I posted an article earlier on Gil Hyatt’s ongoing disputes with the USPTO.  He also has ongoing disputes with the California Tax Board that reach back to his early licensing revenue from his 1990 microprocessor patent.  The case is back before the Supreme Court for the third time.  See  Franchise Tax Board v. Hyatt (Hyatt I), 538 U.S. 488 (2003); Franchise Tax Board v. Hyatt (Hyatt II), 136 S.Ct. 1277 (2016).

The basic issue is that a Nevada jury found that California had used improper aggression in pursuing Hyatt for taxes that were not really owed.  At trial, the jury awarded Hyatt $300 million in damages. The punitive damages were reduced however by the Supreme Court.

The question that the court will focus on again this year:

Whether Nevada v. Hall, 440 U.S. 410 (1979), which permits a sovereign State to be haled into another State’s courts without its consent, should be overruled.

In its 2016 decision, the Supreme Court was evenly divided on the same question.

The board has asked us to overrule Hall and hold that the Nevada courts lack jurisdiction to hear this lawsuit. The Court is equally divided on this question, and we consequently affirm the Nevada courts’ exercise of jurisdiction over California.

This time though, that tie is potentially already broken with the addition of Justice Gorsuch.

Read more at ScotusBlog: http://www.scotusblog.com/case-files/cases/franchise-tax-board-of-california-v-hyatt-2/

by Dennis Crouch

The Supreme Court now starting its Fall 2018 term with its first Conference set for September 24, 2018.  At that initial Conference, the Court is set to consider certiorari in for a rich set of pending patent cases.  The following is a rundown of some of the more interesting:

• Smartflash LLC v. Samsung Electronics America, Inc. et al., No. 18-189 (Three good questions):

1. Whether Administrative Patent Judges of the [PTAB] are principal Officers of the United States who must be appointed by the President with the advice and consent of the Senate under the Appointments Clause.
2. Whether retroactive application of CBM Review to patents on inventions disclosed before passage of the [AIA] violates the Due Process Clause of the Fifth Amendment.
3. Whether undisputed evidence that a patented invention is not unduly preemptive, presented to technically proficient judges of the Board, is relevant to the question whether the invention is patent-eligible under 35 U.S.C. § 101.

• B/E Aerospace, Inc. v. C&D Zodiac, Inc., No. 17-1252 (are the objective indicia of non-obviousness analyzed only after a prima facie case of obviousness is established).
• Nichia Corporation, et al. v. Everlight Electronics Co., Ltd., et al., No. 17-1707 (Although obviousness is a question of law, should deference be given to a jury’s verdict on the ultimate legal question?).
• Regeneron Pharmaceuticals, Inc. v. Merus N.V., No. 17-1616 (litigation misconduct and inequitable conduct).
• Bombardier Recreational Products Inc., et al. v. Arctic Cat Inc., No. 17-1645 (does the “should have known” standard for willful infringement under Seagate meet the “intentional or knowing” requirement set forth in Halo v. Pulse).
• RPX Corporation v. ChanBond LLC, No. 17-1686 (appellate standing for IPR petitioner).
• Integrated Technological Systems, Inc. v. First Internet Bank of Indiana, No. 17-1590 (“Does 35 U.S.C. § 282 allow for challenges to a patent’s validity based on patent eligibility under 35 U.S.C. § 101?”).
• Allergan Sales, LLC v. Sandoz, Inc., et al., No. 18-21 (whether the court may “ignore a factual stipulation” resulting in a non-infringement finding).
• Jang v. Boston Scientific Corporation, et al., No. 17-1332 (does “ensnarement” apply as a defense to patent infringement).
• Queen’s University at Kingston, Petitioner v. Samsung Electronics Co., Ltd., et al., No. 18-190 (does the presumption that prior art is enabled improperly invert the statutory burden).
• Leon Stambler v. Mastercard International Inc., No. 17-1140 (Whether the Federal Circuit’s issuance of Rule 36 judgments without opinions for the disposition of appeals from the Patent and Trademark Office violates 35 U.S.C. § 144’s requirement that the Federal Circuit “shall issue” its “mandate and opinion” for such appeals.).
• Promega Corporation v. Life Technologies Corporation, et al., No. 17-1669 (timing of a new trial motion — does the 28-day rule of R.50(d) apply).
• Paul Andrew Leitner-Wise v. LWRC International, LLC, et al., No. 18-52 (does an inventor have any residual patent rights after assigning the patent).
• Droplets, Inc. v. Iancu, No. 17-1384 (Chenery doctrine: can an appellate court substitute its own views of the law in siding with an agency decision?).
• American Technical Ceramics Corp. v. Presidio Components, Inc., No. 17-1497 (Indefiniteness: Can a court rely only on the ex post facto application of the scientific method to hold that the “clear notice” requirement of § 112 ¶ 2 has been satisfied?).
• New World International, Inc., et al. v. Ford Global Technologies, LLC, et al., No. 18-264 (when is a suit dismissed on personal jurisdiction grounds barred from refiling?).

The PTAB has substantially revised its Standard Operating Procedures (“SOPs”) regarding paneling of matters before the PTAB (SOP1) and precedential and informative decisions (SOP2). The revisions focus upon increasing transparency, predictability, and reliability across the USPTO. They update the procedures based upon feedback received from stakeholders, courts, legislators, and our 6 years of experience with AIA trial proceedings.

Revised SOP1 explains the procedures for panel assignment and for informing parties regarding panel changes. It also explains the process for designating panels with more than three judges, and notes that such panels should be rare and will only occur with the approval of the Director.

Revised SOP2 creates a Precedential Opinion Panel (POP), typically comprising the Director, the Commissioner for Patents, and the Chief Judge of the PTAB. The POP will serve two primary functions: 1) it may be convened to rehear matters in pending trials and appeals, for example on issues of exceptional importance; and 2) it may assist the Director in determining whether a decision previously issued by the PTAB should be designated as precedential or informative. It is expected that the POP and the procedures described in revised SOP2 will, in most cases, replace the prior practice of expanded paneling under SOP1, with a process that is more transparent and predictable. It is also expected that revised SOP2 will result in more decisions being designated as precedential.

Revised SOP2 includes, among other things:

• Creation of the POP, typically comprising the Director, the Commissioner for Patents, and the Chief Judge of the PTAB;
• Identification of the circumstances when POP members may delegate their authority, and to whom;
• Provision of notice to the parties when POP review takes place, as well as the identification of the POP members in a particular case;
• Explanation of the standards, procedures, and timing for requesting POP review in a pending case on rehearing; and
• Revised procedures for designating a decision previously issued by the PTAB as precedential or informative.

For more details about revised SOP1 and SOP2, please see the full text available on the USPTO website.

by Dennis Crouch

In this past summer’s Power Integrations v. Fairchild decision (Power Integrations I), the Federal Circuit held that the entire market value rule cannot be used to calculate infringement damages unless the patentee proves that the unpatented features in the accused product did not influence consumer demand.  The patentee had not met that burden and so the $140 million verdict was vacated and remanded.  Power Integrations, Inc. v. Fairchild Semiconductor Intl., Inc., 894 F.3d 1258 (Fed. Cir. June 3, 2018) (altered on rehearing)

On petition, the original panel has  revised its opinion — but maintained its judgment vacating the damage award.  Power Integrations II.

In the revised opinion, the court pulled back from the level of proof required. In particular, under the old language, the court required proof that the non-patented features were not relevant to and did not influence the consumer purchasing decision. The new formulation requires the patentee seeking EMVR damages show that the non-patented features “did not cause consumers to purchase the product.” The relevant blackline edits are in the following paragraph:

Where the accused infringer presents evidence that its accused product has other valuable features beyond the patented feature, the patent holder must establish that these features are not relevant to consumer choice do not cause consumers to purchase the product. . . . When the product contains other valuable features, the patentee must prove that those other features did not influence purchasing decisions do not cause consumers to purchase the product.

The result here is a revival of the EMVR as a way to calculate patent damages, although it will still be disfavored.

In the original opinion the panel had also provided an example situation where it “may be appropriate” to apply the entire market value rule — notably where the non-patented features of an accused product are “simply generic and/or conventional and hence of little distinguishing character.”  In the revised opinion, the court added a tiny-bit more explanation with the example “such as the color of a particular product.”

by Dennis Crouch

My prior post on DuPont v. Synvina focused on the obviousness of a claimed range in the context of inter partes review (IPR) proceedings.  The decision also raises a question of standing — whether the patent challenger DuPont had standing to appeal the IPR decision favoring the patentee Synvina.

E.I. DuPont de Nemours v. Synvina C.V. (Fed. Cir. 2018)

The patent act provides a couple of limits on who may file a petition to institute an IPR. The petitioner must be “a person” and may not be either the patent owner nor a person (or privy) who was sued for infringing the patent more than 1-year before the petition filing date.* Notably absent – the IPR statute does not require the petitioner to have any reason for challenging the patent or any actual dispute with the patentee.

Courts are different – a lawsuit cannot be filed by just any person.  Rather, the plaintiff must have “standing” — a an actual case or controversy that the lawsuit can resolve.  Standing is required at every stage of court litigation. This creates a bit of a difficulty for IPR proceedings: Although no standing is required for a patent challenger to pursue an IPR proceeding — standing is required once the case goes to the Federal Circuit on appeal.  In this situation, the patentee always has standing — their patent is under risk of being cancelled.  However, the patent challenger needs to show that it has an actual stake in the outcome of the decision — even though the Patent Act appears to provide a right-of appeal to any “party dissatisfied” with the IPR outcome.

In a 2016 decision in Spokeo, the Supreme Court explained that standing requires that a plaintiff must have:

(1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision.

Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016).  When a harm has already occurred, the injury-in-fact is easy to find. However, in pre-injury declaratory situations — the injury requirement may be met by a potential injury “of sufficient immediacy and realty.” ABB Inc. v. Cooper Indus., LLC, 635 F.3d 1345 (Fed. Cir. 2011).  In Consumer Watchdog, however, the Federal Circuit noted in dicta that the immediacy requirement “may be relaxed” in situations like this “where Congress has accorded a procedural right to a litigant, such as the right to appeal an administrative decision.”  Consumer Watchdog v. Wis. Alumni Research Found., 753 F.3d 1258 (Fed. Cir. 2014).

Here, DuPont – the patent challenger – has (apparently) never been accused of infringing the Synvina patent; does not believe that it presently infringes the patent; and is not paying any royalties based upon the patent’s validity.  However, the Federal Circuit identified a controversy based upon the fact that DuPont’s factory has the capability of infringing:

Such a controversy exists here because DuPont currently operates a plant capable of infringing the ’921
patent.

I’ll note here that the court appears to have written this as a broad statement that could apply in many untold situations, including declaratory judgment actions.  However, later courts may cabin-in the holding to the specific facts of this case.

If you remember my prior post, the patent at issue covers a method of making a “green” plastic-precursor known as FDME from plant sugars (fructose).  In reaching its decision, the court walked through several bits of evidence that all come together to show that the DuPont plant has the capability use the claimed invention in its factory:

According to DuPont’s declarations, the process conducted at its plant uses the same reactants to generate the same products using the same solvent and same catalysts as the ’921 patent. Likewise, the temperature and PO2 ranges used at the plant overlap with those claimed in the ’921 patent. At the very least, this indicates that DuPont “is engaged or will likely engage in an activity that would give rise to a possible infringement suit.”  Quoting JTEKT

In its decision, the Federal Circuit also noted two additional facts that it saw as supporting standing:

1. At the Board Synvina argued that DuPont had copied elements of Synvina’s invention and put them in a DuPont application (the board found this not compelling).
2. Synvina has refused to grant DuPont a covenant not to sue.

Together, these “further confirm that DuPont’s risk of liability is not conjectural or hypothetical.”

With the standing requirement met, the Federal Circuit was able to hear DuPont’s argument and agreed that the claims are obvious.

Burden Shifting at the PTAB and the Obviousness of Ranges

by Dennis Crouch

The White House is following through with its promise of adding a 10% tariff to $200 billion in goods imported into the US from China — set to begin on September 24, 2018.  On January 1, 2018, the tariffs are set to be raised to 25% on January 1, 2019. This is in addition to the 25% tariff applied earlier this summer on $50 billion in imports.  The President also issued statement that “if China takes retaliatory action against our farmers or other industries, we will immediately pursue phase three, which is tariffs on approximately $267 billion of additional imports.”

Tariffs have put the U.S. in a very strong bargaining position, with Billions of Dollars, and Jobs, flowing into our Country – and yet cost increases have thus far been almost unnoticeable. If countries will not make fair deals with us, they will be “Tariffed!”

— Donald J. Trump (@realDonaldTrump) September 17, 2018

Note – the tariffs are calculated based upon a valuation of the goods at the point of entry into the US.  The Trade Agreements Act of 1979 provides six different ways methods of customs valuations in ranked order: (A) transaction value; (B) transaction value of identical merchandise;  (C) transaction value of similar merchandise; (D) deductive value; (E) computed value; and (F) reasonable value. 19 U.S.C. 1401a.

Earlier in 2018, the United States Trade Representative (USTR) released its Section 301 Report concluding that China is engaged in unfair policies and practices relating to United States technology and intellectual property. The report highlighted:

• “China uses joint venture requirements, foreign investment restrictions, and administrative review and licensing processes to require or pressure technology transfer from U.S. companies.
• China deprives U.S. companies of the ability to set market-based terms in licensing and other technology-related negotiations.
• China directs and unfairly facilitates the systematic investment in, and acquisition of, U.S. companies and assets to generate large-scale technology transfer.
• China conducts and supports cyber intrusions into U.S. commercial computer networks to gain unauthorized access to commercially valuable business information.”

According to the USTR release, the new tariffs follow because “China has been unwilling to change its policies involving the unfair acquisition of U.S. technology and intellectual property.”

Trade Act of 1974 authorizes the USTR to take action to address these conclusions — via tariffs and exclusion orders.

In addition to US unilateral action, the WTO Dispute Settlement System is designed to help countries resolve this exact type of dispute the US and China have filed competing complaints that are now in process.  The key underlying dispute is DS542 filed by the US against China for “Certain Measures Concerning the Protection of Intellectual Property Rights” in violation of Articles 3, 28.1(a) and (b) and 28.2 of the TRIPS Agreement.  In the complaint (“request for consultations”) document, the USTR explained the basis for WTO action:

China denies foreign patent holders the ability to enforce their patent rights against a Chinese joint-venture party after a technology transfer contract ends. China also imposes mandatory adverse contract terms that discriminate against and are less favorable for imported foreign technology. Therefore, China deprives foreign intellectual property rights holders of the ability to protect their intellectual property rights in China as well as freely negotiate market-based terms in licensing and other technology-related contracts.

542-1

https://twitter.com/realDonaldTrump/status/1041751173034848260

Americans deserve to know the lowest drug price at their pharmacy, but “gag clauses” prevent your pharmacist from telling you! I support legislation that will remove gag clauses and urge the Senate to act. #AmericanPatientsFirst

— Donald J. Trump (@realDonaldTrump) September 17, 2018