by Dennis Crouch

A newly canonical case in property law texts is Popov v. Hayashi, 2002 WL 31833731 (Cal. Super. Dec. 18, 2002).  The case involves a Barry Bonds record-setting home run baseball.  Alex Popov almost caught the ball, but as it entered his glove he was immediately engulfed by the crowd of fans who were deemed an “out of control mob, engaged in violent, illegal behavior.”  The ball came-out and Patrick Hayeshi (who was also knocked to the ground) picked up the ball and took possession. There was no credible evidence that Hayeshi took part in any of the violent or illegal behavior. Because of the oddity of fandom, the $6 ball was boosted to an expected value $1.5 million based upon its record-setting experience. (It was eventually sold at auction for ~$500k because of Bonds’ drop from fame).

Hayeshi had physical possession, but Popov wanted ownership and sued — pleading conversion, trespass to chattel, injunctive relief and constructive trust.

In its decision, the California judge partially ruled for Popov — holding that he had a “pre-possessory interest” in the baseball once it went in his glove, and that interest was unlawfully interrupted by the Crowd.

As a matter of fundamental fairness, Mr. Popov should have had the opportunity to try to complete his catch unimpeded by unlawful activity. To hold otherwise would be to allow the result in this case to be dictated by violence. That will not happen.

Although Popov had some interest in the ball, Hayeshi was the one who took actual possession (gaining complete control of the ball and stopping momentum), and did so using within the bounds of both law and baseball custom.

In the end, the judge was unable to figure out which of the two should win:

Neither can present a superior argument as against the other.

Mr. Hayashi’s claim is compromised by Mr. Popov’s pre-possessory interest. Mr. Popov cannot demonstrate full control. … Their legal claims are of equal quality and they are equally entitled to the ball.

The court therefore declares that both plaintiff and defendant have an equal and undivided interest in the ball.

Id. In the end, the two co-owners sold the ball. The case would have come out differently if Hayashi was seen as a wrongdoer (Popov would get full ownership) or if Popov had dropped the ball without being wrongfully jostled (Hayashi would get full ownership).  The halfsies outcome is somewhat unusual in property law but was made easier because both parties announced they wanted to sell the ball — it was much easier to split the money rather than share possession of the ball itself.

In patent law, conception used-to establish a pre-possessory interest in the future patent.  Conception created an inchoate (incomplete) right that could be secured by diligently reducing the invention to practice (either actually or constructively by filing the patent application).  This approach has changed substantially post-AIA where the focus is on completing the invention process by filing for patent rights with severe limitations on any pre-filing rights or interests.  Prof Oliar and Stern explained;

The first-to-invent rule was abandoned following enactment of the Leahy-Smith America Invents Act (“AIA”) in 2011, the most comprehensive overhaul of U.S. patent law in at least half a century. Its most prominent change was to replace the first-to-invent rule with a first-to-file system, or more precisely, a system that awards patents to the first person to disclose their invention to the public, whether by filing a patent application or through other public acts. The AIA thus pushes back the temporal lynchpin from the beginning of the inventive process to its end.

Dotan Oliar, James Y. Stern, Right on Time: First Possession in Property and Intellectual Property, 99 B.U. L. Rev. 395, 422 (2019) (DDC: Note that the FTF change hasn’t been the most prominent change as suggested by the authors).

Patent law presents an element beyond the Oliar article and the Popov v. Hayashi decision. The patent system is not not generally focused on a winner-take-all approach. We’re not talking about the single Barry Bonds ball (or even a half-dozen). Rather, there are hundreds of thousands of potential valuable inventions awaiting discovery.  The plethora of potential inventions naturally offers the partial reward granted in Popov v. Hayashi.  No single person or entity will be able to claim all (or even a substantial percentage) of the inventions.  But, to claim any rights, the inventor must actually capture the “wily quadruped” despite knowledge of other hunters.  Pierson v. Post, 3 Cai. 175, 175 (N.Y. Sup. Ct. 1805) (“Pierson, well knowing the fox was so hunted and pursued, did, in the sight of Post, to prevent his catching the same, kill and carry it off.”).

In thinking through Popov v. Hayashi, I would pause to distinguish between the Popov’s pre-possessory interest in the ball and the pre-filing inchoate rights of an inventor.  While the second has been long considered a property right — the former is more like a personal interest that should not be wrongfully injured.  The closest actions would be unfair competition or wrongful interference with contractual relationships. Those actions are powerful, but are generally seen as outside of the property law context and instead in the midst of torts. The Supreme Court, on the other hand, has explained the power of an inchoate right to a patent:

The discoverer of a new and useful improvement is vested by law with an inchoate right to its exclusive use, which he may perfect and make absolute by proceeding in the manner which the law requires.

Gayler v. Wilder, 51 U.S. 477, 493 (1850).

In re Google (Fed. Cir. 2020)

In a mandamus order, the Federal Circuit has ruled that Google cannot be sued in E.D. Texas for patent infringement — holding that the district is an improper venue under TC Heartland LLC v. Kraft Foods Group Brands LLC, 137 S. Ct. 1514 (2017).

For most Federal Causes of action, venue is deemed proper if the court hearing the case has personal jurisdiction over the defendants. However, patent infringement cases are different.  Patent cases fall under a more specific venue statute that limits actions to districts where either (a) the defendant ‘resides’ (i.e., is incorporated) or (b) the defendant has a regular and established place of business and has committed acts of infringement. 28 U.S.C. 1400(b).

In Super Interconnect Techs. LLC v. Google LLC, No. 2:18-CV-00463-JRG, 2019 U.S. Dist. LEXIS 132005 (E.D. Tex. Aug. 7, 2019), Super Interconnect sued Google for infringing, but Google responded a motion for dismissal for improper venue.

Google is not a Texas company and so does not reside in E.D. Texas. Google is accused of infringing in TX, but Google argues that the company does not have a “regular and established place of business” in the district.

• Yes, Google does have many millions of customers and dollars in revenues from the district.
• Yes, Google does market its goods and services directly to consumers in the district.
• Yes, Google has AI services that provide immediate access to information and activities to millions within the district.
• Yes, Google ha[d] very large servers located within the district particularly designed to serve customers within the district. (Note (1) these servers were operated by local ISPs rather than Google itself; and (2) after the filing of this lawsuit, Google removed its servers from the District in order to avoid being sued in E.D. Tex.).

But:

• No, Google does not have a regular and established place of business in the district.

In its decision, the Federal Circuit repeated its prior holding in Cray that a regular-and-established-place-of-business must be a physical place located within the district.  While the servers qualify for the physicality requirement, they are not a “place of business.” According to the court, a “place of business” must have an “employee or agent” conducting business in the location — Google’s AI is not sufficient.

We conclude that a “regular and established place of business” requires the regular, physical presence of an employee or other agent of the defendant conducting the defendant’s business at the alleged “place of business.”

In making this “employee or agent” requirement, the court looked to the patent-law service-of-process statute 28 U.S.C. 1694 that indicates service may be made upon a defendants “agent or agents conducting such business” at the regular and establish place of business. The court explains:

The service statute plainly assumes that the defendant will have a “regular and established place of business” within the meaning of the venue statute only if the defendant also has an “agent . . . engaged in conducting such business.” Likewise, the provision that “service . . . may be made by service upon the agent” and the “regular and established” character of the business assumes the regular, physical presence of an agent at the place of business. In the absence of a contrary indication, these assumptions must govern the venue statute as well. . . .

Slip Op.

Judge Wallach joined the opinion, but also penned a concurrence questioning Google’s business model (hmm, seems that the company is doing pretty well for itself…). Judge Wallach explains:

I join with the majority’s order, but I write separately to raise questions about Google’s business model. During oral argument, Google did not answer, when asked, the question of what its main source of business is in the Eastern District of Texas. Google simply explained that it does not “actively do[] anything. In other words, there’s no evidence of any employee or agent . . . being present in the district.” Oral Arg. at 51:55–52:15.

When asked again, “what do you do in the Eastern District?,” Google responded  what “what Google does in the District will depend on what the subject of that verb is,” and “when you look at the service statute the subject of that verb has to be ‘employees’ or ‘agents’ in the District.” Id. at 52:30–52:53. Finally, Google was asked “when you gather information, from customers, which is part of your business, you agree. How does that get passed back to Google? It goes through the server?” Id. at 58:59–59:10.
Google’s counsel responded stating: “I am not aware.

There’s nothing in the record that I’m aware of on that point, your Honor.” Id. at 59:11–59:14. Given the absence from the record of information sufficient to understand Google’s business model, the question remains for the District Courts to determine whether Google’s end users become agents of Google in furtherance of its business by virtue of voluntarily or involuntarily sharing information generated on Google’s servers. If, for example, by entering searches and selecting results a Google consumer is continuously providing data which Google monetizes as the core aspect of its business model, it may be that under the analysis in which I today join, Google is indeed doing business at the computer of each of its users/customers. Because this is a question I believe should be entertained by District Courts, I concur.

Mira Advanced Tech v. Microsoft (Fed. Cir. 2020)

The PTAB sided with Microsoft — finding the challenged claims of Mira’s two challenged patents obvious. U.S. Patents 8,848,892 & 9,531,657.  On appeal, Mira hired new counsel and argued for an alternative claim construction of the term “contact list.”  Figure 1 in the claims is described in the patent as “the database structure of contact list of present invention.”  The idea here is to have a “memo” interface tightly incorporated into a contact list.

Microsoft’s attorney Chris Carroway responded to the appeal with a motion for sanctions:

An appeal is not a mulligan. While a party is certainly free to retain new counsel to pursue an appeal, that new counsel is not free to raise new arguments that could have been made, but were not made, on behalf of the client before the first tribunal. An appeal premised on such new arguments—arguments waived because they were not presented to the first tribunal—is futile and, therefore, frivolous.

MicrosoftMotionForSanctions.  Mira then responded with a discussion of de novo claim construction — arguing that the main question on appeal is the correctness of the Board’s construction — which was vigorously argued before the Board.

In the appellate court, sanctions for frivolous appeals are handled under Federal Rule of Appellate Procedure R. 38:

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

FRAP 38.  In its judgment, the Federal Circuit did not delve into the merits of either claim construction or the sanctions. Rather, the court (1) issued a R.36 affirmance of the Board’s decision in Microsoft’s favor and (2) denied the sanctions without explanation.  The oral arguments included some limited discussion of whether sanctions can apply to a appeal that is weak on the merits — or must there be additional misconduct or failed lawyering.

Underlying the IPR is a pending lawsuit in West Virginia involving the patents at issue. That case has been stayed since 2017 – pending resolution of the IPR proceedings. The court now won’t have to decide Microsoft’s pending motion to dismiss on 101 and for improper venue.

By Sarah Burstein, Professor of Law at the University of Oklahoma College of Law

Despite the protestations of Columbia and its amici in support of the petition for rehearing, the Federal Circuit’s decision in Columbia v. Seirus is not the end of design patent law as we know it. (For prior Patently-O coverage, of this case and the pending petition, see here and here.)

It would be better for everyone if the court had been clearer on one key point but—even if that part is not corrected—the sky still will not fall.

The paragraph that has spurred these declarations of designpocalypse reads as follows:

The district court relied on one precedent from this court—L.A. Gear—for the proposition that logos should be wholly disregarded in the design-infringement analysis. In that case, the parties did not dispute that the patented and accused designs were substantially similar. L.A. Gear, 988 F.2d at 1125. In fact, “copying [was] admitted.” Id. In evaluating infringement there, we explained that design infringement is not avoided “by labelling.” Id. at 1126. A would-be infringer should not escape liability for design patent infringement if a design is copied but labeled with its name. But L.A. Gear does not prohibit the fact finder from considering an ornamental logo, its placement, and its appearance as one among other potential differences between a patented design and an accused one. Indeed, the fact finder is tasked with determining whether an ordinary observer would find the “effect of the whole design substantially the same.” Gorham, 81 U.S. at 530. It would be inconsistent with this mandate to ignore elements of the accused design entirely, simply because those elements included the name of the defendant.

Columbia v. Seirus, 942 F.3d 1119 at 1131. Columbia and its amici argue that the court’s decision in Columbia is inconsistent with a “holding” in L.A. Gear and will wreak destruction and devastation on design patent law. Columbia and its amici are wrong on both counts.

First, the statement in L.A. Gear that pertained to “labelling” was not a holding. As the Columbia panel noted, the issue of whether the designs were sufficiently similar was not before the court in L.A. Gear. In the briefs, none of the parties involved in L.A. Gear argued that “labelling” was relevant to design patent infringement. Nothing in the decision in L.A. Gear suggests that the issue came up in oral argument. The issue of whether “labelling” was relevant to the issue of design patent infringement was simply not before the Federal Circuit in L.A. Gear. Thus, nothing the Federal Circuit said about “labelling” vis-à-vis design patents constituted a decision of any kind—let alone a holding.

It’s not clear why the L.A. Gear panel chose to include that bit of “labelling” dicta. But it is dicta.

And even if it weren’t, not all uses of logos, brand names, etc. constitute “labelling.” As the panel appreciated, these visual elements can be used decoratively. (For many good examples, consider Louis Vuitton’s textile designs.) If we were to have a rule against “labelling,” some thoughtful development and line-drawing may be required.

Second, Columbia argues (and some of its amici echo) that the decision in Columbia v. Seirus will require courts to issue judgments of noninfringement whenever a defendant “simply emblazon[s] [its] brand name or logo on another’s design.” The panel decision says no such thing. It merely says that courts don’t have to ignore any and all uses of logos.

The three traditional types of protectable designs are: (1) configuration (a/k/a shape), separate and apart from any surface ornamentation; (2) surface ornamentation, separate and apart from the underlying configuration; and (3) a combination of both. The USPTO currently interprets the second category broadly, including any and all “surface treatment.”

In Columbia v. Seirus, the claimed design was for surface ornamentation only. Despite the broad language used by the panel, the panel had no occasion to—and could issue no holding as to—all possible types of designs. This decision simply does not apply to designs that claim configuration only. If patent owners wish to avoid having brand names, logos, etc. considered as part of the infringement analysis, they are free to keep claiming configuration-only designs (such as those shown in Bison’s amicus brief). Read properly, the panel’s decision in Columbia v. Seirus, merely says that, when surface ornamentation is claimed as part of the design, a court should consider the entire surface design—even if the surface design includes logos or brand names.

That ruling is consistent, by the way, with the USPTO’s current treatment of logos, brand names, etc. in the prosecution context. Logos, brand names, etc. can—and are—claimed as (or as part of) “surface treatments.” Here are just a few examples:

It would be odd to say that these kinds of elements count as “designs” (or parts thereof) for the purposes of patentability but must be ignored entirely when it comes to infringement. Such a rule would not only be odd, it would also significantly undermine the notice function of design patents.

Of course, we could have a system where we said that logos, brand names, etc. aren’t protectable as “designs” and should be irrelevant to both patentability and scope. But that’s not the system we have today. Perhaps it’s a conversation we should have.

The panel’s decision in Columbia v. Seirus could put some pressure on patentees to be clearer about whether they’re claiming a configuration-only or combination design. After all, the latter involves surface designs while the former does not. But that wouldn’t be a bad thing. Greater clarity in this area would promote competition and greater public notice and could be achieved with minimal cost or complication for design patent applicants.

One final note: It’s not clear why the panel in Columbia v. Seirus put such emphasis on “copying.” Copying is neither necessary nor sufficient to support a finding of design patent infringement. (For more on the contemporary test for design patent infringement, see this short piece.) The references to copying are unhelpful at best; pernicious dicta at worst.

To summarize, if the panel in Columbia v. Seirus wanted to issue a revised decision that made it clear that they’re talking about surface designs—not configuration-only designs—that would probably be helpful. And the part about “copying” could go. But the sky is not falling.

= = = = =

The following briefs have been filed in the pending en banc petition for the case:

• 5 – Columbia Petition for Panel Rehearing
• 6 – IDSA motion and amicus brief
• 6 – Practitioners motion and amicus brief
• 6 – Bison motion and amicus brief
• 7 – Seirus Response

Apple Inc. v. Andrea Electronics (Fed. Cir. 2020)

After Andrea sued Apple for infringing its U.S. Patent 6,363,345 (noise cancelling audio signal processing), Apple responded with two inter partes review (IPR) petitions.  The PTO initiated both petitions and eventually cancelled all of the claims except 6-9.  Apple then appealed – asking that they all be invalidated.

The invention sets noise-thresholds for a set of frequency groups and subtracts-out amplitude beyond a calculated “future minimum value.”  Claim 6 does this on a periodic basis.

In the original IPR ‘626 petition, Apple argued obviousness of the claims based upon Hirsch over Martin.  In its responsive briefing during the IPR, Andrea argued that Martin does not disclose the “future minimum value” as claimed in claims 6-9.  Then in reply, Apple explained that obviousness becomes clear when seen over multiple periods (sub-windows).  However, the Board refused to consider Apple’s reply – finding that the multiple sub-window argument “raised a new theory of unpatentability for the first time in its reply brief.”

On appeal, the Federal Circuit reversed this holding — concluding instead that the reply brief did not offer a new argument:  “Its reply still asserted that claims 6–9 would have been obvious over Hirsch and Martin [and] relies on the same algorithm from the same prior art reference to support the same legal argument: that Martin
discloses the … “future minimum” limitations of the asserted claims.”  In its decision, the Federal Circuit distinguished prior cases where the reply brief cited to new evidence or new portions of already cited evidence.

• Ariosa Diagnostics v. Verinata Health, Inc., 805 F.3d 1359, 1367 (Fed. Cir. 2015) — reply improperly referenced an embodiment of the prior art not discussed in the petition.
• Intelligent Bio-Sys., Inc. v. Illumina Cambridge Ltd., 821 F.3d 1359 (Fed. Cir. 2016) — reply improperly cited new non-patent literature references.

The issue here is age-old. A good reply brief should do more than simply rehash the exact statements found in the original brief. At the same time, the reply should not be introducing new arguments that go beyond the original brief.  Consider the following interesting article: John F. Muller, The Law of Issues, 49 Wake Forest L. Rev. 1325 (2014)

On remand, the PTAB will now consider Apple’s reply brief and whether its argument is sufficient to render the claims obvious.

by Dennis Crouch

The decision in Cheetah Omni is an important reminder regarding implied licenses.  The holding solidifies the presumption that a license to a particular patent impliedly includes a license to all parents and continuations that “disclose the same inventions as the licensed patent.”  This extends the court’s prior decision in  General Protecht Group Inc. v. Leviton Manufacturing Co., 651 F.3d 1355 (Fed. Cir. 2011) and builds upon the parallel doctrine of legal estoppel discussed in AMP Inc. v. US, 389 F.2d 448 (Ct. Cl. 1968) and TransCore, LP v. Elec. Transaction Consultants Corp., 563 F.3d 1271 (Fed. Cir. 2009).

Cheetah Omni LLC v. AT&T Services, Inc. & Ciena Corp. (Fed. Cir. 2020), began when Cheetah sued AT&T for infringing its U.S. Patent 7,522,836 (optical communication networks).

In a prior lawsuit, Cheetah had asserted the ‘714 patent against Ciena and Fujitsu (See family tree above). That lawsuit settled with a license agreement and covenant not to sue — relevant here because Ciena and Fujitsu supply AT&T with the accused infringing devices.  The question on appeal: whether the license agreement includes an implied license to the ‘836 patent.

The Ciena/Fujitsu lawsuit centered on the ‘714 patent. The resulting license agreement was directed toward the patent-in suit and also expressly called out certain family patents that were also included in the license:

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.”

Ciena License Agreement (emphasis added).  Although the list of family-members is extensive, it does not include continuations-of-parents or the specific relationship here: a continuation of a continuation of a parent-in-part (or nephew).

The Federal Circuit asks the question as follows:

In personal terms, because the uncle and grandparent of the ’836 patent, are licensed, is the ’836 patent also licensed?

I’ll pause here to note how the Federal Circuit’s question shifts the focus from the way I presented the case above.  Although the license agreement discusses everything in relation to the patent-in-suit (the uncle ‘714 patent), the Federal Circuit concludes that an important relationship is the “grandparent” relationship between the ‘836 patent and the ”925 patent, neither of which were the patent in-suit.  That shift to the ‘925 patent is important for two reasons (1) we have prior precedent implying a license to grandchildren patents but not to ‘uncles.’ General Protecht; and (2) the linkage between the ‘836 and the uncle ‘714 patent is tenuous because of the continuation-in-part status, whereas the grandchild lineage is straight continuation all the way down. The conclusion here is easy once the focus shifts to the grandparent-grandchild setup.

In General Protecht, the Federal Circuit found that a license to particular patent impliedly licensed the grandchild as well (continuation-of-a-continuation) – “because those continuations disclose the same inventions as the licensed patent.” On appeal, the Federal Circuit ruled that the General Protecht reasoning worked here as well:

Applying the presumption established in General Protecht provides a simple and clear resolution in this case. Because the ’925 patent is an expressly licensed patent in the licenses, the licenses also include an implied license to a continuation of its continuation, the ’836 patent. . . . If Cheetah did not intend its license “to extend to claims presented in continuation patents, it had an obligation to make that clear.” General Protecht.

Slip Op. License agreements are contracts typically interpreted under state-law (or foreign law). This particular style implied license appears to fall under federal law in finding that a patentee is legally estopped from claiming no-implied-license. “Legal estoppel prevents licensors from derogating or detracting from definable license rights granted to licensees for valuable consideration.”

Cheetah makes a couple of extra arguments here.

• The ‘836 patent covers a different/narrower invention — Doesn’t matter since “the same inventive subject matter was disclosed in the expressly licensed patents.”
• The parties all knew about the ‘836 patent but didn’t include it — Doesn’t matter because presumption goes against patentee. Further the license included a list of excluded patents and the ‘836 was not on the list.

I’ll note the 2018 decision in Cascades AV LLC v. Evertz Microsystems Ltd., 335 F. Supp. 3d 1088, 1097 (N.D. Ill. 2018) where the district court refused to find an implied license for a divisional.  The court noted differences in the claims — however the Federal Circuit here holds (again) that the focus should be on the disclosure.  That case was settled though so we don’t know how the Federal Circuit would react.

WASHINGTON – The United States Patent and Trademark Office (USPTO) announced today that U.S. Secretary of Commerce Wilbur Ross has appointed David Gooder to be the new Commissioner for Trademarks. As Commissioner, Gooder will be responsible for oversight of all aspects of the USPTO’s Trademarks organization.

 Gooder has worked for more than 25 years on intellectual property (IP) and brand protection challenges facing iconic global brands. Gooder will begin his new role on March 2, 2020. (more…)

Trump:

I also promised our citizens that I would impose tariffs to confront China’s massive theft of American jobs. Our strategy worked. Days ago, we signed the groundbreaking new agreement with China that will defend our workers, protect our intellectual property, bring billions of dollars into our treasury, and open vast new markets for products made and grown right here in the United States of America. For decades, China has taken advantage of the United States, now we have changed that but, at the same time, we have perhaps the best relationship we have ever had with China, including with President Xi. They respect what we have done because, quite frankly, they could never believe what they were able to get away with year after year, decade after decade, without someone in our country stepping up and saying: Enough. Now, we want to rebuild our country, and that is what we are doing.

Read the US China Agreement (Phase 1) here: Economic_And_Trade_Agreement_Between_The_United_States_And_China.

With regard to the New NAFTA, IPO has suggested that it does not live-up to the hype with regard to pharmaceutical patent enforcement.  From IPO:

President TRUMP signed the U.S.-Mexico-Canada Agreement (USMCA), the North America trade pact that will replace NAFTA. The White House states that the USMCA “contains new protections for American intellectual property, ensuring strong, effective protection for American innovators and creators.” IPO has expressed disappointment with the agreement and said that “[i]n the future, IPO hopes to work with the Administration and Congress to create a fair and level playing field with our trading partners and establish appropriate safeguards for American innovators.”

IPO’s basic problem with new NAFTA is its lack of provisions focusing on protections for data submitted to regulatory authorities (especially for biologics).

by Dennis Crouch

I wrote an essay last month discussing the rarity of certified questions on appeal under 28 U.S.C. § 1292(b). See, Dennis Crouch, Certified Questions on Appeal under § 1292(b), Patently-O (January 31, 2020).

In Feit Electric Co. v. CFL Tech. (Fed. Cir. February 3, 2020)[20-110 CAFC denial], the Federal Circuit has denied Feit’s petition for discretionary review of a certified question.

The case involves CFL Tech’s U.S. Patent No. 6,172,464 that was previously held unenforceable (back when owned by Ole Nilssen).  However, the unenforceability decision came before the law of unenforceability changed in Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276 (Fed. Cir. 2011) (en banc).  Therasense made it harder to find patent unenforceable.  Thus, if re-judged under the revised law, the ‘464 patent might actually be enforceable.

Change of Law: Unenforceability of the patent has been fully litigated and decided and issue preclusion would normally apply.  The certified question on appeal is whether the change-of-law exception to issue preclusion applies in this case – citing primarily Dow Chemical Co. v. Nova Chemicals Corp., 803 F.3d 620 (Fed. Cir. 2015) (finding that the Supreme Court’s decision in Nautilus was an “intervening change in law”).

The CFL Tech district court applied the change-of-law doctrine under Dow and thus found no issue preclusion. However, the district court also noted the case of Morgan v. Dep’t of Energy, 424 F.3d 1271 (Fed. Cir. 2005). In Morgan, the Federal Circuit limited the change-of-law doctrine in cases involving “clarifying” interpretations. Uncertain in its opinion, the district court then certified the question for discretionary interlocutory appeal.

Discretion: Here, the appellate court used its discretion to not hear the appeal, but then went ahead to decide that the district court got it right — no preclusion.

Feit and the amici read too much into Morgan. All that Morgan rejected was a version of the change-in-law exception “so broad” that it would deny preclusion based on judicial decisions that merely “clarify earlier interpretations of a statute.” It did not reject the higher standard for a result-altering intervening change in law required by Dow Chemical, which was applied in this case based on the significant change of law made by this court in Therasense.

Thus, although the Federal Circuit refused to hear the appeal, it went ahead and decided the issue.

Advisory Dicta: I would call the appellate decision advisory dicta — and thus would not become “law of the case” since the court did not actually hear the appeal.  However, from a practical standpoint the district court will (and should) follow the guidance laid down here.  The Federal Circuit took the same approach in Heat Techs., Inc. v. Papierfabrik August Koehler Se, 2019 WL 3430477 (Fed. Cir. July 18, 2019) (denying petition for interlocutory appeal, but explaining its interpretation of the law in the denial order).

(more…)

I posted WiLan’s $85 million verdict against Apple earlier this week out of the Southern District of California.  A new verdict on Jan 29, 2020 looks to set-back Apply by another $837 million (in favor of the patent owner California Institute of Technology). Apple’s setback dwarf’s the parallel Broadcom verdict in the case of $270 million.  The verdict form is not yet publicly available — the courtroom was sealed for much of the damages trial on the request of Broadcom and Apple.  Craig Clough at Law360 reports that the verdict included $1.40 per device for Apple’s 600 million infringing devices and $0.26 per chip for Broadcom’s billion+ Wi-Fi chips.

U.S. Patent Nos. 7,116,710, 7,421,032 and 7,916,781.

Big verdict for WiLAN against Apple $85.23 million in damages – the full amount that the company requested. McKool Smith represented the patentee here. Apple will likely appeal on several grounds.

The jury awarded a royalty of $.45 per iPhone 6 & 7. This is less than 0.1% royalty rate ($650 per iPhone 7) but things add up when you sell 200 million units.

This is the second time around on damages.  The first jury awarded $145,100,000.  However Judge Sabraw gave WiLAN the option of either (1) remitting the damages down to $10 million or (2) holding a new trial on damages.  According to the court the problem stemmed from expert opinions regarding apportionment that were not supported by the evidence.  Even though it was a single-issue jury trial, the judge still provided the jury with 31 pages of jury instructions: Jury Instructions.  Here are a few of the key instructions:

In this case, Wi-LAN seeks a reasonable royalty. A reasonable royalty is defined as the money amount Wi-LAN and Apple would have agreed upon as a fee for use of the invention at the time prior to when infringement began. You must be careful to ensure that award is no more or no less than the value of the patented invention.

The amount you find as damages must be based on the value attributable to the patented technology, as distinct from other, unpatented features of the accused product, or other factors such as marketing or advertising, or Apple’s size or market position. In determining the appropriate royalty base and the appropriate royalty rate, the ultimate combination of both the royalty rate and the royalty base must reflect the value attributable to the patented technology. In other words, the royalty base must be closely tied to the invention. It is not sufficient to use a royalty base that is too high and then adjust the damages downward by applying a lower royalty rate.

Similarly, it is not appropriate to select a royalty base that is too low and then adjust upward by applying a higher royalty rate. Rather, you must determine an appropriate royalty rate and an appropriate royalty base that reflect the value attributable to the patented invention alone. . . .

You may also consider the impact of any available noninfringing alternatives to the asserted claims on the royalty negotiated in the hypothetical negotiation. In doing so, you may consider the value of any differences in benefits and costs between the noninfringing alternatives and the asserted claims.

The two patents at issue in the case are WiLAN’s 8,457,145 and 8,537,757. The patents cover a mechanism for grouping data within queues ranked by required quality-of-service needed with timers associated with each queue. Claim 9 of the ‘145 was infringed (among other claims)

9. A subscriber unit for a wireless communication system, wherein the wireless communication system includes a plurality of subscriber units in communication with an associated base unit, comprising:

a plurality of queues, each queue for grouping data based on the QoS; and

a media access (MAC) module configured to set an initial value for a timer associated with a queue, and periodically, on expiration of the value of the timer, transmit a bandwidth request indicating an amount of bandwidth required for transmitting the data from the queue.