The Federal Circuit’s decision in Broadcom v. Netflix revolves around the construction of the claim term “drive server” found in Broadcom’s U.S. Patent No. 6,341,375. The decision reaffirms the significance of preferred embodiments in claim construction and their potential to shape the validity of patent claims.
The basic question in the case is whether a “drive server” requires computing capabilities, or is storage capacity enough. Although the plain language of “server” suggests computing capacity, the court agreed with the PTAB that the intrinsic evidence, including the claim language and the specification, supported the broader interpretation. In the IPR, Broadcom was seeking the narrower construction in order to avoid prior art. Under the broader construction, the claims were found invalid as obvious.
The important part of the case serves as a reminder of the power of “preferred embodiment” language within the patent specification. In this case, Qualcomm had included a preferred embodiment of a DVD drive server, also known as a disk library, that contained a number of DVD drives and associated disks. Broadcom admitted that its proposed construction would exclude this preferred embodiment if the disk library contained no additional computer. On appeal, the Federal Circuit quoted Vitrionics in its conclusion that: Claim constructions that exclude a preferred embodiment are “rarely, if ever, correct and would require highly persuasive evidentiary support.” Vitronics Corp. v. Conceptronic, Inc., 90 F.3d 1576, 1583 (Fed. Cir. 1996) (opinion by Judge Michel). In this case, that evidentiary support was lacking. Invalidity affirmed.
Since Vitrionics, the Federal Circuit has placed additional weight upon intrinsic evidence — something that seemingly should give the recited principle even more power.
This week, the Supreme Court is considering the re-filed certiorari petition of Franz Wakefield, dba CoolTVNetwork.com v. Blackboard, Inc., No. 22-819. The petition’s basis stems from the debate over Judge Newman’s competency. The appellate case was decided by a panel that included Judge Newman, and the petitioner relies heavily upon the public documents circulated in the ongoing disability hearing. Including the repeated statements suggesting that Judge Newman lacks competence and “may suffer from impairment of cognitive abilities (i.e., attention, focus, confusion and memory).” The petition notes that Judge Newman’s colleagues acted unanimously to remove her from being assigned new cases. Wakefield is pursuing his case pro se and so it lacks some fine points, but the thrust of the claims here are quite clear.
On the 22nd of June, the court will also consider petitions in two additional IP cases that both focus on IPR procedure grounded in statutory interpretation:
Apple Inc. v. CalTech, No. 22-203: Scope of estoppel following IPR. After losing an IPR, when can defendant later raise similar issues in district court?
Nike v. Adidas, No. 22-927: Can the PTAB raise its own patentability objections to substitute claims that are different from those raised by the patent challenger?
As always, the odds are on denial, and we’ll know something by early July.
The Federal Circuit’s special investigation committee recently released an order in focusing on next steps in its ongoing investigation into the conduct and capacity of Judge Newman. Although the investigation generally centers on disability and misconduct in her role as judge — the most recent order narrows the focus to the question of whether Judge Newman’s refusal to submit to medical testing constitutes misconduct that could potentially lead to her removal from the bench. The committee’s next steps will be to hold a closed-door hearing on July 13 solely on this issue. The committee appears to be tacitly admitting that its allegations of general misconduct are insufficient alone and that it cannot prove disability without a medical evaluation. Still, the committee is moving forward methodically and the order indicates that the refusal-to-cooperate is one area that it could fairly efficiently review and reach a conclusion sufficient to make a final recommendation to the Judicial Council, despite Judge Newman’s lack of cooperation.
Confidentiality: The court’s decision to refuse Judge Newman’s request for a public hearing is another important aspect of this case. This decision raises questions about transparency and the public’s right to know about proceedings that could potentially impact the composition of the judiciary. The order explains the committee’s reasoning:
The court begins with a strong presumption that all proceedings that form part of the Committee’s investigation should be confidential, as mandated by the Judicial Conduct and Disability Act of 1980 and the Rules for Judicial-Conduct and Judicial-Disability Proceedings.
Confidentiality facilitates the investigative process and is almost universally accepted.
Opening the argument to the public carries a grave risk of inadvertent disclosure of both witnesses’ identities and confidential details of witness statements, which could impair the investigative process.
The court believes that a public hearing may include references to materials that have not been made public, and that discussion may disclose information that would identify witnesses or confidential details of witness statements.
The court believes that a better approach to permitting some public transparency would be to consider releasing a redacted transcript after the argument has been completed.
The court argues that the cases defining a right of access to trials are of limited usefulness in the context of the fundamentally different procedures of judicial disciplinary boards, which do not have a long history of openness.
This essay focuses on proposed Advancing America’s Interests Act (H.R.3535) which aims to limit NPE access to the ITC by refining the economic prong of the domestic industry requirement and by adding a stronger public interest consideration prior to issuance of an exclusion order.
The International Trade Commission (ITC) is a branch of the U.S. government focused on protecting domestic industry against undue foreign competition. The ITC’s power extends in to several areas, but primarily by enforcing the laws of (1) intellectual property rights; (2) anti-dumping; and (3) countervailing duties.
Intellectual Property Rights: Section 337 investigations constitute a significant portion of ITC’s enforcement activities. These investigations patent, trademark, or copyright violations caused by trade importation into the US. The ITC has the power to issue an exclusion order — much like an injunction — to bar infringing products from entering the US.
Anti-dumping and Countervailing Duties: The ITC can impose anti-dumping duties on foreign manufacturers selling goods in the U.S. at less than fair value. The ITC can also impose countervailing duties to counter effects of foreign subsidies on products imported into the U.S.
Because the ITCs key role is protecting US industry, the agency can only act if there is a domestic industry to be protected. In recent years, the ITC and Federal Circuit have expanded the scope of what counts for ITC domestic industry. For instance, US investments in licensing of IP have been increasingly recognized as a major factor in establishing the economic prong of the domestic industry requirement. And, patent holders have been able to rely upon uses of their technology licensees as evidence of a domestic industry. Likewise, R&D may also satisfy the requirements. Changes like these have broadened the scope of the domestic industry requirement, making ITC action accessible to industries and companies that may not have traditional manufacturing facilities or significant capital investments in the United States. — i.e., non practicing entities.
H.R.3535 – Advancing America’s Interests Act (AAIA). This proposed legislation aims to amend Section 337 of the Tariff Act of 1930 to counteract some of these expansions by narrowing the definition of domestic industry. This is the third time that Rep Schweikert has introduced the legislation. And, the basic thrust is that non-practicing patent holders would have real difficulty in bringing Section 337 complaints.
Key features of the proposed amendments include:
Licensing Activities: The Bill seeks to refine the economic prong of the domestic industry requirement by requiring that complainants demonstrate their licensing activities have led to the development of a product. This change is intended to prevent Non-Practicing Entities (NPEs), which often license their patents under threat of patent infringement suits, from establishing a domestic industry. This adjustment is designed to still permit entities who license patents as part of a technology transfer leading to new products, to assert their intellectual property rights at the ITC.
Unwilling Licensees: The Bill proposes changes regarding the use of “unwilling” licensees to establish a domestic industry. Currently, a third-party licensee can be subpoenaed for confidential information, regardless of their desire to participate in the investigation. The proposed Act stipulates that the patent owner can only rely on the licensee’s activities to establish a domestic industry if the licensee joins the complaint under oath.
Public Interest and Exclusion Orders: The Act introduces a significant shift in how the ITC considers exclusion orders. It requires the ITC to affirmatively determine that any exclusion serves the public interest. This change effectively removes the current presumption in favor of exclusionary relief — making ITC action more akin to the eBay analysis in district court..
Expedited Fact Finding: The Act would codify the ITC’s existing “100-day early disposition program,” directing the ITC to consider at the beginning of an investigation whether there are potentially dispositive issues appropriate for an early Initial Determination by the presiding administrative law judge.
ITC action became much more popular in the wake of eBay and the difficulty of obtaining injunctive relief in district court. The proposal here would shift that dynamic once again and would represent a significant shift — coupled with the limits on NPE filings. If passed, this legislation would reshape the ITC’s approach and its effectiveness for many patent holders.
The USPTO began establishing satellite offices a decade ago to expand beyond the traditional Alexandria (Washington DC) headquarters. We now have offices in Detroit, Dallas, Denver, and San Jose. Last year, Congress voted to further expand the decentralization by at least one more. The Unleashing American Innovators Act of 2022 (UAIA) mandates creation of a Southeast Regional Office (SERO). The USPTO is now seeking comments on where the office should be located — and the methodology it should use in selecting a location. [Fed Reg].
The statute requires that it be located in Virginia, North Carolina, South Carolina, Georgia, Florida, Tennessee, Alabama, Mississippi, Louisiana, or Arkansas. I would automatically rule-out Virginia and North Carolina as too close to the PTO HQ; and also rule-out Arkansas as too close to the Dallas Office. In my mind, I quickly narrowed things down to four potential cities: Atlanta, Jacksonville, Miami, and Nashville.
In my comments to the PTO, I will be including the results of this poll:LinkedIn Poll. Voting is open for a few more days. Atlanta is currently in the lead.
The core objective here is to is to deliver better services to citizens and inventors in the region; be more responsive to their needs; and drive positive changes in these regions. Simultaneously, the Community Outreach Office aims to provide a platform for dialogue, bridging the gap between citizens and the government. The statute sets out five particular considerations:
Strengthen connections between the Office and patent filers through enhanced outreach to a broad spectrum of innovators including underrepresented, rural, low-income, and student populations.
Improve retention of diverse patent examiners and judges, taking into account economic, geographic, and demographic factors.
Enhance the recruitment process to attract more high-quality patent examiners.
Reduce the backlog of pending patent applications.
Elevate the standards of patent examination to ensure greater accuracy and quality.
In addition to the new Southeast Regional Office, the PTO has also been tasked with opening a “Northern New England Community Outreach Office (NNECOO)” and the PTO is seeking comments on its location as well. The USPTO will be also be conducting a study to identify whether more regional offices would benefit US innovation.
An every day part of patent practice is arguing about whether a cited prior art reference teaches a particular claim limitation. That analysis is not always an easy task because prior art is often quite cryptic as are the patent claims being evaluated. One way to look at the process is an interpreting of the prior art to see if it teaches the claim. In that form, the process is seen a question of fact that must be based upon substantial evidence and reviewed with deference on appeal. Tribunals also often use an alternative approach that involves a question of law reviewed de novo on appeal. In the alternative approach, the patent claim is interpreted to see whether it covers the the prior art in the process known as claim construction. The difference between these two approaches is subtle, but often with huge results.
In its recent Roku decision, the Federal Circuit provides an example of these two approaches. Roku, Inc. v. Universal Electronics, 63 F.4th 1319 (Fed. Cir. 2023). The 2-1 majority decided to interpret the prior art to see whether it taught the claimed multiple “communication methods.” The court found value in “both sides of this factual question,” but ultimately gave deference to the Board’s conclusions. In her dissenting opinion, Judge Newman contended that the majority overlooked the established principle that the obviousness is a question of law that should be reviewed afresh, or ‘de novo’.
Universal Remote: In its IPR petition, Roku presented the prior art (“Chardon”) that described a universal remote control that uses two different types of communications codes (CEC and IR) in order to control various devices. Chardon includes a table with CEC and IR codes for each different type of action that might be needed. The patent at issue claims the use of “two different communication methods.” The panel majority endorsed the Board’s factual finding that a “listing of command codes does not teach or suggest a listing of communication methods.”
In its rehearing petition, Roku argues that the panel majority’s analysis conflicts the Supreme Court’s repeated statement that obviousness is a question of law. Rather, according to Roku, the majority’s treatment of obviousness as effectively a question of fact contravenes 150 years of precedent holding that obviousness is a question of law. This shift could have far-reaching “pernicious consequences.”
Roku’s bad-consequences argument centers on two main points. First, they assert that the majority’s approach could undermine the uniformity of obviousness jurisprudence. I.e., the Court is effectively deferring to lower tribunals on the question of obviousness. This, they contend, contradicts a key purpose of the Court’s exclusive patent jurisdiction, which is to ensure nationwide uniformity in patent law. It also undermines the requirement set out in KSR that the obviousness analysis must be made explicit.
Second, Roku suggests that the majority’s methodology could lead to undesirable substantive outcomes — allowing for patents on trivial distinctions from the prior art. Roku argues that such trivial advances should not warrant patent protection as they do not represent real innovation and can hinder progress. They also caution that the majority’s approach could lead to genuine inventions being deemed unpatentable if the Court simply affirms factual findings without conducting a de novo analysis of obviousness. The argument here is that the appellate court is in a better position to judge obviousness than the PTAB or a Jury.
The U.S. Patent and Trademark Office (USPTO) has announced a call for nominations for membership in its esteemed Patent Public Advisory Committee (PPAC) and the Trademark Public Advisory Committee (TPAC).
These committees were established under the Patent and Trademark Office Efficiency Act in 1999 with the task of advising the Secretary of Commerce and the Under Secretary of Commerce for Intellectual Property on patent and trademark operations, including agency management, goals, performance, budgets, and user fees. Kathi Vidal, Under Secretary of Commerce for Intellectual Property and Director of the USPTO, has repeatedly highlighted the central role of these committees in helping her to guide the agency’s strategic actions and upholding the robust IP system that powers American innovation.
Each committee is composed of nine voting members who are chosen by the Secretary of Commerce to serve a three-year term. The USPTO is seeking nominations for up to three members for both the PPAC and the TPAC. The term for new members will begin on December 1, 2023. The deadline for nominations, which must be submitted electronically or postmarked, is July 3, 2023. If you are a U.S. citizen with a strong background in finance, management, labor relations, science, technology, or office automation, this could be your opportunity to influence the landscape of IP and promote innovation on a significant platform.
Here are three key goals for the next PPAC that I would promote:
1. Persistently advocating for the highest quality patent examination and to ensure enforceable patent rights. Much like a constant gardener, this task requires ongoing attention to accommodate the continual emergence of new innovation.
2. Harnessing ‘born digital’ opportunities to enhance efficiencies in patent examination and technology dissemination. This involves embracing digital transformation to revolutionize our approach to patent processes.
3. Championing the potential of beneficial innovation and the critical task of acknowledging that each individual possesses innate genius and transformative potential. It’s inspiring to witness the astounding results that can spring from establishing an environment that fosters growth and exploration.
To apply for membership in the PPAC or TPAC, please find the application forms at the following links:
The decision in Parus Holdings, Inc. v. Google LLC, — F.4th — (Fed. Cir. 2023), underscores the importance of adhering to the PTAB procedural requirements, particularly the prohibition against incorporating arguments by reference from one document into another during an IPR, as stipulated in 37 C.F.R. § 42.6(a)(3). The court’s affirmation of the PTAB’s decision not to consider arguments and evidence that violated this rule sends a clear message to future litigants: all arguments must be explicitly presented in the briefs, and the PTAB is not obligated to consider evidence or arguments that are not properly presented.
During the IPR the patentee (Parus Holdings) made a number of arguments supporting the validity of the challenged claims. Relevant for this appeal was its attempt to provide evidence showing it was the first to make the claimed invention, antedating the prior art. However, the PTAB declined to consider Parus’s arguments and evidence because of the procedural approach taken by the patentee. the substance of those arguments were made within several declarations, but not actually within the briefs. Rather, the briefs merely incorporated those arguments by-reference into its Response and Sur-reply briefs. The problem, PTAB practice rules prohibit incorporation by reference. 37 C.F.R. § 42.6(a)(3).
(3)Incorporation by reference; combined documents. Arguments must not be incorporated by reference from one document into another document. Combined motions, oppositions, replies, or other combined documents are not permitted.
Id.
On appeal, the Court of Appeals for the Federal Circuit affirmed the PTAB’s decision. The court agreed that the PTAB was correct in disregarding Parus’s arguments that were in violation of the rule (no abuse of discretion). The court also disagreed with Parus’s argument that the PTAB should have considered all record evidence, regardless of how it was presented. The justification here is that the PTAB is restricted to deciding cases on arguments that advanced by a party and to which the opposing party was given a chance to respond. Allowing subtle incorporation by reference raises potential confusion on these issues. The court further noted that Parus had almost 3,000 unused words in its Patent Owner Response and could have sought leave to exceed its word count under 37 C.F.R. § 42.24(a)(2) or reallocated more of its briefs to that argument, but chose not to use the avenues available to it. The result then is that the reference qualifies prior art and the obviousness holding stands.
In the case, the court noted that the patentee had an increased burden in this instance because it was not simply rebuffing claims from a patent challenger, but affirmatively asserting a pre-filing priority date.
When I look at the briefs, it looks awfully close to sufficient arguments. The following comes from the briefs by the patentee:
The inventors conceived of the claimed subject matter before Kovatch’s January 4, 2000 U.S. priority filing date. . . .
Here, the source code, documents, and testimony show that at least by July 12, 1999, Alexander Kurganov, and Valery Zhukov conceived of and invented the claimed subject matter while working on the web-based upgrades to the Webley Assistant. Kurganov Decl. at ¶ 13. . . .
As shown through Alexander Kurganov’s testimony, which is corroborated by the time-stamped source code, emails documents, and the testimony of Paul Mulka and Benedict Occhiogrosso, the inventors conceived of the subject matter no later than July 12, 1999. Following conception, the inventors were reasonably and continuously diligent as the Webley Assistant enhancements was the only project they were working on at Webley and they were employed full-time. The evidence produced in Mr. Kurganov’s declaration, along with the accompanying exhibits, demonstrate that the enhancements to the Webley Assistant reduced the ’431 and ’084 inventions to practice in a prototype no later than December 31, 1999, five days before Kovatch’s earliest filing date of January 4, 2000.
To the extent that it is argued that the ’431 and ’084 inventions were not reduced to a prototype until January 7, 2000, the date the last source code file was added to the source code revision system, the inventors worked diligently to reduce the invention to practice from the critical date of January 4, 2000, until the grammar file was entered into the source code revision system on January 7, 2000. See Ex. 2059, Occhiogrosso Dec. at ¶¶ 44-91; Ex. 2060, Mulka Dec. at ¶¶ 1-6; Ex. 2020, Kurganov Dec. at ¶¶ 103-119.
. . . To show diligence during this short period, Patent Owner relies on the source code revision logs and emails, as well as the testimony of Paul Mulka. The source code revision logs and Paul Mulka’s testimony shows that from December 1999 to early January 2000, the inventors were employed full-time on the Webley Assistant project, and every file, or file modification they committed to the source code revision system, was for the Webley Assistant project. Accordingly, the activity represented by these source code revision logs exceeds the reasonable diligence required.
On appeal, the court apparently concluded that the citations here were not specific enough.
The burden of production cannot be met simply by throwing mountains of evidence at the Board without explanation or identification of the relevant portions of that evidence. One cannot reasonably expect the Board to sift through hundreds of documents, thousands of pages, to find the relevant facts.
Slip Op. The court explained that a “detailed explanation of the evidence” is required under the rule, and this does not suffice.
===
NOTE – the court cites to 37 C.F.R. § 42.44, as requiring a “detailed explanation of the evidence.” However, that provision does not appear to be part of the Federal Regulation. The court has not previously required this level of explanation within the briefing.
As Dennis reported, the Supreme Court has granted certiorari in the case of Vidal v. Elster to determine if the PTO violated Steve Elster’s First Amendment right to free speech when it declined to federally register his trademark TRUMP TOO SMALL in connection with T-shirts. The PTO had denied registration under 15 U.S.C. § 1052(c), which provides that a mark cannot be registered if it “[c]onsists of or comprises a name, portrait, or signature identifying a particular living individual except by his written consent.” In February, the Federal Circuit held that this provision is unconstitutional as applied to TRUMP TOO SMALL, a mark intended to criticize defeated former president Donald Trump’s failed policies and certain diminutive physical features.[2] The Federal Circuit held that, as applied to marks commenting on a public figure, “section 2(c) involves content-based discrimination that is not justified by either a compelling or substantial government interest.”[3] The question presented before the Supreme Court is “[w]hether the refusal to register a mark under Section 1052(c) violates the Free Speech Clause of the First Amendment when the mark contains criticism of a government official or public figure.”
Under the Supreme Court’s precedent in Matal v. Tam and Iancu v. Brunetti, the Federal Circuit’s decision was almost certainly correct.[4] Unlike the provisions at issue in those cases, which barred the registration of disparaging, immoral, and scandalous marks, section 1052(c) does not discriminate based on the viewpoint expressed; it bars registration of a famous person’s name whether the mark criticizes praises or is neutral about that person. But the provision does discriminate based on content, because it bars registration of marks based on their subject matter. The Supreme Court has held that “a speech regulation targeted at specific subject matter is content based even if it does not discriminate among viewpoints within that subject matter.”[5] Even though viewpoint discrimination “is a more blatant and egregious form of content discrimination,” both viewpoint discrimination and content-based discrimination are subject to strict scrutiny.[6] Even if we view trademarks as purely commercial speech – an issue the Supreme Court has never decided – laws burdening such speech are subject to at least the intermediate scrutiny of Central Hudson, which is the level of scrutiny the Federal Circuit applied in finding section 1052(c) unconstitutional as applied to TRUMP TOO SMALL.
To survive the Central Hudson test, section 1052(c) must advance a substantial government interest and be narrowly tailored to serve that interest.[7] The government argues that the provision advances a government interest in protecting the right of publicity of public figures from having their names used in trademarks without their consent. However, even if the government has a substantial interest in protecting the state right of publicity, the provision is not narrowly tailored to serve that interest. This is because every state’s right of publicity law incorporates some sort of defense to protect First Amendment interests,[8] and “recogniz[es] that the right of publicity cannot shield public figures from criticism.”[9] But the PTO takes no countervailing interests into account before denying registration to a mark under Section 1052(c). The PTO merely inquires into whether “the public would recognize and understand the mark as identifying a particular living individual” and whether the record contains the famous person’s consent to register the mark.[10] Accordingly, section 1052(c) is unconstitutionally overbroad because it burdens speech that the right of publicity would not burden. The provision is therefore far more extensive than necessary to serve the government’s purported interest and is facially unconstitutional.
A peculiar aspect of the Supreme Court’s First Amendment jurisprudence in the context of trademark registration is that a trademark registrant is not only asserting a right to free speech, but also to obtain an exclusionary right to prevent others from using the same speech in commerce (at least to the extent it would cause consumer confusion). In other words, if we are concerned with burdening Elster’s right to proclaim that Trump is too small, it is odd to remedy that concern by giving him a right to prevent others from saying the same thing. Section 1052(c) is not equipped to deal with this larger concern with marks containing political commentary because it only prevents the registration of marks by persons other than the named political figure, and only if they contain the name of that political figure. Outside of this narrow context, the Lanham Act can do great harm to free political speech because it allows for the federal registration of all manner of marks containing pollical commentary. Anyone can register a mark containing political commentary so long as it does not name the political figure without her consent. And politicians are free to register marks making political commentary whether or not they contain their own names. For example, the Trump Organization has a federal registration for the mark MAKE AMERICA GREAT AGAIN.[11] This grant of a federal registration does more harm to free speech than the denial of any registration would, because it allows the trademark holder to prevent others from making the same political comment in commerce to the extent it would result in a likelihood of confusion (or to the extent they are unwilling to incur the expense of defending against a federal lawsuit).
This raises a broader critique of the Supreme Court’s rigid approach to the First Amendment. The Court deals in inflexible categories of scrutiny that focus solely on the rights of the speaker (in these cases, the trademark registrant), without considering how the absolute protection of those rights might affect the speech rights of others. For example, in Boy Scouts of America v. Dale, the Court decided that the First Amendment rights of the Boy Scouts were violated by a New Jersey law requiring it to rehire a gay scoutmaster it had fired.[12] But the Court did not consider how the Boy Scouts’ assertion of their First Amendment rights affected the rights of the fired scoutmaster or of other New Jersey employees to publicly express their sexual orientation without fear of being fired. And in Citizens United, the Court vindicated the First Amendment rights of private corporations to support political candidates without considering how the resulting flood of corporate political propaganda could drown out the speech of less powerful private citizens.[13] The trademark registration cases put this issue in stark relief, because in protecting the rights of the trademark registrant to say scandalous, immoral, disparaging, or political things, the Court utterly fails to consider the ways in which the resulting rights of exclusion might prevent other people from saying the very same things. This was the point Justice Breyer made in his Brunetti concurrence, where he argued that “[t]he First Amendment is not the Tax Code.”[14] Rather than focusing on inflexible, outcome-determinative categories, he urged the Court to adopt a balancing test: “I would ask whether the regulation at issue works speech-related harm that is out of proportion to its justifications.”[15] Even under such a test, section 1052(c) would likely not survive, because it is far broader than its purported justification to protect the right of publicity. But such an approach would at least allow the Supreme Court to consider in these trademark registration cases that it is not only protecting a right to speak, but a right to exclude others from speaking.
Several prominent scholars have argued that the PTO could prevent the registration of political commentary marks under the “failure to function” doctrine.[16] The Lanham Act’s definition of a “trademark” requires that a trademark must be “used by a person to identify and distinguish that person’s goods from those of others and to indicate the source of the goods, even if that source is generally unknown.”[17] The argument is that political commentary marks are not perceived by the public as source indicators, but, rather, as political commentary. Under the failure to function doctrine, the PTO has denied registration to EVERYBODY VS RACISM and ONCE A MARINE, ALWAYS A MARINE.[18] Denying registration to political commentary marks under this doctrine might not violate the First Amendment because it is clearly a legitimate trademark policy to regulate interstate commerce. However, this issue is not before the Supreme Court in the Elster case because failure to function was not a basis for the denial of registration of TRUMP TOO SMALL in the PTO. In any event, the constitutionality of section 1052(c) cannot be saved by the failure to function doctrine because that has never been the government’s asserted justification for the provision, and because in that context too, the provision would be unconstitutionally overbroad insofar as it would bar the registration of marks containing the names of famous persons that do operate as source indicators.
While predicting the outcome of a Supreme Court case is always hazardous, it appears that if the Court is to follow its own First Amendment precedent, it must either declare section 1052(c) facially unconstitutional or formulate a test for the PTO to apply similar to the First Amendment defenses to the right of publicity, such that a substantial number of the statute’s applications do not violate free speech. (more…)
Under former director Iancu, the USPTO created a set of guidelines allowing the PTAB to deny IPR institution even in situations where the challenger raises strong challenges. These discretionary denials are known as Fintiv guidelines based upon the precedential case of Apple Inc. v. Fintiv, Inc., IPR2020-00019 (P.T.A.B. 2020). The statute appears to provide the USPTO Director with discretion in at least two key ways: (1) The statute does not expressly require institution but rather sets the reasonable-likelihood of success as a minimum threshold for granting institution. (2) The statute also indicates that the decision of whether to issue is non-appealable, suggesting a discretionary approach.
A group of five large companies led by Apple then sued the USPTO in the N.D. Cal. — arguing that the discretionary denials were in violation of the Administrative Procedure Act (APA). These five companies all regularly face patent infringement allegations and want a smoother path to invalidating the claims via IPR and PGR.
The district court dismissed the APA case and that was largely affirmed on appeal (although the Federal Circuit did ding the USPTO for failing to follow notice-and-comment procedure). See, Jordan Duenckel, IPRs and the APA: Review of Director’s Discretion to Initiate IPRs, Patently-O (March 15, 2023).
In a recent filing, the plaintiffs have indicated that they are planning to petition the Supreme Court to hear the case. The new filing is a request for extension of time until August to file the petition for writ of certiorari.
In the background, Dir Vidal has moved forward with her Advance Notice of Proposed Rulemaking (ANPRM) for potential PTAB reforms that place some limits on discretionary denials, but not to the extent Apple would like. The forthcoming brief is likely argue that the Federal Circuit’s ruling has led to the PTO signaling interest in adopting rules that would contradict the America Invents Act (AIA) and that fail to adequately address concerns.
The Supreme Court recently issued its pro-trademark-owner opinion Jack Daniel’s Properties, Inc. v. VIP Products LLC and unanimously vacated the Ninth Circuit favoring the accused comedic copycat. Justice Kagan delivered the opinion of the Court with concurring opinions from both Justice Sotomayor and Justice Gorsuch. The holding is that the First Amendment does not require any special scrutiny in cases where the accused activity is “the use of trademarks as trademarks.” Rather in this use-as-a-mark situation, standard principles of trademark law apply. The court offered the possibility (but did not decide) that a heightened situation could still apply in other situations such as use of another’s mark as artwork or for criticism, etc.
VIP’s dog toy resembles a Jack Daniel’s whiskey bottle, with several allegedly humorous alterations. Jack Daniel’s Properties, which owns the trademarks, demanded VIP stop selling the toy, leading to VIP seeking a declaratory judgment that their product neither infringed nor diluted Jack Daniel’s trademark rights. The District Court sided with the mark holder after concluding that VIP product used Jack Daniel’s features to identify the source of their own products. On appeal, the Ninth Circuit reversed, applying the Rogers test, which provides a heightened scrutiny in situations where a trademark is being wielded against “expressive elements” protectable under the First Amendment. See Rogers v. Grimaldi, 875 F. 2d 994 (2nd Cir. 1989). After a bit more procedure, the case eventually reached the Supreme Court on a question focusing on the Rogers test. The court attempted to issue a somewhat narrow holding:
Without deciding whether Rogers has merit in other contexts, we hold that it does not [require any threshold requirement] when an alleged infringer uses a trademark in the way the Lanham Act most cares about: as a designation of source for the infringer’s own goods.
Slip Op. Here, the court found that VIP’s use of the mark was as a source identifier. What this mean is that VIP does not have an extra special First Amendment excuse. However, standard trademark law already has some free speech outlet valves, such as the exception for parody. The Supreme Court remanded the case to the lower courts to consider whether VIP’s “effort to ridicule Jack Daniel’s” offer an excuse in the “standard trademark analysis.”
Trademark law includes a special cause of action for big players with “famous marks” under the doctrines of dilution and tarnishment. The trademark statute includes a fair-use exception, but it only applies in situations where the accused dilution/tarnishment is a use “other than as a designation of source.” This is a narrower exception that that available based upon judge-made law in traditional trademark infringement cases. And, the Supreme Court decided to stick with the statute — with the holding here that the VIP cannot claim fair use for the dilution/tarnishment because its use of the JD mark was as its own source identifier.
Critically, the [statutory] fair-use exclusion [for dilution] has its own exclusion: It does not apply when the use is “as a designation of source for the person’s own goods or services.” §1125(c)(3)(A). In that event, no parody, criticism, or commentary will rescue the alleged dilutor. It will be subject to liability regardless.
Id. This is a powerful boon to those already in power.
Justice Kagen’s opinion was for the unanimous court. However, 5 of the justices also signed one of the concurring opinions.
Justice Sotomayor, joined by Justice Alito, joined the majority opinion but wrote separately to emphasize the need for caution in the context of parodies and other uses implicating First Amendment concerns. She highlighted the potential risk in giving uncritical or undue weight to surveys in alleged trademark infringement cases involving parody. She argued that surveys should be understood as merely one piece of the multifaceted likelihood of confusion analysis and that courts should carefully assess the methodology and representativeness of surveys.
Justice Gorsuch, joined by Justices Thomas and Barrett, also joined with the majority opinion. Gorsuch wrote separately to underscore that lower courts should handle Rogers v. Grimaldi, with care. He noted that the Court’s decision leaves much about Rogers unaddressed, including where the Rogers test comes from and whether it is correct in all its particulars. He urged lower courts to be attuned to these unresolved issues.
Tune In Next Term for More on TM/Speech: The Supreme Court recently agreed to hear the case of In re Elster, which involves a California lawyer, Steve Elster, is seeking to trademark the phrase “Trump too small,” a reference to a taunt from Senator Rubio during the 2016 presidential campaign. Elster’s intent was to use the phrase on T-shirts to convey a message that he believed some aspects of President Trump (as well as his policies) were diminutive. However, the USPTO rejected the application, citing the prohibition on registering marks that identify a particular living individual without their written consent. The Federal Circuit ruled in favor of Elster — effectively following the Supreme Court’s prior cases of Tam and Brunetti and holding denial of registration as a free-speech violation. The Gov’t’s petition to the Supreme Court argued that Elster is different than Tam or Brunetti for a couple of important reasons: (1) the prohibition on registering another person’s name is an effective protection of competing rights of privacy / publicity held by the other person; and (2) the prohibition is viewpoint-neutral and therefore should be reviewed with less scrutiny.
In the recent case of In re Microsoft, 23-128 (Fed. Cir. 2023), the Federal Circuit once again granted a writ of mandamus, ordering a patent infringement case to be transferred out of Judge Albright’s courtroom in the Western District of Texas (WDTX). This decision was made under the provisions of 28 U.S.C. § 1404(a), which allows for the transfer of cases for the convenience of the parties and in the interest of justice.
Microsoft, a multinational corporation with a significant presence in many U.S. states, including Texas, is no stranger to litigation in the Lone Star state. The company’s substantial business activities in Texas, which include marketing, selling, and servicing the accused products, did not significantly impact the 1404(a) jurisprudence in this case.
In 2022, Virtru Corporation sued Microsoft for infringing three of its data privacy patents: US8589673, US8874902, and US9578021. Microsoft sought to transfer the case to the Western District of Washington (WDWA) under § 1404(a), citing its incorporation and headquarters in Washington, the location of the accused technology’s development, and the absence of relevant operations by either party in WDTX.
The Judge Albright denied the motion, concluding that while access to sources of proof and local interest slightly favored transfer, administrative difficulties due to court congestion disfavored it. The district court found 27 Microsoft employees in WDWA who were potential witnesses, but it deemed the willing witness factor neutral because Virtru had identified eight potential party witnesses more conveniently located near (but not in) WDTX.
In the § 1404(a) mandamus context, the appellate court reviews only for clear abuses of discretion that produce patently erroneous results. The decision of whether to transfer a case is committed to the district court’s discretion, but the district court should transfer when a movant demonstrates that the transferee forum is clearly more convenient.
The appellate panel concluded that Judge Albright’s denial of transfer was patently erroneous. It noted a clear abuse of discretion in the district court’s assessment of the convenience of potential witnesses. The appellate court concluded that the center of gravity of the action was clearly in the WDWA, where the majority of potential witnesses with relevant and material information resided, where accused product features were researched, designed, and developed, and where physical evidence was located. The court granted the petition, vacated the district court’s order denying transfer, and directed the district court to grant the transfer motion.
The pending petition in Nike v. Adidas asks the Supreme Court whether it is proper for the Patent Trial & Appeal Board (PTAB) to raise sua sponte new grounds of unpatentability against a substitute claim added during an inter partes review proceeding. The government, as a respondent in this case, argues that the PTAB can create its own reasons for rejecting newly-added claims so long as the patent owner is given sufficient notice and a chance to respond.
However, the case intrigue has recently heightened due to a somewhat chaotic saga involving the PTAB. Key figures involved include former PTAB Chief Judge Ruschke, current Chief Judge Boalick, and Judge Michael Fitzpatrick, who was recently justified as a wronged-whistleblower.
The Supreme Court petition was submitted amidst revelations of secretive maneuvers within the Board. These questionable practices include an abrupt panel expansions and judge replacement without notifying involved parties. Specifically, in the Nike v. Adidas IPR, the Board panel was first expanded to include Chief Judge Ruschke and then Deputy Chief Judge Boalick after all parties had finished their arguments and opinion writing had begun. The process also witnessed the replacement of Judge Fitzpatrick after he expressed discontent over the panel’s expansion, prompting his removal from all America Invents Act (AIA) cases.
Judge Fitzpatrick’s ousting ignited a legal battle against the USPTO, which recently concluded with a victory for Fitzpatrick at the Merit Systems Protection Board (MSPB). Fitzpatrick alleged that the USPTO had manipulated the inter partes review process in the Nike v. Adidas case, inappropriately expanding the PTAB review panel and delaying the final decision. Furthermore, Fitzpatrick’s whistleblowing disclosures extended beyond the PTAB, unearthing a misrepresentation by the Solicitor General to the Supreme Court regarding the frequency of expanded panels during the Oil States proceedings. In briefing in the case, the Solicitor General recently apologized to the Supreme Court, expressing regret for the unintended misinformation. The SG’s brief indicates that they only recently learned of the underlying drama.
In light of these troubling revelations, the Solicitor General suggests the Supreme Court grant, vacate, and remand Nike v. Adidas, offering the petitioner a chance to present arguments based on this new information to the Federal Circuit, and allowing the Federal Circuit to consider these points in the first instance.
Interestingly, this practice of unannounced judge replacements parallels the Federal Circuit’s tactics in the infamous Novartis case. Although the Adidas name is still on the case, the company has formally requested not to be involved in the appeal, citing a settlement reached with Nike.
Washington Post has published a long article titled, “Colleagues want a 95-year-old judge to retire. She’s suing them instead,” by Rachel Weiner. Judge Pauline Newman, the oldest active federal judge in the country, has been embroiled in controversy as she resists her colleagues attempts to urge/force her to retire. The article ends with a noteworthy quote from Newman that rings true to her characteristic resilience and dedication: “I want to spend my last five years correcting my colleagues’ mistakes.” In a career spanning four decades and more than 300 dissenting opinions, Newman’s resolve is clear.
My own quote in the Washington Post article outlines the complexity of the situation: “Moore’s order says other judges are concerned about Judge Newman’s health; I think that’s real.” I genuinely believe the concerns are rooted in care for Judge Newman, but the issue at hand extends beyond personal sentiments. As a former Naval engineer, Chief Judge Kimberly Moore is seeking to run a disciplined court.
Weiner reports the details of her in-person interview with Judge Newman in her Lafayette Square office overlooking the White House.
The article cites to my 2022 study of Federal Circuit decisions showing that Judge Newman is the most patentee-friendly judge, with Chief Judge Moore a close 2nd. Dennis Crouch, Judging Patent Cases, Patently-O (May 4, 2022).
In CareDx v. Natera, an intriguing amicus brief was recently filed by the Honorable Paul Michel (Ret.) and Professor John Duffy in support of the patentee petitioners Stanford and CareDx. The brief advocates for the clarification of patent-eligibility law, and criticizes the Federal Circuit’s handling of the case. The filing of the brief has seemingly prompted the Supreme Court to request a response from the accused infringers, after they initially waived their right to do so. This move reflects some significance of the arguments presented in the brief. [Read the Brief]
According to Michel and Duffy, the Federal Circuit’s decision in the case overlooked the text of the Patent Act and conflicts with Supreme Court precedent such as Diehr and Cochran v. Deener. They argue that the decision fails to recognize the difference between patent eligibility (under § 101) and patentability (under §§ 102, 103, and 112). They further criticize the decision for an unduly simplified description of the invention that leaves out important details and for improper emphasis on “conventionality.” The concept of “conventionality” is more appropriately associated with issues of novelty and nonobviousness, as regulated by §§ 102 and 103 respectively, rather than being a key criterion for patent eligibility under § 101.
The brief spends some amount of time focusing on landmark patent cases such as Diehr and Cochrane v. Deener (while rejecting Flook) to illustrate how a process can be patent eligible despite encompassing conventional elements. And, throughout this argues that the Federal Circuit misunderstood the definition of “process,” which under 35 U.S.C. § 100(b) is defined to include “a new use of a known process.” The brief contends that this definition permits patents on new applications or improvements of known technologies, and that such improvements should be presumed to be patent eligible. But, the Federal Circuit’s eligibility criteria of “conventionality” prohibits this interpretation even though not rooted in the Patent Act’s text or the Supreme Court’s precedent.
As with other recent eligibility briefs, this one also underscores a need to address confusion and uncertainty surrounding patent eligibility, particularly in relation to biomedical and diagnostic patents.
Now that we’re almost to June, the petition is unlikely to be decided before the recess and instead will be held-over until the fall 2023 before we get a decision on whether the court will grant certiorari.
The most recent enablement case invoked by the Supreme Court in Amgen is Holland Furniture Co. v. Perkins Glue Co., 277 U. S. 245 (1928). The Court also referenced several other historically significant enablement cases, including Wood v. Underhill, 5 How. 1 (1846); The Incandescent Lamp Patent, 159 U. S. 465 (1895); and Minerals Separation, Ltd. v. Hyde, 242 U. S. 261 (1916). The Court went to lengths to present O’Reilly v. Morse, 15 How. 62 (1854), as an enablement decision, even though in both Alice and Mayo, the court had labeled O’Reilly as an eligibility decision. The approach of Amgen echoes that of the Supreme Court’s 2010 Bilski decision, which advised a simple adherence to established precedents. The only non-Supreme Court decision that Amgen cites is Whittemore v. Cutter, 29 F. Cas. 1120 (C.C.D. Mass. 1813). Notably, Whittemore was adjudicated by Supreme Court Justice Joseph Story while on circuit duty.
In looking at the leading Supreme Court precedent case of Holland Furniture, it is telling that the Federal Circuit has invoked this case only twice – in both instances, for discussions regarding means-plus-function claim interpretation, not enablement. Nevertheless, Holland Furniture remains a crucial decision that precludes (a) genus claims built upon on the disclosure of a single species, as well as (b) genus claims that encompass inoperable species. The case involved a patent covering starch-based glue. The Supreme Court explained “an inventor may not describe a particular starch glue which will perform the function of animal glue and then claim all starch glues which have those functions, or even all starch glues made with three parts of water and alkali, since starch glues may be made with three parts of water and alkali that do not have those properties.” Id. The Federal Circuit’s failure to rely upon Holland Furniture likely stems from the fact that the case served as the foundation for Walker v. Halliburton that was later rejected by the 1952 Patent Act.
Elephants in the Room: The Federal Circuit has adjudicated numerous biotech enablement cases, providing nuanced analysis, none of which was cited or dissected by the Supreme Court. Perhaps the simply have a tit-for-tat since the Federal Circuit so rarely cites the Supreme Court in enablement cases. The appellate court’s Amgen decision, for instance, cited many Federal Circuit opinions, but nothing from the Supreme Court. In many ways, the two courts are simply talking past one another without disagreeing.
A critical case absent from the Supreme Court’s Amgen analysis is In re Wands, 858 F.2d 731 (Fed. Cir. 1988). In Wands, the Federal Circuit introduced a set of factual considerations to assess whether a claim is sufficiently enabled or would necessitate undue experimentation – a key factor is the amount of experimentation required. In Amgen, these elements were handed to the jury for adjudication as mandated by the 7th Amendment. The jury in Amgen sided with the patentee, deeming the claims enabled. However, this pro-patentee verdict was overturned by the district court on JMOL, a decision subsequently affirmed by both the Federal Circuit and the Supreme Court. In its deliberation, the Supreme Court seems to reassess the Wands factors de novo without acknowledging the jury’s verdict. Intriguingly, the Supreme Court’s opinion finds substantial experimentation necessary, but does not even acknowledge the existence of a jury verdict, simply stating that “both the district court and Federal Circuit sided with Sanofi.” This omission marks a significant oversight by the Court.
While the Supreme Court’s decision in Amgen v. Sanofi seems to generally affirm the current approach of the Federal Circuit to enablement, it lacks any depth of engagement with the nuanced analysis often conducted by the Federal Circuit. In particular, the absence of reference to In re Wands and its eight-factor test, is a surprising omission. Even more disconcerting is the Court’s disregard for the jury’s verdict in the original Amgen trial, reflecting a potential underappreciation of the complexities of patent law and the factual determinations involved. It remains to be seen how this lack of engagement with Federal Circuit precedent may influence future patent law decisions. Most likely, the Federal Circuit will continue its historic approach implicitly suggested by Prof Holman and continue to ignore the Supreme Court precedent on point.
The case involving Medtronic and Teleflex centered on five patents related to a coaxial guide catheter used in interventional cardiology procedures. These patents, US Patents 8,048,032, RE45,380, RE45,776, RE45,760, and RE47,379, cover inventions devised to offer an “enhanced backup support” in contrast to using a guide catheter individually.
In an attempt to invalidate these patents, Medtronic launched a succession of Inter Partes Review (IPR) petitions. Despite the initial approval of the petitions, the Board eventually ruled in favor of Teleflex, the patent holder. The pivotal question on appeal was whether U.S. Patent 7,736,355 (“Itou”) could be regarded as prior art.
In a split decision, the Federal Circuit confirmed the Board’s decision, establishing that the first-to-invent law from before the America Invents Act (AIA) allowed Teleflex to antedate the prior art by demonstrating prior invention. The case underlines a situation where the transition to the AIA has resulted in the loss of certain rights for patent holders. Under the AIA’s provisions, Itou would have been considered prior art, therefore preventing Teleflex’s patenting. The also case stands out as Itou was clearly the first inventor, but this evidence was not taken into account due both to arcane pre-AIA rules and due to the IPR process focusing only on the published patent documents.
Teleflex’s patents claim a priority filing date of May 3, 2006, based on a purported conception date in early 2005. Itou’s priority application was filed in Japan in September 2004, and a year later, the US application was filed on September 23, 2005. Despite Itou pioneering the invention in Japan and filing the Japanese patent application prior to Teleflex’s invention, Teleflex arguably demonstrated an invention date that preceded Itou’s US filing date, which was critical for the court’s decision.
A crucial regulation in this context is pre-AIA 102(e), which introduces a form of ‘secret prior art’ for patent applications that are unpublished as of the patentee’s invention date. Under this regulation, a third party’s US or PCT patent application becomes prior art once published. However, the quirk of 102(e) as compared to pre-AIA 102(a) lies in the fact that these applications are treated as prior art from their filing date, not their publication date. An important subtlety is that a foreign patent filings, like Itou’s Japanese application, do not qualify as prior art under 102(e). In re Hilmer, 149 USPQ 480 (CCPA 1966).
Proving Prior Invention: The concept of ‘invention date’ is crucial in pre-AIA patent cases, and typically, this date is assumed to be the filing date of the patent application. The patentee can then furnish evidence to establish an earlier date of invention, which usually involves a sworn declaration from the inventor, corroborated by additional evidence. Perfect Surgical Techs., Inc. v. Olympus Am., Inc., 841 F.3d 1004 (Fed. Cir. 2016).
Both the Patent Trial and Appeal Board (PTAB) and the majority judges (Judge Lourie and Chief Judge Moore) concurred that Teleflex had provided adequate evidence to substantiate an earlier invention date. Judge Dyk, however, wrote in dissent.
It’s important to understand that the process of invention involves two steps – conception and reduction to practice. The majority and dissent agreed that Teleflex had provided evidence sufficient to proven both conception and the creation of a prototype before the critical date. However, reduction to practice also necessitates evidence demonstrating the suitability of the invention for its intended purpose. For complex inventions like the one in this case, the courts can require testing to establish this suitability prong. Steinberg v. Seitz, 517 F.2d 1359 (C.C.P.A. 1975). While the majority deemed the evidence of testing adequate, the dissent argued it was insufficient — with the debate focusing on the extent of corroboration required.
The majority observed, “[B]oth inventors Howard Root and Gregg Sutton testified regarding testing performed on a prototype of the claimed invention. These tests, although more qualitative than quantitative, were sufficient to confirm that the prototype would work for its intended purpose — providing increased backup support as compared with a guide catheter alone.” The judges concurred with the Board’s view that the tests did not require a direct comparison or a quantitative analysis to prove improvement in function. They also noted expert testimony suggesting “qualitative testing would have been sufficient.”
However, Judge Dyk, dissenting, questioned the lack of corroborative evidence supporting the prior testing. He cited to Cooper v. Goldfarb, 154 F.3d 1321 (Fed. Cir. 1998), to assert that “[i]n order to establish an actual reduction to practice, an inventor’s testimony must be corroborated by independent evidence.” Judge Dyk particularly concluded that every “inventive fact” should be corroborated with evidence beyond the inventors’ testimonies.
The corroborating evidence in this case included a sales presentation and two non-inventors’ testimonies. However, Judge Dyk believed that this evidence did not provide any information regarding proof of operation for the intended purpose. Specifically, there was “no specific description of what tests were performed or the results of the tests … [or] when the tests were performed and whether they were performed before the critical date.” Dissent.
The majority responded that not every detail of reduction-to-practice needs to be independently corroborated, advocating for a rule of reason. Despite agreeing with this general principle, Judge Dyk insisted that the lack of corroboratory evidence regarding testing for the intended use couldn’t be overlooked.
Judge Dyk, in his dissent, noted the lack of internal documents from Teleflex corroborating any testing during the crucial period in 2005. “Common sense, and Teleflex’s own testimony [showing record keeping in this area], suggest that these documents would exist if testing had occurred.” Dissent. He argued requiring such documents did not created an unreasonable standard for inventors seeking to enforce a patent claim. Judge Dyk’s dissent concludes that “I think that Itou has been shown to be prior art to the patents at issue and therefore could support a determination of anticipation or obviousness.”
However, the majority, led by Judge Lourie, disagreed with the dissent and upheld the PTAB’s decision in favor of Teleflex.
The attorneys for the appellants (Medtronic) were led by Tasha Bahal from Wilmer Cutler. Representing Teleflex were attorneys from Carlson Caspers, led by Derek Vandenburg.
The Devil’s Dictionary of Patent Law and Beyond by Martin Abramson fills a long-standing humor gap in patent law. It contains diabolical definitions, hilarious cartoons, and amusing anecdotes on patent law and the general law environment in which it exists. Where there’s satire, clarity follows, and as in the original Devil’s Dictionary by Ambrose Bierce, the droll definitions in the present book have the “ring of truth.” The author has more than 40 years of IP experience and a deep knowledge of its history, so along with the patent law are showcased the little known gems of patent lore.
Also a great gift for those fortunate enough to have a patent attorney in your life.
In OneSubsea IP v. FMC Tech (Fed. Cir. 2023), the court has affirmed a district court denial of attorney fees for the successful defendant. A key holding in the case is that denial of summary judgment serves as a big flashing sign that the case is not exceptional.
OSS sued FMC back in 2015 for infringing claims found in ten different patents all relating to subsea processing of hydrocarbons (oil and gas). This includes: adding chemicals, separating water and sand from the hydrocarbons; increasing pressure; etc. The patents required a “flow diverter assembly” to “divert fluids” to and from a processing area. The parties argued about the word “divert.” In the context of the invention, the district court concluded that it required two different potential flowpaths, and that fluid flow must be forced to follow one instead of the other. And simply changing directions is not a diversion.
The two-flowpath requirement was a problem for the patentee. FMC’s accused structure just had one flowpath that passed through the processor as shown in the figure below.
The Proceedings: The district court issued its claim construction back in 2016, but rather than quickly granting summary judgment of non-infringement, it stayed the case pending outcome of parallel inter partes reviews challenging the patents’ validity. Those IPRs resulted in many of the claims being found invalid as obvious, with that determination affirmed by the Federal Circuit without opinion. In 2019, the district court lifted the stay and the case moved toward trial. The district court again refused to grant summary judgment of non-infringement. According to the transcripts, FMC’s counsel presented 3,200 pages of documents illustrating the differences between the patented claims and the accused products. Judge Bennett (S.D.Tex.) thought that depth of factual record was a bit too much for a summary judgment. “And you really think I’m going to be able to grant summary judgment on that?” Judge Bennett asked. Eventually, Judge Bennett excluded OSS’s expert testimony for misapplying its prior claim construction and granted the summary judgment of non-infringement. OSS did not appeal the dismissal.
Attorney Fees: After winning on the merits, FMC moved for attorney fees and non-taxable costs. The district court denied those costs, finding the case to be not exceptional. On appeal, the Federal Circuit affirmed, finding no abuse of discretion.
Section 35 U.S.C. § 285 permits a district court to award reasonable attorney fees to the prevailing party; with the caveat that it may only do so “in exceptional cases.” Under the 2014 decisions of Octane Fitness and Highmark, the Section 285 analysis is a flexible one with the district court having substantial discretion in its determination of whether a particular case is “exceptional” and whether fee shifting is appropriate. In this case, the court noted a “totality of the circumstances” approach should be taken on a “case-by-case” basis. The district court can consider whether the case is an outlier from others in terms of the “substantive strength of a party’s litigating position . . . or the unreasonable manner in which the case was litigated.” Octane Fitness.
Because district courts are given discretion in making these determinations, the decisions are given deference on appeal and only overturned based upon either: (1) clear error of judgment, (2) clear error in factual finding, or (3) a material error of law. (Note here, the error of law is reviewed de novo).
Deference and Successor Judges: Here, Judge Bennett stepped into the lawsuit at the very end of the case, replacing Judge Atlas who moved to senior status. On appeal, FMC argued that no deference should be given to Judge Bennett’s decision because he had not “lived with the case.” In Highmark, the Supreme Court grounded its decision to give deference to district court decisions upon the fact that district courts are much more into the weeds of the litigation and thus better positioned to judge exceptionally bad behavior. Because Judge Bennett decided the case on written record without even a hearing, FMC suggested that his decision should not be given deference. On appeal though the Federal Circuit rejected that analysis based upon caselaw from the other circuits consistently holding that deference is also given to successor judges discretionary decisions. “The successor judge receives the same deferential review on appeal as the original judge would have received.” Slip Op. Further, “FMC had ample notice that a successor judge would decide its § 285 motion and did not object.”
Exceptional Case: In looking at the exceptional case question, the appellate court concluded that FMC’s failure to achieve an early summary judgment was its own fault. Basically, the original motion for summary judgment was deemed “unpersuasive.” The appellate court then explained the importance of summary judgment denial:
When a district court, fully aware of the competing contentions of the parties, declines to end the case on summary judgment and allows a plaintiff’s case to proceed, the district court may have effectively determined that the position of the party opposing summary judgment is not objectively baseless, making it nearly impossible for the plaintiff’s case (on the issue that was the subject of the summary judgment motion) to “stand out” as lacking substance at that time.
Denial of fees affirmed.
US Patent Nos. 6,637,514, 7,111,687, 8,066,076, 8,122,948, 8,272,435, 8,281,864, 8,540,018, 8,573,306, 8,746,332, and 8,776,893.
As a member and supporter of the National Association of Patent Practitioners (NAPP), I am looking forward to the NAPP Annual Meeting and Conference scheduled for July 19-21 in Alexandria, Virginia at the USPTO Headquarters. I invite all those invested in protecting intellectual property rights to attend, especially folks who are deep in the day-to-day business of protecting patent rights. We have a remarkable line-up of speakers this year, including the USPTO Director, Kathi Vidal.
Delving deeper into the conference agenda, we kick off on July 19th with an optional tour of Old Town Alexandria, followed by expert-led discussions on a broad range of topics from the current USPTO Pilot Programs to how to protect your practice from cyber-attacks. Thursday, July 20th, will offer another full day of sessions covering everything from responding to prior art rejections, to cultivating diversity in patent law, and best practices for PTAB appeals. My patent law update is Thursday morning. Finally, on Friday, July 21st, we’ll wrap up with in-depth sessions on nonce words and means plus function, invention in the corporate environment, and patent term adjustment calculation, among other nerdy patent topics.
I particularly encourage law students to attend and take advantage of the steeply discounted rate for students and academics. It’s worth noting that attendance is free for the Judiciary and Federal Government employees such as PTAB Judges and Patent Examiners. Organizers have made arrangements for discounted accommodation at the Embassy Suites Alexandria Old Town for those who book early.
If you have not been part of NAPP, this is a wonderful opportunity to join a great organization for patent practitioners, network with industry professionals, and gain practical insights into the world of patent law. I hope to see you there!
For more information and registration, click here.
by Dennis Crouch
