains that none of these antibody types in the dependent claim conform with the narrow definition of the term as used in claim 1.

The district court’s construction which excludes these explicitly claimed embodiments is inconsistent with the plain language of the claims. . . . The plain language of these dependent claims weighs heavily in favor of adopting Baxalta’s broader claim construction.

Slip Op.  The court then looked at the definition discussed by Judge Dyk and concluded that it was a “generalized introduction” rather than a “definitional statement.” In this process, the court noted the lack of patent-profanity such as “the present invention is … ”  The court’s conclusion is supported by other aspects of the specification that refers to the bispecific and other forms of antibodies that do not conform to Judge Dyk’s definition. The result: “The claim construction excluding these disclosed and claimed embodiments is therefore incorrect.”

The case also included some prosecution history. In particular, the patentee amended its claims from “antibody derivative” to “antibody fragment.” On appeal, the court found no clear statement from the prosecution history regarding how that amendment modified the scope. Without a ‘clear statement’ there is no prosecution disclaimer leading to disavowal of scope.

Revised Opinion in Windy City: Court Still Bars Self-Joinder in IPR Proceedings

by Dennis Crouch

Facebook v. Windy City (Fed. Cir. 2020) [WindyCity Original OP] [WindyCity Revised OP][WindyCity Mark-up Showing Changes]

This was an important PTAB JOINDER case when it was decided by the Federal Circuit back in March 2020.  (Panel of Chief Judge Prost with Judges Plager and O’Malley).  The en banc court has now denied rehearing, but the original panel has also revised its opinion to take into account the the Supreme Court’s intervening decision in Thryv.

In Civil Procedure, joinder is typically divided into distinct area: joinder of claims and joinder of parties.  The AIA statute provides only for joinder of parties, but the PTAB allowed Facebook to join itself to a pending IPR in order to add additional claims. Facebook had wanted to do this type of joinder, because its later-filed IPR petition would have otherwise been time-barred under § 315(b) — and the patent act particularly notes that the 1-year 315(b) time-bar “not apply to a request for joinder”.  In its first decision, the appellate panel held that the self-joinder approach was not permitted by the statute.

Since March, the Supreme Court decided Thryv — and overturned a set of Federal Circuit cases reviewing various petition-stage decisions by the PTAB.  In Thryv, the court held that the USPTO’s interpretation of the § 315(b) one-year time-bar was not reviewable on appeal based upon the “no appeal” provision of § 314(d).

Now the original panel has revised its opinion in Windy City to take into account Thryv.  In its decision, the court explained that 315(c) joinder requires two decisions: (1) determination of whether the joinder-applicant’s petition warrants institution (including whether it is time-barred); and (2) determination of whether joinder should be allowed.  Under Thryv, the first portion of the test is not reviewable on appeal, but the second portion is appealable.

The statute requires the Director (or the Board on behalf of the Director) to make a “joinder decision.”  The statute makes clear that the joinder decision is made after a determination that a petition warrants institution, thereby affecting the manner in which an IPR will proceed.

Thus, the joinder decision is a separate and subsequent decision to the intuition decision.  Nothing in § 314(d), nor any other statute, overcomes the strong presumption that we have jurisdiction to review that joinder decision. . . .

Accordingly, we have jurisdiction to review the Board’s joinder decisions in this case to determine whether the Board (on behalf of the Director) acted outside any statutory limits under § 315(c).

Revised Opinion. Thus, the holding:

Because joinder of the new claims was improper, we vacate the Board’s final written decisions as to those claims, but because we lack authority to review the Board’s institution of the two late-filed petitions, we remand to the Board to consider whether the termination of those proceedings finally resolves them.

Id. I expect that on remand, the PTO will dismiss the late-filed petitions.

In its revised opinion, the court maintained its unanimous secondary opinion offering “additional views” on deference to Precedential Opinion Panels at the PTO.

Guest Post: Silicon Valley’s APA Challenge to PTAB Discretion

Guest post by Saurabh Vishnubhakat, Professor at the Texas A&M University School of Law and College of Engineering.  Professor Vishnubhakat was formerly an advisor at the USPTO, but his arguments here should not be imputed to the USPTO or to any other organization.

This week, four iconic Silicon Valley technology companies—Apple, Cisco, Google, and Intel—sued the USPTO under the Administrative Procedure Act.  The lawsuit challenges the USPTO’s so-called NHK-Fintiv rule, named after a pair of inter partes review decisions in the PTAB that the agency previously designated as precedential.

The 23-page complaint, docketed as Case No. 5:20-cv-06128 in the Northern District of California, is worth reading in full.  Yet what is especially striking about the lawsuit, and worth considering more deeply, is a particular pair of arguments at the heart of the challenge.  One is that the NHK-Fintiv rule is contrary to the policy and text of the AIA and therefore exceeds the Director’s authority.  The other is that the NHK-Fintiv rule is procedurally infirm because it was not promulgated through APA notice-and-comment rulemaking.

The NHK-Fintiv Rule

The disputed USPTO policy allows the PTAB to deny institution of an inter partes review petition based on how far a parallel U.S. district court proceeding on the same patent has already gone.

NHK Spring v. Intri-Plex

The policy was first articulated in NHK Spring Co. v. Intri-Plex Techs., No. IPR2018-00752, Paper 8 (Sept. 12, 2018).  There, a panel of the PTAB declined to institute NHK Spring’s petition against an Intri-Plex patent where a parallel infringement suit was already pending between the same parties in the Northern District of California.

In denying institution, the panel cited its discretion under 35 U.S.C. § 325(d) as well as under § 314(a).  First came § 325(d), which empowers the Director to “determine the manner in which the post-grant review or other proceeding or matter may proceed, including providing for the stay, transfer, consolidation, or termination of any such matter or proceeding.”  Here, the panel applied the nonexclusive factors of the PTAB’s prior informative opinion in Becton, Dickinson and concluded that the art and arguments now asserted in the PTAB were already considered (and overcome) during examination.

Though it found this analysis sufficient on its own, the panel then also went on to exercise its discretion under § 314(a), which makes a “reasonable likelihood” of invalidating at least 1 of the challenged claims a necessary—but not sufficient—condition for instituting review.  Where review is permissible, the Director may still decide in his discretion to deny review, and the NHK panel found it compelling that the parallel proceeding in U.S. district court was “nearing its final stages”—with a five-day jury trial already set for six months before the PTAB’s own proceeding would conclude.

The principle of NHK—that the “the advanced state of the district court proceeding is an additional factor that weighs in favor of denying the Petition under § 314(a)”—forms the first part of the policy now being challenged.

Apple v. Fintiv

That policy was further elaborated in Apple Inc. v. Fintiv, Inc., No. IPR2020-00019, Paper 11 (Mar. 20, 2020).  There, a panel of the PTAB ordered supplemental briefing at the institution stage of Apple’s petition against a Fintiv patent where a parallel infringement suit was pending between the same parties in the Western District of Texas.  Fintiv had already argued in its preliminary response that the “advanced state” of the parallel proceeding warranted discretionary denial under NHK, as the same issues were before the district court and trial there had already been set.  (The setting of a trial date had come after Apple’s petition but before Fintiv’s response, making additional briefing appropriate.)

The panel then set out a number of factors to consider when evaluating whether the state of a parallel proceeding warrants discretionary denial under NHK:

  • whether the court granted a stay or evidence exists that one may be granted if a proceeding is instituted;
  • proximity of the court’s trial date to the Board’s projected statutory deadline for a final written decision;
  • investment in the parallel proceeding by the court and the parties;
  • overlap between issues raised in the petition and in the parallel proceeding;
  • whether the petitioner and the defendant in the parallel proceeding are the same party; and
  • other circumstances that impact the Board’s exercise of discretion, including the merits.

NHK was designated as precedential in May 2019 and Fintiv in May 2020.  Taken together, the NHK-Fintiv rule represents a policy of denying institution where a parallel district court proceeding is so far along and so substantially similar in art and argumentation that it would be best to conserve USPTO resources rather than undertake a largely or entirely duplicative review.

The Policy and Text of the AIA

That policy choice is firmly rejected in the opening argument of the APA challenge.  The plaintiffs identify the inter partes review system as a “centerpiece of Congress’s efforts to strengthen the U.S. patent system” through post-grant error correction.  By their account, the system of PTAB adjudcation responded to an environment where “questionable patents were too easily obtained and too difficult to challenge through existing procedures”—and, indeed, this language aptly cites the AIA House Judiciary Committee Report.  Thus, to deny institution under the NHK-Fintiv framework weakens the very purpose of PTAB review through artificial limits that are “found nowhere in the AIA.”  However, though there is much to agree with in the line of argument that follows, it suffers from at least two important weaknesses.

PTAB Review as an Alternative to the Courts

One weakness is that while the PTAB is desirable over the baseline of Article III courts, there are important and under-appreciated limits to this desirability.  It is certainly true that the PTAB was intended as “an improved alternative to litigation” on questions of patent validity.  Indeed, my coauthors and I have similarly argued that the PTAB offers a number of important advantages over the Article III courts, including lower barriers to standing, lower cost, lower delay, and lower rates of error.

However, it does not follow that PTAB review remains preferable regardless of what happens in the Article III courts.  By the time court litigation has reached a stage advanced enough that the NHK-Fintiv doctrine would apply, much of the cost of litigation has already been sunk, especially by the close of discovery and the scheduling of trial, as in NHK itself.  Meanwhile, the problem of delay is turned on its head, as it is the court that will now likely finish before the PTAB would.  The problem of Article III standing is largely irrelevant, as the defendant can point not merely to the threat of suit but the actual suit itself.  Much, though not all, of the marginal benefit from PTAB review relative to the federal courts is already dissipated.

Moreover, while it is true that decision making in the PTAB is done by administrative judges who have relevant technical as well as legal expertise, this benefit is also dissipated to some degree by a late-stage federal court proceeding.  By that time, considerable effort and investment has already been sunk into educating the judge or jury.  This, after all, is where much of the cost of litigation goes, and what makes expert administrative judges an attractive value proposition is that they do not require nearly so much education in each case.  The more that such investments have been made anyway, the less that PTAB review is a clear cost-saving.

Finally, there is the problem inherent to error correction, a problem starkly highlighted by the legislative design of PTAB review.  It is true, as the plaintiffs point out, that “while bad patents can be held unpatentable in IPR by a preponderance of the evidence . . . those same patents will survive litigation unless the challenger proves invalidity by clear and convincing evidence.”  But as I have pointed out in testimony before the FTC, the same is also true of good patents—and there is no way to distinguish the good from the bad up front.  If there were, error correction itself would be unnecessary.

Agency Discretion to Deny Review

The second weakness is that agency discretion carries not only significant structural benefits when protecting agreeable outcomes but also substantial obstacles when the outcomes go the other way.  The crux of the case against discretionary denials under the NHK-Fintiv rule is that “no provision in the AIA expressly requires or even permits the Director (or the Board as his delegee) to deny IPR petitions based on pending litigation involving the same patent claims.”

It is repeated throughout the argument, too, that the principle of NHK and the additional factors enumerated in Fintiv are to be found “nowhere in the AIA” and are, for that reason, outside the Director’s authority.  In this telling, what discretion the Director does have is limited to § 325(d), which is concerned more with managing multiple proceedings inside the agency itself than with doing so across an interbranch court-agency divide.  This matters because the NHK-Fintiv framework is an elaboration of institution authority specifically under § 314(a), not of case management authority under § 325(d).

However, the principle that § 314(a) gives the Director discretion—broad discretion—to deny otherwise meritorious petitions is, by now, fairly well established in Federal Circuit and Supreme Court case law.  For example, the two most significant cases involving the judicial unreviewability of the Director’s institution power—Cuozzo v. Lee in 2016 and Thryv v. Click-to-Call earlier this year—take just this view.  The Court in Cuozzo held explicitly that “the agency’s decision to deny a petition is a matter committed to the Patent Office’s discretion” and cited § 314(a) with an explanatory parenthetical that there is “no mandate to institute review.”  Likewise, the Court in Thryv expanded the scope of that unreviewable discretion to include conditions on institution as well—there, the condition in dispute was the one-year time bar of 35 U.S.C. § 315(b).

Indeed, some of the plaintiffs who now seek to cabin the Director’s institution-related discretion previously endorsed those very same positions before the Court.  In Cuozzo, Apple submitted a brief as amicus curiae supporting the USPTO Director’s assertion of unreviewable discretion in matters of institution.  Intel did the same in Thryv, arguing that a “decision not to institute review is committed to agency discretion.”

These complications in the case against the NHK-Fintiv rule cast serious doubt on the view that the policy choices embodied in that rule contradict the AIA.

The Choice of Rulemaking vs. Adjudication

Beyond the substance of the USPTO’s policy of sometimes denying inter partes review based on the status of parallel court litigation, there also lies an alternative argument that the policy is procedurally defective.  Here, the challenge springs from the familiar APA values of public input and transparency, which are traditionally accomplished by notice-and-comment rulemaking.  By contrast, the disputed USPTO policy was adopted “by designating the NHK and Fintiv decisions as precedential through a unilateral, internal process that involved no opportunity for public comment and no consideration by the Director of any public input.”

In this regard, the challenge to NHK-Fintiv certainly has merit as a matter of desirable administrative practice, but it is not at all clear that this makes the USPTO’s approach legally deficient.  For over 70 years, the Supreme Court has left the form of policymaking up to agencies themselves.  The Court’s 1947 opinion in SEC v. Chenery Corp. (Chenery II) explained that “the choice made between proceeding by general rule or by individual, ad hoc litigation is one that lies primarily in the informed discretion of the administrative agency.”

In Chenery II, the Court recognized that “problems may arise in a case which the administrative agency could not reasonably foresee, problems which must be solved despite the absence of a relevant general rule.”  The Court also pointed to a touchstone of agency practice that is especially important to the PTAB—expertise—and noted that “the agency may not have had sufficient experience with a particular problem to warrant rigidifying its tentative judgment into a hard and fast rule.”  Both of these considerations point to adjudication as an acceptable mechanism for making policy.

To be sure, rulemaking offers significant benefits, and not only the public participation and transparency that the present APA challenge cites.  Rulemaking also fosters greater predictability, both by specifying rules more fully in advance and by raising the agency’s own political costs from visibly changing course.  For these reasons, I have argued in my own recent work about Patent Office policymaking that setting PTAB policy through rulemaking, such as the USPTO’s 2018 change to the PTAB’s claim construction standard, will often be preferable to shifting and incrementalist adjudications.

Still, a well advised preference is not the same thing as a legal requirement.  Moreover, though notice-and-comment rulemaking is a direct and well established way of securing public input, it’s not as if PTAB adjudication does not allow for meaningful public input.  The plaintiffs themselves note that members of the public are entitled to nominate PTAB opinions for designation as precedential.

Beyond this, the PTAB has accepted and, at times, even invited amicus curiae briefs in cases of public importance, such as whether tribal sovereign immunity defeats inter partes review.  Similarly, under the current USPTO Standard Operating Procedure No. 2 (Rev. 10), cases before the agency’s Precedential Opinion Panel may also be opened for amicus curiae briefing.  In short, where the USPTO exercises its prerogative to make policy through adjudication, it need not ignore public input to do so.


The APA challenge to the NHK-Fintiv rule, like much of the USPTO’s own recent policymaking, balances a range of important considerations and reaches a position that is coherent and reasonable.  The weakness—if it can be called that—of the challenge is that it represents merely one reasonable position among several, especially given the Supreme Court’s views on agency discretion in general and USPTO discretion in particular.  If the challenge eventually fails to dislodge the disputed policy, then the reason will likely be that, like most agencies, the USPTO enjoys wide latitude that is difficult to paint as unreasonable.

Inventorship as the Wind Blows

Egenera, Inc. v. Cisco Systems, Inc. (Fed. Cir. 2020)

Egenera’s network system architecture patent (US7231430) lists eleven inventors.  Back in 2016, Energa sued Cisco for infringement, and Cisco responded with an IPR petition.  At that point, Egenera “realized that all claim limitations had been conceived before one listed inventor, Mr. Peter Schulter, had started working there.”  Egenera’s underlying concern in the case was its ability to prove an early pre-filing invention date.

It is apparent that at least part of Egenera’s motivation to remove Mr. Schulter was to facilitate swearing behind  “Grosner,” a piece of prior art asserted against Egenera in the IPR.

Slip op.  The PTAB declined to institute the IPR, but the PTO did grant the petition to remove Shulter.

Back in the district court, Cisco argued that Shulter was actually an inventor (of the claimed tripartite structure) and that the patent was therefore invalid under pre-AIA 102(f).  At that point, Egenera suggested that Shulter be conditionally re-listed as an inventor:

The [district] court … rejected Egenera’s argument that if the trial showed Mr. Schulter to be an inventor, the patent’s inventorship should be corrected under 35 U.S.C. § 256(b). The court reasoned that judicial estoppel precluded Egenera from “resurrect[ing]” Mr. Schulter’s inventorship.

Slip Op.  The district court did subsequently determine that Shulter had conceived of the claimed structure, that Egenera was judicially estopped from adding him back as an inventor, and that the patent claims were therefore invalid.

Section 256 of the Patent Act was modified in the AIA (2011) to remove “deceptive intent” from the inventor-correction provision. The statute now allows correction of an “error” of omitting a named inventor and does not require that “such error arose without any deceptive intention on his part“.   The statute goes on to explain that the error “shall not invalidate the patent in which such error occurred if it can be corrected.”  Although Energa’s patent is a pre-AIA patent, the modification here applies to old patents.

The district court found that the removal of Mr. Shulter was a strategic and deliberate decision — and therefore not an error.  In addition, the district court found that the inventorship “tactical ploy” created an estoppel to present the second Shulter from being added back.

Regarding Error: Deliberate and calculated acts are often in error.  And the law of inventorship allows for correction of those errors — even if they were “dishonest” errors. Thus, the removal of Shulter counts as an “error” under the statute that may be corrected.

Judicial Estoppel: Judges are given some discretion in applying judicial estoppel regarding changing of arguments during litigation. However, there is a usual three-element test:

  1. Are the two positions clearly inconsistent with one another?
  2. Did the party succeed in persuading the court to accept the first position?
  3. Would the party receive an unfair advantage if not estopped?

1. Clearly Inconsistent: Originally Egenera listed Shulter as an inventor of the claims; Later they argued he should not be listed as an inventor of the same claims; finally they argued that he should be relisted as an inventor, still the same claims.  At first (and second) glance, these appear clearly inconsistent.

In reviewing these elements, the Federal Circuit found no clear inconsistency. In particular, the court explained that the district court’s claim construction and development of inventorship facts. In particular, the court had, over Egenera’s objection, interpreted a certain claim term as means-plus-function. That interpretation tied the claim to embodiments in the specification conclusively linked Shulter to the invention.  The court notes that changes in “the law” excuse inconsistency.  Since claim construction is a question of law, then it apparently serves as an excuse.

2. Acceptance of the First Position: Although the PTO accepted the change in inventorship, the Federal Circuit held that the PTO’s actions here do not serve as judicial action. Rather, the PTO did not truly examine the facts of the situation — instead it simply “agreed that all the signatures and fees were in order.”  As such, the second requirement of “persuading the court to accept” was not met.

3. Unfair Advantage: The court here could also find no unfair advantage taken by the inconsistent positions.  In particular, although Shulter was dropped in order to gain some advantage in the IPR, the IPR was actually denied before the change in inventorship was approved. Although arguments were made regarding the issue in the petition, the PTAB apparently denied the petition “without addressing Egenera’s priority arguments.”  The appellate panel writes that “Things might be different had Egenera succeeded in swearing behind the prior art. . . . But that is not this case.”

Since none of the factors point toward estoppel, the appellate panel found that it was improperly applied. On remand, the district court will need to allow inventorship to be amended and then reconsider validity and infringement.

IPR: Not a Taking; Not an Illegal Exaction

by Dennis Crouch

Christy, Inc. v. US (Fed. Cir. 2020)

David McCutchen is the inventor of U.S. Patent No. 7,082,640 – a shop-vac that can reverse the air flow (back-flush) in order to clear the filter.  The video below shows how this is implemented.  McCutchen passed-away in 2019, but assigned his patent to his company – Christy, Inc. – which is apparently named after his daughter (Christy).

The patent here issued in 2003 — well before the AIA was even a concept.  However, when Christy attempted to enforce its patent against Black & Decker, the company turned around and petitioned for inter partes review. The PTAB cancelled most of the patent claims — a judgment affirmed on appeal without opinion.

At that point, Christy filed a class-action lawsuit in the Court of Federal Claims (CFC) against the U.S. Government — alleging that the cancellation constituted a 5th Amendment taking that required compensation.

nor shall private property be taken for public use, without just compensation.

U.S. Const. 5th Amendment.  In Oil States, the Supreme Court explained that patents are a “public right” also known as a “public franchise” rather than being pure “private property.” However, the Oil States majority was careful to cabin-in that decision only to the question presented in the case.

We emphasize the narrowness of our holding. We address the constitutionality of inter partes review only. . . . [O]ur decision should not be misconstrued as suggesting that patents are not property for purposes of the Due Process Clause or the Takings Clause.

Oil States Energy Services, LLC v. Greene’s Energy Group, LLC, 138 S. Ct. 1365, 1379 (2018).  In its decision in Christy, the CFC sided with the Gov’t and found that IPR cancellation is not a compensable taking. This result comports with the Court’s prior decisions in Celgene Corp. v. Peter, 931 F.3d 1342, 1360 (Fed. Cir. 2019), cert. denied, 19-1074, 2020 WL 3405867 (U.S. June 22, 2020) and Golden v. United States, 955 F.3d 981 (Fed. Cir. 2020).   I’ll note that the not-a-taking holding is based upon the Federal Circuit’s legal conclusion that “IPRs do not differ sufficiently” from inter partes and ex parte reexaminations available pre-AIA.

The illegal exaction theory is interesting — Christy asks for a refund of its issuance and maintenance fees.  Since this is a class-action, that amount could add-up if we look at all of the patent claims cancelled via IPR.

On appeal, the Federal Circuit found that the CFC does have jurisdiction to hear the illegal exaction case under the Tucker Act, but found that the case lacks merit.

An illegal exaction occurs when money is “improperly paid, exacted, or taken from the claimant in contravention of the Constitution, a
statute, or a regulation.” Norman v. United States, 429 F.3d 1081 (Fed. Cir. 2005).  Given that the Board did not violate Christy’s Fifth Amendment rights by canceling its patent claims, Christy asserts no constitutional provision, statute, or regulation that the PTO violated by failing to refund Christy’s issuance and maintenance fee payments for the ’640 patent. Instead, Christy is left to contend that the PTO’s requiring Christy to pay issuance and maintenance fees for the ’640 patent was in error, and therefore the fees should be refunded. . . .

Christy’s argument fails because the law requires payment of these issuance and maintenance fees without regard to any later result of post-issuance proceedings, see, e.g., 35 U.S.C. §§ 41, 151. Christy identifies no statute, regulation, or constitutional provision compelling the fees’ refund if claims are later canceled in post-issuance proceedings.

Slip Op.




CAFC: IPR Cancellation Is not a 5th Amendment Taking

CHRISTY, INC. v. US (Fed. Cir. 2020)

I’ll add more on this case. The holding is big, but expected. Cert petition to SCOTUS coming this fall:

Christy, Inc. asserts that the United States owes it just compensation for the Patent Trial and Appeal Board’s cancellation of claims 1–18 of Christy’s patent, U.S. Patent No. 7,082,640, in two inter partes reviews. Because the cancellation of a patent in an inter partes review does not grant the patentee any compensable claim against the United States, we affirm the Court of Federal Claims’s dismissal of the case for failure to state a claim.

Slip Op.


Doubling Up: Federal Circuit Mischaracterizes both its own Precedent and the Lower Court Ruling

by Dennis Crouch

I am struggling somewhat to wrap my head around the Federal Circuit’s recent claim preclusion decision in Sowinski v. California Air Resources Bd. (CARB) (Fed. Cir. 2020).   I believe that it turns out to be a really poor decision — probably prompted by poor lawyering in the first-place.  In particular, the court reaches its result here only after mischaracterizing both (1) the lower court holding and (2) its own prior precedent.

Claim preclusion always involves (at least) two lawsuits.  Here, Sawinski’s first lawsuit against CARB was dismissed “with prejudice” for lack of subject-matter-jurisdiction based on sovereign immunity (12(b)(1)) and also for failure to state a claim upon which relief can be granted (12(b)(6)).  Sowinski later re-filed his lawsuit — but focusing on subsequent acts of alleged infringement that occurred after the prior case ended.  The district court dismissed on res judicata and the Federal Circuit here affirms.

Sowinski’s Patent No.  6,601,033 claims a pollution credit system that he argues is infringed by California’s Cap-and-Trade Program.

Sowinski originally sued CARB (and others) for patent infringement in California state court. The defendants first removed the case to Federal Court and then moved for dismissal for lack of subject matter jurisdiction and failure to state a claim.  One minor note about that filing is that Kamala Harris represented CARB in her role as California AG.

After some wrangling, Sowinski failed to respond to the motion to dismiss and the district court subsequently dismissed the case.  In dismissing, the C.D.Cal. court pointed to a local rule that “failure to file any required document, or the failure to file it within the deadline, may be deemed consent to the granting or denial of the motion . . . .”  And, the court dismissed the case “with prejudice.”  That dismissal was affirmed by the Federal Circuit back in 2017 — with the court noting that Sowinski had recognized that the Motion to Dismiss was potentially dispositive but still failed to oppose.

Sowinski then re-filed the lawsuit which was dismissed on res judicata grounds.  On appeal, Sowinski raised two arguments.

[Sowinski] raises two principal arguments:

(1) that res judicata does not apply because his present complaint seeks damages only for infringement that occurred after conclusion of his prior suits and

(2) that res judicata does not apply because the prior suit was resolved on procedural grounds, without reaching the merits of infringement.

Failure to Prosecute Was not the Reason: Taking these grounds in reverse-order.  In its decision here, the Federal Circuit characterized the original court’s dismissal as one of failure-to-prosecute.  And, there is prior precedent supporting claim preclusion following from dismissal on those grounds.

Federal Rule of Civil Procedure 41(b) provides that a dismissal for failure to prosecute “operates as an adjudication on the merits,” with exceptions not here applicable

Slip Op. The problem with the court’s holding here is that it somehow failed to delve into the details of the three-page dismissal order. [DismissalOrder].

Contrary to the appellate panel’s statements here, the original case was not dismissed for failure to prosecute. Rather the case was dismissed for failure state a claim and lack of subject matter jurisdiction. But, those motions were granted because of Sowinski’s failure to oppose.  The distinction is appropriate because R.41(b) (quoted by the Federal Circuit in its decision) distinguishes between the two scenarios: Dismissals for failure to prosecute are treated as “adjudication[s] on the merits.” Dismissals for “lack of jurisdiction” are not treated as such. FRCP 41(b).  The court should pick-up this case a second time and consider the impact of lack-of-jurisdiction on the res judicata question or else explain how the issue was waived (and is waivable).

Later Infringement: The court also held that Sowinski was barred from pursuing action against post-judgment infringement — so long as the infringing activity was the same.  The court quoted a 10% rule of thumb from the 9th Circuit:

[T]he plaintiff alleges facts which by the defendants’ own concession are at least 10 percent different from the facts alleged in Harkins I, and, of course, the plaintiff alleges conduct that occurred in a different time period.

Harkins Amusement Enters., Inc. v. Harry Nace Co., 890 F.2d 181 (9th Cir.
1989) (finding no preclusion).

Here, Sowinski did not allege any different behavior by the defendants except that it occurred after the original lawsuit.  So — less than 10% difference.   The oddity of the decision is that it then draws in what seem to be issue preclusion and Kessler doctrine principles:

[W]hen the act has been adjudged not wrongful, its repetition cannot be challenged in a subsequent suit. . . .

Here the accused CARB activity had been held not to be infringing, for Dr. Sowinski’s failure to respond to the motions to dismiss was treated as a judgment on the merits.

Slip Op.  I’ll note here that the district court did not actually make any ruling regarding infringement, but instead dismissed the case on other grounds. Thus, while the infringement claim may have been dismissed on the merits, it is entirely improper to state that there was any holding of “non-infringement.”

The appellate court goes-on with this point by citing to Brain Life, LLC v. Elekta Inc., 746 F.3d 1045 (Fed. Cir. 2014). The panel applied Brain Life as follows:

[T]he [Brain Life] court considered the effect of a prior judgment of non-infringement; the court explained that preclusion does not apply to new or changed products or methods, but does apply when the accused products or methods are essentially the same.

Slip Op. Citing Brain Life at 1054. It turns out that Brain Life actually holds the opposite.

[W]e find that Brain Life’s second suit is not barred by claim preclusion—regardless of whether the same transactional facts are present in both suits—to the extent Brain Life’s current infringement allegations are temporally limited to acts occurring after final judgment was entered in the first suit. . . .

[T]raditional notions of claim preclusion do not apply when a patentee accuses new acts of infringement, i.e., post-final judgment, in a second suit—even where the products are the same in both suits.

Id. at 1054.  The holding here is completely the opposite to what the Sowinski court described.

Now, the court in Brain Life does go on to apply the Kessler Doctrine to prohibit re-litigation of the infringement question for post-judgment products, but only after holding particularly that its decision is outside of the traditional bounds of claim preclusion.  In Sowinski, the court does not cite the Kessler Doctrine as the basis for its decision, but rather misapplies the court’s claim preclusion precedent.

= = = = = =

In the end, Sowinski probably should lose anyway – because the patent is invalid under contemporary eligibility analysis.

1. A data processing apparatus for establishing one of a pollution offset and tax offset, for a seller using gas within gas distribution system of a home, business or the like, to bring about a reduction of known pollutants being emitted into the atmosphere associated with said seller’s home, business or the like, on a day-to-day basis or on a catastrophic basis, comprising:

(a) a central controller including a CPU and a memory operatively connected to said CPU,

(b) at least one terminal adapted for communicating with said central controller for transmitting thereto, pollution credit or tax credit information to gain a conditional pollution reduction credit (“CPRC”) for said seller,

(c) said memory containing a program adapted to be executed by said CPU for

(1) authenticating legal basis of the energy efficiency means employed against a data base of eligible energy efficiency means,

(2) authenticating the eligibility of the seller against a data base of eligible sellers,

(3) if the energy efficiency means relates to non-filtering of pollutants, generating a CPRC for tax credit offset purposes for said seller as a function of a seller identifier,

(4) if the energy efficiency means relates to filtering of pollutants, determining the eligibility of each pollutant against a pollutant data base,

(5) determining the amounts of reduction of each eligible pollutant normalized to a standard time duration;

(6) generating a CPRC for each pollutant based on (5), and

(7) storing each CPRC generating at (3) and (6) as a function of a seller identifier which may include a seller’s credit card number,

whereby economic incentive has been provided to said seller to bring about a substantial reduction of emission of pollutants to the atmosphere whether on a day-to-day basis or on a catastrophic basis.

Dr. Sowinski is the listed inventor on a number of other patents that all relate to technical aspects of gas and gas distribution.   In a separate lawsuit, Sowinski sued cereal manufacturers Post, General Mills, and Kellogg– arguing that their products should include a Cancer warning under California’s Proposition 65 because of their acrylamide content.  That case was dismissed on preemption grounds. In particular, the California appellate court found the existence of a comprehensive federal scheme promoting consumption of whole grains to preempt the marking requirement. Post Foods, LLC v. Super. Ct., 235 Cal. Rptr. 3d 641, 644 (Cal. App. 2d Dist. 2018), as modified on denial of reh’g (Aug. 15, 2018), review denied and ordered not to be officially published (Oct. 31, 2018).


NJ Law Limiting Patentee’s Capacity to Sue Upheld on Appeal

by Dennis Crouch

This is a quirky case, but the holding is troubling — that a patent owner’s state of residence can prohibit the patentee from using the federal courts to assert their patent rights.  I would think the 14th Amendment is on point: “nor shall any State deprive any person of life, liberty, or property, without due process of law.”

Walter Tormasi v. Western Digital Corp. (Fed. Cir. 2020)

Tormasi is serving a live sentence at the Maximum Security New Jersey State Prison in Trenton for murdering his mother. Tormasi is also a patentee — his U.S. Patent No. 7,324,301 covers a particular disk drive construction — and the claims appear quite broad.

In 2019, Tormasi sued Western Digital in N.D. Cal. for patent infringement seeking $5 billion in damages.  The district court quickly dismissed the case — holding that Tormasi lacks the capacity to sue to enforce his patent rights.  On appeal, the Federal Circuit has affirmed.  Here is the logic:

  • FRCP 17(b)(1) indicates that an individual’s capacity to sue or be sued is determined “by the law of the individual’s domicile.” For Tormasi, that is New Jersey.
  • Although N.J. has a broad capacity-to-sue statute, N.J. law also prohibits inmates from “commencing or operating a business … without the approval of the Administrator.” N.J. Admin. Code § 10A:4-4.1.  No approval has been granted.
  • Joining these two laws together, the court held that Tormasi’s lawsuit here is a continuation of his business activities and thus prohibited by the “no business” provision. And, the court tied this to his capacity-to-sue — holding that his enforcement lawsuit is simply prohibited.

Truthfully, this holding makes very little sense from a statutory construction approach.  It is not surprising that neither judge in the majority (Wallach or Chen) were willing to sign as the opinion author.

Judge Stoll penned a short dissent — explaining that New Jersey’s capacity to sue statute should govern here, and there is no indication that the prohibition of in-prison business was designed to further limit someone’s capacity to use the Federal Court system. “It makes little sense to narrow the New Jersey statute on capacity to sue in light of the ‘no business’ rule, which is an administrative rule of the Department of Corrections that prescribes sanctions for certain ‘prohibited acts.'”

We also have the particular issue here of Federal Patent Rights and the state’s role in limiting a patent owner from asserting and enforcing those rights.

Rather than really addressing the issue, the unsigned majority opinion concluded that Tormasi had waived the argument:

  • Majority: Mr. Tormasi did not argue to the District Court that the “no business” rule cannot generally limit the scope of an inmate’s capacity to sue. The argument is, accordingly, waived, and Mr. Tormasi has therefore conceded that the no business rule may limit his capacity to sue.
  • Dissent: To the contrary, in his briefing to the district court, Mr. Tormasi asserted that the “no business” rule “was never intended to supersede [his] right to file civil lawsuits in his personal capacity.”

The majority also explained that Tormasi abandoned his constitutional arguments on appeal.

How Much Nexus is Too Much Nexus?

by Dennis Crouch

Great question in the new Supreme Court petition of SRAM, LLC v. FOX Factory, Inc.  The Federal Circuit has tightened its belt on Secondary Indicia of nonobviousness — only rarely finding that the claimed indicia are closely enough tied to the claims at issue and creating additional hoops of proof for the patentee. The petition argues that those requirements go beyond the statute and Supreme Court precedent. When I wrote about the original 2019 FedCir decision, I explained that This is “not a good case for patent holders.”

The court here again raised the “nexus” hurdle by holding that a presumption of nexus can only be achieved by proving that the product being sold by the patentee is “essentially the claimed invention.”

Dennis Crouch, Nexus: Product must be “Essentially the Claimed Invention”, Patently-O (December 18, 2019).

New Question Presented:

In Graham v. John Deere Co. of Kansas City, 383 U.S. 1 (1966), this Court recognized the pivotal importance of “objective indicia” of nonobviousness (also known as “secondary considerations”) – including the long-felt but unsolved need for the patented invention, the failure of others to arrive at the invention, and the invention’s subsequent commercial success – in determining whether a patent’s claims were obvious to a person of ordinary skill in the art at the time of the invention under 35 U.S.C. § 103.

In this case, the Federal Circuit effectively undermined this Court’s standard by improperly creating a new categorical and overly restrictive limitation on the consideration of objective indicia of nonobviousness that exists nowhere in the Patent Act or this Court’s jurisprudence.

The question presented is:

Whether the Federal Circuit erred in holding that, under 35 U.S.C. § 103, before a nexus can be presumed between objective indicia of nonobviousness and the patent claim, a patentee must first prove that a commercial product is “essentially the claimed invention” – to the exclusion of all other product features.

SRAM petition for cert.


Nexus: Product must be “Essentially the Claimed Invention”

Immediate Appeal of Denied Dismissal

The pending appeal in AlexSam, Inc. v. HealthEquity, Inc., Docket No. 20-00146 (Fed. Cir. 2020), offers some interesting questions for the Federal Circuit.

As Patently-O readers are aware, lots of patent infringement lawsuits have been ending very quickly – with courts ruling that plaintiffs patents are directed to ineligible subject matter and therefore cannot support a patent infringement claim.  In this case, the patentee AlexSamwanted to ensure that it stated-a-claim and so added page-after-page to its initial complaint explaining inventiveness of its asserted US6000608. (Excerpt below).

Despite the full explanation, the defendant (HealthEquity) moved to dismiss on eligibility grounds and as a matter of law.  The district court sided with the patentee and denied the motion to dismiss — finding that the complaint included “plausible factual allegations” sufficient to avoid dismissal at such a preliminary stage.

[E]ven if the claims here are directed toward an abstract idea, the court cannot find as a matter of law at this early stage of the litigation that the claims are ineligible for patent protection. . . .

[The court then found that none of the the individual claim limitations included anything new, and then continued:] When considering the elements as “an ordered combination,” however, the court cannot find as a matter of law that the claims reflect “conventional, routine, and well understood applications in the art.” To be sure, the ordered combination of elements described by the claims may seem conventional today, but inventiveness is determined “at the time of the patent,” Berkheimer—not a generation later. The court finds it plausible that, even if each element of the claims was itself conventional, the ordered combination and specific arrangement of these conventional pieces described by claims was “non-conventional and nongeneric” at the time of invention. Bascom (holding that “an inventive concept can be found in the non-conventional and non-generic arrangement of known, conventional pieces”).

AlexSam Dismissal Denial Utah.

The district court case is ongoing, and the defendant does not have a right to immediate appeal.  However, it went ahead and filed its petition for interlocutory appeal. That petition was supported by the district court who explained:

If this court’s ruling is erroneous, it would welcome reversal by the Federal Circuit. It is likely that such a ruling would promptly and efficiently resolve litigation not only in this case, but also in two other district courts where similar lawsuits and “nearly identical” motions to dismiss are pending. The court accordingly finds that this “order involves a controlling question of law as to which there is substantial ground for difference of opinion and that an immediate appeal from the order may materially advance the ultimate termination of the litigation.” 28 U.S.C. § 1292(b).

Id.  Apparently, the District Court’s call for immediate appeal was sua sponte.

Although Section 1292(b) allows a judge to certify an interlocutory question for immediate appeal, the appellate panel need not actually hear the appeal.  Rather, the court of appeals is then given “its discretion” to permit an appeal.

Here, HealthEquity petitioned for interlocutory appeal [HealthEquity Petition Interlocutory Appeal], and the Federal Circuit has ordered briefing from AlexSam within 7 days.

AlexSam, Inc. is directed to respond to the petition no later than 7 days from the date of filing of this order. Any reply in support of the petition is due 3 days thereafter.

Fed. Cir. Docket.

In a prior case, Judge Mayer would have held some of the claims of the asserted patent ineligible. Alexsam, Inc. v. IDT Corp., 715 F.3d 1336 (Fed. Cir. 2013). In that case, Judge Mayer dissented — apparently the eligibility issue had not been appealed and so the other two judges did not see it appropriate as the decision point.

Post Thrive: PTAB Decision Affirmed rather than Vacated

Bennett Regulator Guards, Inc. v. Atlanta Gas Light Company (Fed. Cir. 2020)

This case has been up to the Supreme Court and is now back down.

Bennet owns U.S. Patent No. 5,810,029 (Anti-icing of gas pressure regulators, now expired).  Back in 2012, Bennett sued Atlanta Gas for patent infringement.  That case had been filed in N.D. Ohio and the court there dismissed for lack of personal jurisdiction over the Georgia-based defendant.  Three years later (2015), Atlanta Gas filed for inter partes review (IPR). The PTO Granted review and the PTAB eventually found the challenged claims unpatentable. In a 2018 appeal, the Federal Circuit vacated — holding that the statutory time-bar precludes the PTO from instituting a petition in this case. 35 U.S.C. § 315(b) (“An [IPR] may not be instituted if the petition requesting the proceeding is filed more than 1 year after the date on which the petitioner … is served with a complaint alleging infringement of the patent.”).  Atlanta Gas then petitioned for Supreme Court review and in April 2020, the Supreme Court issued the following decision:

Petition GRANTED. Judgment VACATED and case REMANDED for further consideration in light of Thryv, Inc. v. Click-to-Call Technologies, LP, 590 U. S. ___ (2020).

In Thryv, the Supreme Court held particularly that the § 315(b) time-bar is part of the institution decision that is not subject to appeal. Thus, on remand, the Federal Circuit has now altered its holding — writing: “Thryv precludes our review of the Board’s ‘application of § 315(b)’s time limit,'”

Its original decision did not reach the merits of the appeal because it dismissed on the time-bar ground.  Now, the court has affirmed the PTAB decision that the claims are both anticipated and obvious.

The claims here are directed to the skirt assembly 40 designed to reduce ice formation at the outlet tube.

In its argument to avoid the prior art, Bennett argued that its claim terms should be narrowly construed in order to preserve their validity — since the patent is expired and thus cannot be amended.    On appeal, the Federal Circuit appears to agree with the general notion that this canon of claim construction should apply to IPR proceedings, but concluded that it does not apply in this case. In particular, the court explained that the narrow-to-preserve-validity canon only applies if claims are “still ambiguous” after being construed using the standard tools of claim construction. Quoting LiebelFlarsheim Co. v. Medrad, Inc., 358 F.3d 898 (Fed. Cir. 2004).  Here, the particular terms – “diaphragm-type gas pressure regulator” and “outside gas pressure regulator” were not ambiguous.

= = = =

In its appeal, Bennett also detailed a “litany of APA violations by the Board.”  The APA requires the board to establish an evidentiary basis for its factually findings; to actually make those factual findings; and then to explain the connection between the findings and the outcome of the case. For the most part, these arguments came-down to the PTAB not expressly considering Bennett’s evidence presented on each point.  On appeal, the Federal Circuit found that the PTAB had done enough:

The Board did not specifically discuss th[e] particular testimonial evidence supporting Bennett’s argument, but the Board did explain that it found Bennett’s argument unpersuasive when it credited Atlanta Gas’s evidence. That is enough. The Board need not expressly discuss every single bit of evidence proffered by the parties, so long as we can reasonably discern its path.

Slip Op.

= = = = =

One oddity of the PTAB decision involved a sanctions award against Atlanta Gas.  During the IPR proceeding, Atlanta Gas merged with Southern Co.  However, Atlanta Gas did not notify the PTAB until after the Final Written Decision had issued.  At that point, one of the PTAB judges had to recuse himself and a new panel-member was added (who signed on to the opinion as written). The PTAB awarded sanctions (but did not state the amount yet) but refused to terminate the IPR.

On appeal, the Federal Circuit stayed its hand — explaining that “we lack jurisdiction” in this case because the sanction amount is “unquantified” and is therefore not yet final. “On remand, the Board may, at its discretion, further consider its order given the outcome of this appeal. But until the Board quantifies any sanctions, we will not review its decision granting them.”