All posts by Dennis Crouch

About Dennis Crouch

Law Professor at the University of Missouri School of Law.

Inventorship as the Wind Blows

Patent

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

IPR: Not a Taking; Not an Illegal Exaction

Patent

by Dennis Crouch

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

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

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

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

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

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

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

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

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

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

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

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

Slip Op.

 

 

 

CAFC: IPR Cancellation Is not a 5th Amendment Taking

Patent

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

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

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

Slip Op.

 

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

Patent

by Dennis Crouch

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

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

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

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

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

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

[Sowinski] raises two principal arguments:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

= = = = = =

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

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

Patent

by Dennis Crouch

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

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

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

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

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

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

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

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

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

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

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

How Much Nexus is Too Much Nexus?

Patent

by Dennis Crouch

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

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

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

New Question Presented:

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

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

The question presented is:

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

SRAM petition for cert.

 

Nexus: Product must be “Essentially the Claimed Invention”

Immediate Appeal of Denied Dismissal

Patent

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

Patent

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

Patent

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

Patent

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

Patent, ,

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

Patent

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.

Patent

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.

Poll:

 

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

Patent

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

Patent

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

Patent

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

Patent

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

Patent,

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 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1939508].  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 [https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3539731] or (2) speed up the patent prosecution process by using a strategy of fast allowances [https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3546944]. 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

Patent

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.

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