All posts by Dennis Crouch

About Dennis Crouch

Law Professor at the University of Missouri School of Law.

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.”

Dismissals With Prejudice

by Dennis Crouch

This is a non-precedential pro-se case and so a bit quirky, but its support of dismissing a case for improper venue with prejudice is likely to be cited as an example in other cases. 

Nazir & Iftikhar Khan v. Hemosphere Inc. (Fed. Cir. 2020)

In their lawsuit, Khans (both MDs) sued Hemosphere as well as 300+ hospitals and individual physicians for infringing their U.S. Patent No. 8,747,344 (AV shunt). The case did not get far.  The district court dismissed the case – with prejudice – for want of prosecution, insufficient service, improper venue, and misjoinder. The Federal Circuit has now affirmed.

The Khans represented themselves pro se at both the district court and on appeal. Their complaint alleges infringement based upon Hemosphere’s HeRO Graft shunt.

The Khans had mailed out the summons & complaint to the defendants with a waiver request — but did not actually serve the defendants in the manner required by FRCP 4.

The district court found that the Khans had not attempted to personally serve any defendant. Instead, the Khans asserted that they completed service by mailing the summons and complaint to the defendants, despite contrary instruction from the district court. The district court explained that Rule 4(e) does not permit personal service via mail and the Khans had not identified any state laws that would otherwise allow service by mail. The district court further found that the Khans had failed to comply with the [90 day] timeliness requirement of Rule 4(m).

The district court also noted that dismissal was proper for failure to plausibly allege proper venue 28 U.S.C.  § 1400(b) and for improper joinder under 35 U.S.C. § 299.

When dismissing for lack of venue, improper joinder, or failure to prosecute, the usual approach is a dismissal without prejudice. That result would allow the plaintiffs to re-file the lawsuit at a later date (perhaps with the assistance of an attorney). For instance, R.4(m) states that the court “must dismiss the action without prejudice” based upon failure to serve. Here, however, the district court dismissed with prejudice.  I read through the district court order and it does not actually provide any fact finding or discussion of why dismissal with prejudice is appropriate in this case other than the following one-liner regarding failure to prosecute:

Such a dismissal may be with prejudice “if the plaintiff’s delay in obtaining service is so long that it signifies failure to prosecute.”  Williams v. Illinois, 737 F.3d 473 (7th Cir. 2013).

Khan v. Hemosphere Inc., No. 18-cv-05368, 2019 WL 2137378, at *1 (N.D. Ill. May 16, 2019) (dismissal and sanction order).

On appeal, the Federal Circuit affirmed the dismissal. Although the Khans had attempted to obtain waivers of service, the vast majority defendants refused to waive service. At that point, service is required under R.4(e).  And, without service or waiver of service, the district court must dismiss.

Regarding dismissal with prejudice, the Federal Circuit wrote explained that the 250 day delay in serving process for the vast majority of defendants was a form of “extreme delay” that sufficient to justify dismissal with prejudice. Note here that the court actually wrote: “nearly all of the over 300 defendants had not been properly served.”  My comment on that line — make sure your law clerks are great writers.

For the improper venue  dismissals, the appellate panel also concluded that that dismissal with prejudice was proper (rather than without prejudice), but did not provide any reasoning for that conclusion.

Khans have failed to convince us that the district court erred in determining that venue under that statute was improper. . . . Accordingly, we conclude that the district court did not abuse its discretion in dismissing the action with prejudice.

Slip Op. Here, the court should have done a better job of explaining why this case overcomes the presumption set forth in R.41(b) that an involuntary dismissal on venue / joinder grounds is not on the merits.

Sanctions:  Although the district court denied that the case was “exceptional” under 35 U.S.C. § 285, the court still awarded $95k in attorney fees to out-of-state defendants for violation of FRCP 11(b). On appeal, the Federal Circuit affirmed writing that the rules do not “preclude sanctions for frivolous venue
and service assertions.”

A vs The: Preamble Limitations

by Dennis Crouch

Shoes by Firebug LLC v. Stride Rite Children’s Group (Fed. Cir. 2020) petition for rehearing denied (Fed. Cir. August 12, 2020).

The Federal Circuit originally decided this claim construction case in June 2020 on the topic of when a claim preamble is limiting. The court has now denied Firebug’s petition for rehearing.

The case is interesting because it involves two Firebug patents with identical claim preambles. On appeal the Federal Circuit found one preamble limiting, and the other non-limiting. The result here shows that (1) this continues to be a tricky issue; and (2) whether a preamble is limiting is substantially determined by the body of the claim (rather than simply an examination of the preamble itself).

The preamble at issue: “1. An internally illuminated textile footwear comprises.” U.S. Patents 8,992,038 and 9,301,574.  The prior art internally illuminates a piece of plastic that is part of the shoe upper, and the patentee argues that its claims require the textile itself to be internally illuminated. The problem for the patentee is that the limitations in the claim body do not expressly require light diffusion through the textile — hence its reliance on the preamble.

Construction of a claim preamble is a holistic process and requires “review of the entire patent” with any particular litmus test. Coning Glass.  The court has offered a number of platitudes regarding claim preamble limitations — like most platitudes, these are rarely sufficient resolve any particular dispute.

  • Limiting: recites essential structure or steps.
  • Limiting: necessary to give life, meaning, and vitality to the claim.
  • Limiting: reliance on preamble phrase for antecedent basis.
  • Not Limiting: body of the claim defines a structurally complete invention.
  • Not Limiting: preamble merely states a purpose or intended use for the invention.

 = = = =

‘038 Patent ’574 Patent
1. An internally illuminated textile footwear comprises:

a footwear; the footwear comprises a sole and an upper; …

the upper being light diffusing


1. An internally illuminated textile footwear comprises:

a sole and an upper;

the upper being a light diffusing section;

an illumination system; … the illumination system being housed within the footwear; …

The two patents at issue share the same (almost the same) specification and the claims are also quite similar.  The table above shows the most relevant portion of the two claims.  As mentioned, the during the IPR, the patentee wanted the claims to be construed to require that the textile be internally illuminated.

In distinguishing between these two claims, the court basically put on its simplistic grammar hat. The preamble recites a “footwear”, but the ‘038 claim body reintroduces “a footwear” while the ‘574 claim body’s first reference is to “the footwear.”

The preamble [of the ‘038 claim] cannot be said to provide essential structure or necessary meaning to the claimed invention because the same element—the footwear—is independently recited in the body of the claim. . .

Unlike claim 1 of the ’038 patent, claim 1 of the ’574 patent does not reintroduce “footwear” in the body of the claim but instead relies on the instance of “footwear” introduced in the preamble for “antecedent basis.” . . . Because the claim requires that the illumination system be housed in the textile footwear recited in the preamble, the preamble is essential to understanding the structural limitations of the illumination system. Accordingly, rather than merely reciting an intended purpose of the claimed invention, we conclude that the preamble of claim 1 of the ’574 patent limits the scope of claims 1–10 of the ’574 patent to require the use of a textile upper

Slip Op.  Despite its strong reliance on “a” vs “the”, the court reiterated that the process is holistic and noted that nothing in the specification or prosecution history demanded that the light pass through a textile.

Still Obvious: Although the patentee got its limiting construction for the ‘574 patent, the Federal Circuit still affirmed the obviousness determination. Basically, the PTAB had offered an “alternative fact finding” that the prior art “suggests using a woven, porous material in a light diffusing, internally illuminated part of footwear”, and the court affirmed that finding as based upon substantial evidence.

The patentee petitioned for rehearing with a seemingly important argument.  The Board’s “alternative fact finding” was written in an aside within FN16 of the Final Written Decision.  Firebug argues that the conclusion was introduced for the first time in the final written decision and “Firebug did not have the opportunity to address” the issue.   The petition has now been denied without new opinion.

= = = = =

Firebug also argued secondary indicia of nonobviousness. In particular, the patentee presented two third-party license agreements for the patents at issue as well as testimony of Ralph Shanks who negotiated one of the licenses (against Firebug). On appeal, the Federal Circuit noted that the licenses included “eight patents, two patent applications, and one trademark.”  The court questioned the nexus to the particular invention here, but affirmed on the ground that the evidence is so weak that even if a nexus exists the claims are still obvious.  An odd bit of the decision is that the conclusion of “weakness” appears to be directly tied to the no-nexus argument that was not affirmed.

Obviousness: Known Solutions from other Fields of Art

In re Robert Kross (Fed. Cir. 2020)

In this short decision, the Federal Circuit has affirmed the PTAB’s determination that Kross’s claimed invention would have been obvious. Apn. No. 13/275,400. (Real party-in-interest here is Poly-Gel L.L.C.).

The invention: A method of printing using “non-gelatin viscoelastic gel printing plates.” The gel used here is designed to solve cracking problems that were “a hallmark of gelatin plates.”  The claimed viscoelastic gel was already known in the art for its non-cracking properties. In its decision, the Board concluded that PHOSITA would have been motivated to solve the known cracking problem by using “known properties of a known material.”

The difficulty in this case involves the claimed viscoelastic gel. The prior art (Chen) discloses the gel and its non-cracking and ease-of-manufacture properties.  However, Chen only describes this outside of the printing context. On appeal, the Federal Circuit affirmed that PHOSITA would have been motivated to use Chen’s disclosure:

 [T]he fact that Chen does not teach the use of viscoelastic compositions in any type of printing does not undermine the Board’s finding of a motivation to combine. We agree with the Board that Chen’s silence “as to a particular application is of little or no moment given the teachings of the properties and the resulting general uses of the viscoelastic gel-like materials, which would have suggested those materials as, more likely than not, a successful solution to the problems of gelatin cracking and splitting.”

Slip Op. (Quoting PTAB determination).  Here, the Federal Circuit was guided by its reading of the prior art — which identified the particular problematic parameters (cracking, splitting) to be addressed. That guidance from this prior art brought this case outside of the “obvious to try” world and into one of “reasonable expectation of success.”  I’ll note here that the court was guided by its reading of the prior art — it turns out that there are many many problems with gel-based printing recognized in the prior art. The court skipped over how those additional problems might have guided PHOSITA off of the neat invention pathway offered by the opinion here.

The Overly Complicated Law of Getting Your Money Back From the Government

I invited Prof. Burbank to provide a discussion of this recent appellate decision reversing a judgment from the Court of Federal Claims.  Burbank has previously written about confusing elements of the Tucker Act and the scope of claims for “illegal exaction.” In typical law professor style, she writes here that the court came to the “right conclusion but for the wrong reason.”   – Dennis.

Guest Post by Renée A. Burbank, Clinical Lecturer at Law and Robert M. Cover Fellow at Yale Law School

Boeing v. U.S. (Fed. Cir. August 10, 2020)

The Boeing Company holds over $28 billion in contracts with federal government, mostly with the Department of Defense. Those contracts are governed by the Federal Acquisition Regulation (FAR), which dictates all manner of procurement procedures and contract clauses, and includes non-negotiable requirements for federal contracts. Boeing argues that one such requirement concerning price adjustments to contracts based on changes in cost accounting, FAR 30.606, is incompatible with 41 U.S.C. § 1503(b). On a plain reading of the two provisions, they do seem point in opposite directions:

Statute: 41 U.S.C. § 1503(b) Regulation: 48 C.F.R. § 30.606(a)(3)(i), (ii)
“[T]he Federal Government may not recover costs greater than the aggregate increased cost to the Federal Government . . . on the relevant contracts subject to the price adjustment.” The agency “shall not combine the cost impacts” of multiple changes at once, and will thus recover costs of any change that increases costs of the government.

When Boeing made several cost accounting adjustments, some of which lowered costs to the government and some of which raised them, the government followed the FAR provision and made Boeing pay for the raised costs without offsetting the lowered costs. Boeing paid, but it also sued.

Now, you might wonder whether the regulation does, in fact, violate the statute, and whether multiple cost accounting changes are properly included in a single “price adjustment.” But the trial court never got there, and neither will this blog post.

Instead, Boeing is important because the Federal Circuit allowed the case to go forward at all. Between this case and last week’s decision in NVLSP v. US, it has been a good month for people who want sue the federal government for overcharging them. As both cases demonstrate, historically, it’s been a tricky business to sue the federal government for an “illegal exaction” (i.e., when the government illegally requires money or property be paid to it, directly or in effect) without being thwarted by sovereign immunity. With its decision in Boeing, the Federal Circuit finally clarified that an illegal exaction claim need not be based on a “money-mandating” provision.  This removes many of the obstacles and confusion that has often prevented plaintiffs from reaching the merits of their illegal-exaction arguments.

The government argued that money-mandating provisions were required in both NVLSP and Boeing. Under the government’s theory, federal courts lack jurisdiction over illegal exaction claims unless the statutory or regulatory provisions allegedly violated are “money-mandating.” A money-mandating statute is, quite simply, one that requires the government to pay money to someone. For example, the Military Pay Act is money-mandating because it says military personnel “are entitled” to be paid. 37 U.S.C. § 204. Therefore, if a servicemember is wrongfully dismissed, they can sue for back pay. By contrast, neither the PACER fees statute at issue in NVLSP or the cost accounting standards statute in Boeing requires the government to pay money to anyone. Instead, they require people to pay money to the government.  Therefore, the government argued, because the statutes contained no mandate for the government to pay money, much less a requirement that money be paid as damages for the violation of those statutes, they were not money-mandating, and federal courts lacked jurisdiction to hear the plaintiffs’ claims at all.

In both cases, the Federal Circuit rejected the government’s argument.  In Boeing, the Court went a step further and clarified prior confusing case law, largely stemming from dicta a 2005 Federal Circuit decision, and definitively held that an illegal exaction claim does not need to be based on a money-mandating provision. This opens up a wide variety of potential illegal exaction claims. Any time a person or organization has to pay money to the government or to a third party because of the government’s incorrect interpretation of its legal authority, that person can potentially recover the money back under an illegal exaction claim. Because illegal exactions are not limited to a specific doctrinal area of law, the claim can provide relief whenever the federal government oversteps its bounds and creates direct monetary damages.

In my opinion, the Federal Circuit reached the right conclusion but for the wrong reason. The reason the statute allegedly violated doesn’t need to be money-mandating isn’t because illegal exactions are a special type of statutory claim that needn’t be money-mandating.  Instead, illegal exaction claims don’t have to be based on statutes (or regulations or constitutional provisions) at all. They are, properly understood, common law claims. As I explain in a recent article on illegal exactions, the history of illegal exactions demonstrates that the claim fits best in a common law framework. It also is the best interpretation of the Tucker Act, which provides courts with jurisdiction over illegal exaction claims in the first place. The Tucker Act (and its identical language in the Little Tucker Act) waives sovereign immunity for three types of claims, namely claims “[1] founded either upon the Constitution, or any Act of Congress or any regulation of an executive department, or [2] upon any express or implied contract with the United States, or [3] for liquidated or unliquidated damages in cases not sounding in tort.” 28 U.S.C. §§ 1291(a)(1), 1346(a)(2). The first category comprises money-mandating claims, i.e., claims that can be brought under the statutes themselves. The second category includes contract claims. The third category is illegal exactions. Notice that the last category does not include the requirement that they be “founded upon” any constitutional, statutory or regulatory provision. Instead, they are simply a non-tort, non-contract claim for damages. Like a common law claim for unjust enrichment, it should be sufficient under an illegal exaction theory to simply claim that the government has taken the plaintiff’s property without a legal basis. No written provision required, money-mandating or not.

Unfortunately, the neither the NVLSP panel nor the Boeing panel quoted, much less examined, the Tucker Act.  But the cases go a long way to clarify that illegal exaction claims cover a lot more than the government wishes they did.

Covered Business Method Review: Last Day to File is September 16, 2020.

Under the 2011 America Invents Act, certain Covered Business Method Patents (CBM) can be broadly challenged as part of a Post-Grant Review (PGR).  CBM filing was opened on September 16, 2012 – 1 year after AIA enactment. So far, about 600 CBM petitions have been filed.

The CBM program is “transitional” — and is set to sunset (i.e., become inactive) soon.  Under the law, the program sunsets “upon the expiration of the 8-year period beginning on the date that the regulations … take effect.”  That takes us to September 16, 2020 — CBM Sunset Date.  The particular language of the law indicates that Section 18 of the AIA is “repealed” as of the sunset date.  However, the provision will still apply to “any petition … filed before the date.”

So, get your petition filed by the 16th of September 2020.

I’ll add a couple of notes.

  1. A powerful aspect of the CBM program is that the patents can be challenged on any ground (including patent eligibility) whereas inter partes review (IPR) proceedings are tightly limited to anticipation and obviousness grounds based upon patents and printed publications.  Post-Grant Review will still be available, but there is a very tight window for filing such a petition (within nine months of patent issuance).
  2. I believe that the last day to file is Sept 16, but I have not fully analyzed this — so do some of your own legwork if you want to wait for the deadline.



Court: PACER Fees Should Only be Used to Pay for PACER

by Dennis Crouch

NVLSP v. US (Fed. Cir. 2020)

Litigators and researchers all use PACER to access Federal Court documents.  These documents are typically stored as electronic PDF documents and PACER charges 10¢ per page.  That amount is relatively small, but adds up very quickly once you see how many pages are found in a single docket. The cost is particularly prohibitive for public access — those of us who are monitoring court activity but don’t have a financial interest in the case itself. In addition, it is prohibitive to the public-interest plaintiffs in this case, including the National Veterans Legal Services Program (NVLSP) and the National Consumer Law Center.

I downloaded this opinion from PACER for a $3 charge.  Obviously, it did not cost the courts that amount to send the download to me. The marginal cost was likely well under 1¢ for the whole document. The Judiciary has argued that the high charge is intended to pay for buying new computers, upgrading computer systems, and all forms of electronic information dissemination.

Here is what the statute says: the courts may charge “reasonable fees” associated with “access to information available through automatic data processing equipment.”  28 U.S.C. § 1913 note (2012).

Several public interest plaintiffs sued in D.C. District Court arguing that the fees should be reduced.  The district court approved the class action and then agreed that the fees were being improperly used — although only partially.  On appeal, the Federal Circuit affirmed on Goldilocks grounds.

Plaintiffs contend that under this provision unlawfully excessive fees have been charged for accessing federal court records through [PACER] and that the district court identifies too little unlawful excess. The government argues that the district court identifies too much…. We conclude that the district court got it just right.

Slip Op.

In this particular case, the court found that the courts had thus improperly used funds for several projects, including Courtroom Technology expenses, and E-Juror services. This likely also includes CM/ECF expenditures.

Proving Infringement by Standard Essentiality — Also, Interesting Ebay Question

Godo Kaisha IP Bridge 1 v. TCL Communication Technology, 19-2215 (Fed. Cir. 2020)

After a seven-day trial, the jury sided with the patentee IP Bridge — concluding that TCL’s LTE-standard compliant devices for mobile telephony infringed IP Bridge’s  U.S. Patent Nos. 8,385,239 and 8,351,538. The jury also awarded $950,000 in damages.

[Jury Verdict redacted].  The judge denied TCL’s post-verdict motions for Judgment as a Matter of Law (JMOL) and also awarded an ongoing royalty of 4¢ per infringing device.

In the case the patentee proved infringement by showing (1) that the claims-in-suit are essential to the LTE standard and (2) that TCL’s accused devices are LTE-compatible.  The patentee did not walk through the elements of the claims and prove how each element is found in the accused product.  In several prior cases, the Federal Circuit has held that this standard-essential-therefore-infringing approach is proper. See, e.g., Ericsson, Inc. v. D-Link Sys., Inc., 773 F.3d 1201, 1209 (Fed. Cir. 2014) (because a “standard requires that devices utilize specific technology, compliant devices necessarily infringe certain claims . . . cover[ing] technology incorporated into the standard”).

On appeal here, the court focused on the question of “who decides: Judge or Jury?”

This appeal presents a question not expressly answered by our case law: who determines the standard-essentiality of the patent claims at issue—the court, as part of claim construction, or the jury, as part of its infringement analysis?

Slip. Op. In the case, the issue was given to the jury — and that clearly seems to be the correct answer because infringement is a classic fact-based question subject to a right to a jury trial under the 7th Amendment of the U.S. Constitution.

In its appeal, TCL pointed to a prior Federal Circuit decision suggesting that whether or not the claims are standard-essential is a claim construction question.  In Fujitsu, the court wrote:

If a district court construes the claims and finds that the reach of the claims includes any device that practices a standard, then this can be sufficient for a finding of infringement.

Fujitsu Ltd. v. Netgear Inc., 620 F.3d 1321 (Fed. Cir. 2010).  This quote, according to TCL, shows that it is the judge’s claim construction role to consider whether the claims cover the standard.

On appeal, the Federal Circuit sided with the patentee — holding that the issue was properly before the jury and that “TCL’s entire appeal rests on its misreading of a single statement from Fujitsu.”  Basically, the court explains that it spoke loosely in Fujitsu because that case was decided on summary judgment in a situation with no material facts in dispute. When no facts are in dispute, all remaining issues are left for the judge to decide:

[W]e did not say in Fujitsu that a district court must first determine, as a matter of law and as part of claim construction, that the scope of the claims includes any device that practices the standard at issue. To the contrary, in reviewing the district court’s summary judgment decision (where no facts were genuinely in dispute), we stated that, if a district court finds that the claims cover any device that practices a standard, then comparing the claims to that standard is the same as the traditional infringement analysis of comparing the claims to the accused product. That statement assumed the absence of genuine disputes of fact on the two steps of that analysis, which would be necessary to resolve the question at the summary judgment stage. The passing reference in Fujitsu to claim construction is simply a recognition of the fact that the first step in any infringement analysis is claim construction. . . .

Like any other fact issue, it may be amenable to resolution on summary judgment in appropriate cases. But that does not mean it becomes a question of law.

Slip Op.   The conclusion: whether all products complying particular industry standard would infringe a particular patent claim is a question of fact that will typically go to the jury (or decided by the fact finder).

Essentiality is, after all, a fact question about whether the claim elements read onto mandatory portions of a standard that standard-compliant devices must incorporate. This inquiry is more akin to an infringement analysis (comparing claim elements to an accused product) than to a claim construction analysis (focusing, to a large degree, on intrinsic evidence and saying what the claims mean).

Slip Op.

= = = = =

After the verdict was issued, the Judge Bataillon (D.Del.) considered the jury verdict award of $950k and determined that it represented an award of 4¢ per infringing device. The Judge then awarded that amount as an ongoing royalty for any post-verdict infringement through the expiration of the patents.

On appeal, TCL made two interesting arguments about the ongoing royalty award:

  1. First, TCL argues that the $950k verdict represents a fully-paid-up license and that there should be no ongoing royalty.  I looked through the jury verdict form and the Jury Instructions and found nothing to indicate whether these are associated with past damages.
  2. Second, TCL argues that the award of ongoing royalties is a type of permanent injunction controlling TCL’s future behavior.  As such, the district court should have considered the factors set forth in eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006).

The appellate panel did not court did not delve into these questions but rather dismissed them in a 1-paragraph note:

We have carefully considered TCL’s remaining arguments—including its argument that the district court abused its discretion in awarding on-going royalties in this case. We see no reason to disturb the district court’s conclusions.

Infringement and Ongoing Royalty Affirmed.

Moot Opposition for Zero Disclaimer

by Dennis Crouch

Royal Crown Co. v. Coca-Cola (Fed. Cir. 2020)

The case here focuses on Coca-Cola’s trademark registration applications for its beverage products with the ZERO term appended.  We’re talking COKE ZERO; CHERRY COCA-COLA ZERO; PIBB ZERO; POWERAID ZERO; etc. Royal Crown argued that the registrations should only be allowed if Coca-Cola disclaimed the term “zero.”

I previously wrote about this case when it was first appealed in 2018. At that time, the TTAB had dismissed the oppositions — finding a lack of evidence that the term ZERO is generic for the term “zero-calorie” or “zero-sugar” even when used to label otherwise sugary soft drinks. On appeal, the Federal Circuit vacated and remanded after concluding that the Board had, inter alia, applied the incorrect legal standard for generic. In my post, I stated that “Coke could register these marks if it disclaimed protection to ZERO alone.” Dennis Crouch, Registering ZERO: Trademarks mean Nothing to Me, Patently-O (June 20, 2018).

On remand the TTAB started the process of going through a new study on whether the term is generic. Coca-Cola cut that process short via motion-to-amend its marks to disclaim the term ZERO. This satisfied the TTAB and the oppositions were dismissed.

Royal Crown though was not satisfied and appealed. The company was concerned that Coca-Cola may file new applications or expand the scope of its current marks in some future litigation. Thus, it asked for a reasoned opinion explaining that the ZERO portion was generic.   In addition, Royal Crown argued that it was improper under the APA for the TTAB to dismiss the case post-trial based upon this opposed amendment.  Rather, the APA calls for a reasoned opinion.

In this second appeal, the Federal Circuit has effectively affirmed the PTAB determination — finding that the appeal is moot because Royal Crown has received the full remedy that it requested.

Coca-Cola’s disclaimer grants Royal Crown what it sought in its opposition. Throughout this case, Royal Crown requested only that the Board require a disclaimer of the term ZERO before registering the marks at issue. . . .

Royal Crown has obtained what it requested in its opposition, disclaimer of the term ZERO in each of the trademark applications at issue. The Board’s decision reflects entry of those disclaimers. Accordingly, there is no case or controversy for this court to decide.

Regarding Royal Crown’s concern regarding future expansion of the mark, the Federal Circuit found that potential harm “too speculative to invoke the jurisdiction of this court.”

On the procedural grounds, the Federal Circuit also found no abuse-of-discretion in granting the disclaimer — however that holding is superseded by the mootness decision.

Arthrex: Federal Circuit now Staying Cases Pending Supreme Court Resolution

Uniloc 2017 LLC v. Google LLC (Fed. Cir. 2020) (Appeal Nos. 19-2277 and 19-2307)

Conventional wisdom is now that the Supreme Court will grant certiorari in Arthrex on the questions of (1) whether a PTAB judge is a principal Officer under the U.S. Constitution and if so (2) what result?

In this pair of pending inter partes review appeals, the Federal circuit has agreed with the patentee that the proper course of action at this point is to wait for a resolution of Arthrex:

Uniloc 2017 LLC moves to stay the above-captioned appeals pending final resolution of the Supreme Court’s review of Arthrex, Inc. v. Smith & Nephew, Inc, 941 F.3d 132 (Fed. Cir. 2019), reh’g denied 953, F.3d 760 (Fed. Cir. 2020). Google LLC opposes the motions. . . . The motions are granted.

UnilocStay.  These cases related to  U.S. Patent No. 7,853,000 and 7,804,948 (most of the claims found unpatentable by the PTAB).

The Federal Circuit is not the first-mover in this situation.  The cases remanded to the PTAB on Arthrex grounds have all been administratively stayed pending resolution of Arthrex.  And, the US Gov’t has filed an omnibus petition to the Supreme Court.  Uniloc explains in its stay petition:

Remand to the PTO may ultimately be unnecessary, and cases that have already been remanded are being held in abeyance pending the Supreme Court’s review of Arthrex. Accordingly, Uniloc requests that this appeal be stayed pending resolution of the Supreme Court’s review of Arthrex, including resolution of Petitions for Writ of Certiorari.

UnilocStayPetition.  Google opposed the stay — arguing, inter alia, that Uniloc had waived its Arthrex argument.

Guest Post: Fast Examiners; Slow Examiners; and Patent Allowance

Prof. Shine Tu (WVU Law) has been doing interesting work studying patent prosecution and how differences between patent examiners impact the process.  I asked him to provide a guest post to help readers get started on his work. – DC

by Shine Tu

Although we know that individual patent examiners can greatly affect an inventor’s chance to (1) get a patent at all and (2) get it in a timely way, there has been very little work determining how examiners are able to either delay or compact prosecution while still maintaining their quotas via the count system.  Understanding how examiners work the quota system with very different outcomes can be critical for practitioners trying to understand what sort of responses or claim narrowing they should make. It also has significance for those looking to understand and improve the very process intended to spur invention.

In a previous study, I have shown that there are extreme variations on allowance rates between examiners.  For example, in analyzing 10 years of patents from Technology Center 3700 I found that there were approximately 200 examiners from 3700 who had issued over 120,000 patents (approximately 51% of the patents from this Technology Center). In contrast, there was a group of approximately 300 examiners who issued less than 800 patents (less than 1% of the patents from this Technology Center). [See].  In this current dataset, I find that not only is there a difference in allowance rates, but there is a significant difference in prosecution times. Fast examiners allow applications in approximately 1.64 years, average examiners in 3.07 years, and slow examiners on average will allow a case in 5.85 years.  This delay of over four years (fast versus slow examiners) increases direct costs to applicants in the form of PTO and attorney fees, as well as indirect costs such as reduced growth, sales, and follow-on innovation.

In a set of two articles, I explored how examiners can either: (1) slow down the patent prosecution process by using a strategy of constant rejections [] or (2) speed up the patent prosecution process by using a strategy of fast allowances []. To create a sufficiently large sample to be statistically significant, I coded the patent prosecution histories of 300 patents and reviewed 100 patents from slow, average, and fast examiners from workgroup 1610.  Every rejection issued by the examiner and every response and traversal argument by the applicant was recorded.

As an initial matter, these data show that examiners in each group have similar amounts of experience at the PTO and similar average current docket sizes. However, the allowance rates of these examiner groups vary dramatically, with 79.55%, 61.65%, and 27.7% allowance rates corresponding with fast, average and slow examiners, respectively.  The Office Action to Grant (OGR) score shows that these fast examiners grant a patent for every 1.5 Office Actions written, while it takes average examiners roughly 4 Office Actions and slow examiners a stunning 10.5 Office Actions before they grant one patent.

Fast examiners seem to be using a count maximization strategy based on allowances. A typical applicant who gets a fast examiner will usually have one or two Office Actions before an allowance.  Fast examiners do not use many prior art rejections.  Additionally, the rejections employed by fast examiners rely heavily on Obviousness-type Double Patenting (ODP) and/or 35 USC 112 rejections. Fast examiners have four times as many ODP rejections compared to slow examiners.  Most applicants can (and do) traverse these ODP rejections by simply filing a terminal disclaimer.  Interestingly, use of the ODP rejection is a super-efficient way to employ a count maximization strategy. This is because little work is needed to find an ODP rejection, due to the closed universe of patents, and an ODP rejection is relatively easy for the applicant to traverse. Thus, an ODP rejection followed by a terminal disclaimer gets the examiner to maximum counts with minimal effort.

In contrast, slow examiners seem to be using a strategy based on rejections.  First, slow examiners have a much higher restriction rate (almost twice) and encounter three times as many traversals to these restriction requirements.  These data are consistent with a rejection strategy because examiners can create a large patent family and cycle through rejections with less work, especially since they should already be familiar with the specification from the other restricted family members.  Furthermore, slow examiners may not be able to avail themselves of the ODP rejection strategy employed by fast examiners because of the safe harbor created by 35 USC 121.

Not only do slow examiners use more prior art, the sources of prior art differ for slow examiners versus fast and average examiners. Slow examiners employ a rejection strategy based on prior art, with five times as many 102(a/e) rejections and six times as many 103 rejections compared to fast examiners. For 102(a/e) rejections, slow examiners rely on both US patents as well as printed publications, while fast and average examiners rely on US patent applications.  Interestingly, for 102(b) rejections all examiners rely more on printed publications and secondarily on US patents. With 103 rejections, examiners also all mainly rely on US patents and, secondarily, on printed publications. Thus, all examiners search and employ prior art from different databases, however, they use the prior art that they find in different ways.

Unsurprisingly, applicants traverse prior rejections from slow examiners at a much higher rate than fast examiners. Specifically, with 102 and 103 rejections, applicants will push back against slow examiners most commonly with a missing elements argument.  In contrast, most applicants respond to fast examiner 102 and 103 prior art rejections by simply filing claim amendments.  Interestingly, applicants will also push back against 103 rejections from slow examiners by making a “no motivation to combine” argument. This may be because slow examiners use seven times as many references as fast examiners.

Slow examiners also put the brakes on prosecution by filing multiple 112 rejections.  Specifically, slow examiners utilize three times as many 112 second rejections, four times as many enablement rejections and seven times as many written description rejections. With slow examiners, applicants use arguments to traverse enablement and written description rejections. In contrast, applicants with fast examiners usually only make claim amendments to traverse enablement or written description rejections.

Practitioners need to understand what type of examiner they have.  Understanding and using this data is paramount to help manage client expectations as well as to help create a rational prosecution strategy.  I note that all of these data can be accessed through services such as LexisNexis PatentAdvisor® to help determine which examiner you may encounter.  This may also be important for patent prosecution strategy since slow examiners may require a strategy that involves an appeal.  While fast examiners may require a strategy that involves fewer amendments and more arguments.

Although I do not make any definitive judgements about the quality of the claims passed by different examiners nor even if there is an “optimal” or “ideal” allowance rate, these varying trends indicate a wide discrepancy in examiners’ methodology that may be affecting the overall quality and number of patents created. By analyzing the differences, my studies suggest how the counts system might be modified to ensure a more efficient and balanced process where all examiners apply the rules of patentability fairly and consistently. One possible solution, for example, would be to review applications from both fast and slow examiners at a higher rate. Another solution may be to deduct counts from examiners who make too many erroneous rejections.  Conversely, adding counts for examiners who dealt with difficult applicants could also be in order.  Alternatively, we could completely reform the count system and create an examiner incentive structure that focuses more on quality and less on quantity.  Only by looking in-depth at examiner behaviors will we be able to (1) better understand and navigate the current system and (2) make reforms to the current process that will truly encourage innovation.

Federal Circuit Narrows Application of Hooke’s Law, but Still Wields the Ineligibility Hammer

by Dennis Crouch

American Axle & Mfg. v. Neapco Holdings (Fed. Cir. July 31, 2020). 

When I talked with PTO Director Andrei Iancu a few months ago, he lamented that the Federal Circuit is now finding the manufacturing of Truck Axles and operation of Garage Door Openers ineligible for patenting.  The Federal Circuit panel has rewritten its Axle decision — now holding that American Axle’s asserted claim 1 might be eligible; Claim 22 remains ineligible.

The court was evenly divided six-to-six on the en banc petition.  That meant the en banc petition is denied for lack of majority.  The minimal changes made by Judge Dyk to his original opinion were just enough to avoid full rehearing. Still, half of the court thought that the opinion went too far in expanding the ineligibility hammer.

I’ll post this here for now, but will follow up with more later today.





Inventorship: “Conclusory and Self-Serving Testimony is Insufficient”

Gregory James v. J2 Cloud Services (Fed. Cir. 2020)

James filed this change-of-inventorship lawsuit against the patent owner (Advanced Messaging Tech.). James alleged that he was the sole inventor of U.S. Patent No. 6,208,638 and that his name should replace that of Jaye Muller and Jack Rieley.

The listed inventors – Rieley and Muller are famous in the music world.  Rieley was the Beach Boy’s manager in the 1970s and co-wrote many songs with them as part of their “revival.” Muller (“J”) is a German musician.  In the 1990s, the pair started a company known as JFAX.  The company – now known as J2 – has a $2.6B market cap.  The company’s original idea was to receive VM and faxes via email. (more…)

Drawing the Fall Line: No Mandamus for Real-Party-In-Interest Argument

Fall Line Patents, LLC v. Unified Patents, LLC (Fed. Cir. 2020) [FallLine]

In this case, the court begins with a lamentation that a Federal Circuit panel is “bound by the determinations of a prior panel, unless relieved of that obligation by an en banc order of the court or a decision of the Supreme Court.” Quoting Deckers Corp. v. United States, 752 F.3d 949 (Fed. Cir. 2014).*

Here, Fall Line appealed against the PTAB’s real party-in-interest determinations. That argument was recently foreclosed in ESIP Series 2, LLC v. Puzhen Life USA, LLC, 958 F.3d 1378 (Fed. Cir. 2020).  Fall Line attempted to skirt the decision by asking the court to use its “mandamus jurisdiction” to hear the case.  On appeal, the Federal Circuit concluded that would be improper in this case. Although mandamus may be proper to review “institution decisions that implicate constitutional or jurisdictional violations” — mandamus is not proper for an “ordinary dispute” over the construction of an “institution-related statute.”  Fall Line’s argument would have carried more weight – but for Thryv.

While we [previously held] that statutory prerequisites to the Director’s authority to institute an IPR were not related to institution within the meaning of § 314(d), the Supreme
Court disagreed with that conclusion in Thryv.

Slip Op.

Fall Line also argued that the Arthrex severance was inadequate to cure the appointments clause problem with PTAB judges. Here, the court concluded that argument was considered and rejected in the Arthrex decision itself. “As a panel, we are bound.”

Still, Fall Line will get a new trial at the PTAB under Arthrex.

= = = =

Note here that the opening line of the case doesn’t actually apply to this decision because it was issued with the following caveat: “This disposition is nonprecedential.”

Federal Common Law of Patent License Interpretation

Cheetah Omni LLC, v. AT&T Services, Inc. (Supreme Court 2020)

Question Presented:

In Rodriguez v. Fed. Deposit Ins. Corp., 140 S. Ct. 713 (2020), the Court held that federal courts may not create their own court-made rules unless it is “necessary to protect uniquely federal interests.”


Did the Federal Circuit violate Rodriguez when it invoked its own federal common law rule, superseding controlling state contract law, to hold that a patent license—one that does not expressly license a particular patent—nonetheless impliedly licenses that patent merely because it is a continuation of an expressly licensed patent, without examining whether that federal common law rule was necessary to protect uniquely federal interests?

The case here involves Cheetah’s U.S. Patent No. 7,522,836 (‘836 patent) that it asserted against AT&T. 

In a prior lawsuit Cheetah asserted a family member patent – the ‘714 patent – against Fujitsu.  (See the chart above). That case ended with a license to Fujitsu that included the ‘714 patent and also

“all parents, provisionals, substitutes, renewals, continuations, continuations-in-part, divisionals, foreign counterparts, reissues, oppositions, continued examinations, reexaminations, and extensions of the Patents-in-Suit … whether filed before, on or after the [License] Effective Date.”

The license covered “parents” and “continuations”, but did not expressly combine those in a way that would include the ‘836 patent — which is “a continuation of a continuation of the parent of a continuation-in-part.”  In its decision, the Federal Circuit extended the license terms to cover the ‘836.  And, since AT&T buys its products from the licensee, AT&T’s activity was covered by the license.

In its petition here, the patentee argues that the Federal Circuit should not – as it did here – create and extend a Federal common law of patent license contract interpretation.  Rather, the license agreement should be interpreted as if it were a contract (which it is) following state law like any other contract:

Cheetah does not ask the Court to resolve the contract dispute between Cheetah and Respondents. Instead, like Rodriguez, Cheetah asks only that the Court vacate the Federal Circuit decision and remand to the Federal Circuit with instructions to apply state contract law, not federal common law, to the dispute.


Sovereign Immunity for the Involuntary State Plaintiff; But Infringement Lawsuit Continues Without the Patent Owner

by Dennis Crouch

This decision offers some interesting analysis of Federal Courts questions. We have three opinions; a “splintered majority;” and a loss of dignity for the state of Texas. The basic issue here is core to many biotech patents because they are owned by public universities and then licensed out to private entities.  The holding: (1) an exclusive licensee cannot force the university be joined as a plaintiff in the case (State Sovereign Immunity); (2) But, a lawsuit brought by the exclusive licensee can continue without the patent owner (balancing test of FRCP 19(b)). 

Gensetix, Inc. v. Baylor College of Medicine and William K. Decker, Appeal No. 19-1424 (Fed. Cir. 2020)

University of Texas (UT) owns the patents (US8728806; US9333248 — using modified dendritic cells to create an anti-tumor immune response); Gensetix is the exclusive licensee who sued Baylor for patent infringement.  The first-named-inventor, William K. Decker continues to research in this area, but is now at Baylor rather than UT and is a defendant in the lawsuit. Note also that the Gensetix license doesn’t come directly from UT. Rather, UT provided the exclusive license to “Mr. Alex Mirrow” who later “sold” the license to Gensetix.

When Gensetix sued, UT refused to participate in the litigation.  The problem though is that the patent owner is regularly seen as a necessary party to patent litigation.  Ordinarily, a necessary party can be be forced into a lawsuit under Fed. R. Civ. Pro. 19 (Required Joinder of Parties).  This case is not an ordinary case because the party to be joined is a branch of a US State.  Gensetix, Inc. v. Baylor Coll. of Med., 354 F. Supp. 3d 759 (S.D. Tex. 2018). With a few exceptions, States are generally immune from being sued in Federal Court under the 11th Amendment of the US Constitution. And here, the district court held that UT was immune from being forced into court – even as a plaintiff.

In cases where a necessary party cannot be joined, the district court then has to decide whether to allow the case to proceed or to dismiss the case.  The basic test is also set out in R. 19 and asks “whether, in equity and good conscience, the action should proceed among the existing parties or should be dismissed.” Here, the district court dismissed the case.

On appeal, the Federal Circuit has reversed — holding that the case should continue despite the immunity. Each of the three judges issued an opinion and I’ve broken-down their basic holding in the chart below:

As you can see, from the chart, Judge O’Malley’s approach carries the day — holding that UT is immune from litigating the case Federal Court, but that the case should be allowed to continue. In her opinion, Judge O’Malley identified this as a “splintered majority.”

Immunity: First, everyone recognizes that the Supreme Court has extended sovereign immunity beyond the text of the 11th Amendment.  The court explained in Coll. Sav. Bank v. Fla. Prepaid Postsecondary Ed. Expense Bd., 527 U.S. 666 (1999) that sovereign immunity was not created by the 11th Amendment but rather is “reflected in” the amendment and that immunity “transcends the narrow text of the Amendment itself.”  Of course, that conclusion from the Supreme Court overlooks history — that the Amendment was adopted to overrule a U.S. Supreme Court decision denying immunity to the States.

Gensetix argued that immunity should be limited to its text and applied only to cases “against one of the United States.” (Quoting the Amendment).  On appeal, Judge O’Malley explained that the 11th Amendment protects state egos against the “indignity” of coercive judicial process.  And, the court could find no principle to distinguish an unwilling plaintiff from an unwilling defendant based upon the breadth of Supreme Court cases.

Writing in dissent, Judge Newman argued that exclusive license created a contractual obligation for UT to participate in patent enforcement litigation, and that the 11th Amendment cannot to be used to protect the state in this context. “When a State
agency enters into commercial transactions, it is subject to the rules of commerce.” Newman in dissent.  On this point, Judge Newman cites to Justice Breyer’s dissent in College Savings Bank.

When a State engages in ordinary commercial ventures, it acts like a private person, outside the area of its ‘core’ responsibilities, and in a way unlikely to prove essential to the fulfillment of a basic governmental obligation.

Judge O’Malley responds to this criticism by citing precedent — Justice Breyer’s dissent is not the law.

While I may not speak for our splintered majority on this point, I have some sympathy for Judge Newman’s views. Unfortunately, absent abrogation of Florida Prepaid Postsecondary Education Expense Board v. College Savings Bank, 527 U.S. 627 (1999), which I suspect would be welcome by many, I remain of the view that involuntary
joinder of UT as a plaintiff to this action is impermissible.

Slip Op. at Note 6. Judge Taranto joined the immunity portion of the majority opinion – except for FN 6.  He explained:

Those portions of the opinion conclude that the constitutionally preserved protection of state sovereign immunity bars a coerced joinder of the University of Texas (UT), which is an arm of the State of Texas, as an involuntary plaintiff in this federal action, which Gensetix, Inc., as UT’s exclusive licensee, initiated to assert infringement of UT-owned patents.

Taranto concurring-in-part and dissenting-in-part.

Necessary and Indispensable Party: The rules of civil procedure have separate joinder rules “required joinder” (R.19) and “permissive joinder” (R.20).  Required joinder is grounded in both due process and efficiency of the court system and has two steps with a branch: (a) determine whether a party is “required” — this is often termed necessary; (b) if required and joinder is feasible, then join the party; (3) if required but joinder is not feasible then apply “equity and good conscience” to decide whether the case should continue.  Here, everyone appears to agree that UT is a required party — it owns the patents. The dispute is on 19(b) – whether the case should continue.

The rule asks the district court to apply its discretion when determining whether to move forward — and thus is reviewed on appeal with the deferential standard of abuse of discretion.  The rule itself requires analysis of four distinct factors: “(1) the extent to which a judgment rendered might prejudice the missing required party or the existing parties; (2) the extent to which any prejudice could be lessened or avoided (3) whether a judgment rendered in the required party’s absence would be adequate; and (4) “whether the plaintiff would have an adequate remedy if the action were dismissed for nonjoinder.” (Slip op., paraphrasing Rule 19(b)).

On appeal, the majority (for this portion O’Malley and Newman, JJ) found that the district court “collaps[ed] the multi-factorial Rule 19(b) inquiry into one dispositive fact: UT’s status as a sovereign.”

Rather than cede control … to UT’s claim of sovereign immunity, the district court should have given weight to the fact that Gensetix is without recourse to assert its patent rights because UT cannot be feasibly joined. Accordingly, we conclude that the district court abused its discretion in giving overwhelming weight to UT’s sovereign status to the exclusion of all other facts.

Slip Op.

Judge Taranto dissented on this point — arguing that the district court was bound by Supreme Court precedent to give extreme weight to the Sovereign Immunity argument.

The Supreme Court’s decision in Republic of Philippines v. Pimentel, 553 U.S. 851 (2008), explains that when a sovereign entity is a required party under Rule 19(a), is protected against joinder by sovereign immunity, and makes a non-frivolous assertion that it will be prejudiced by a suit proceeding in its absence, a district court is generally obligated to dismiss the suit under Rule 19(b).

Taranto in dissent.  The majority attempted to distinguish Pimentel on a few grounds — the distinction that rings most true to me is that, unlike in the Philippines case, here there is a party (the exclusive licensee) who will protect the State’s interest in the patent right.

COVID-19 Classes

In the fall, I’ll be teaching one class in-person (civil procedure) and one class online (patent law).