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…)

by Dennis Crouch

In civil procedure, I just finished teaching appeals of interlocutory orders under 28 U.S.C. § 1292(b).

The normal rule in patent cases (and in federal litigation generally) is that the parties have to wait until the case is complete — final judgment — before having a right to appeal. Under this “final judgment rule,” interlocutory orders — orders that do not end the case — are generally not immediately appealable. Rather, parties have to wait for final judgment. There are, however, a number of exceptions to the final judgment rule.

Appealing Injunction Orders: Because injunctions are often requested in patent cases, § 1292(a) is regularly invoked. That section creates a right to appeal district court decisions “granting, continuing, modifying, refusing or dissolving injunctions, or refusing to dissolve or modify injunctions.”  Thus, even if an injunction order is interlocutory (such as denying preliminary injunctive relief), that order can be automatically appealed.

Certified Questions: Section 1292(b) provides the Courts of Appeals with discretionary authority to review of interlocutory issues of law that are “certified” for appeal by a district court:

When a district judge … shall be of the opinion that [an otherwise non-appealable] 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, he shall so state in writing in such order. The Court of Appeals … may thereupon, in its discretion, permit an appeal to be taken from such order.

28 U.S.C. § 1292(b).

This week in MLC Intellectual Property v. Micron Tech (Fed. Cir. 2019), the Federal Circuit decided a 1292(b) issue — allowing MLC (the patentee) to appeal a set of interlocutory orders excluding MLC’s expert testimony.  The Federal Circuit opinion is short on detail and analysis — explaining (1) that the Federal Circuit has discretion to exercise interlocutory review in this situation; and (2) review here appears appropriate to “avoid an expensive trial solely on liability” since the patentee was left with a very weak damages case and no injunction case (since the patents are expired). [1292(b) Decision].  The case is now placed on the regular docket with full briefing of the issues.

In its certification order, the district court explained the situation as follows:

In the Damages Orders, the Court excluded [MLC’s expert] Mr. Milani’s damages opinion under Daubert because the Court concluded that his comparative license analysis did not comport with Federal Circuit jurisprudence. These deficiencies included, inter alia, Mr. Milani’s failure to apportion the revenue base to include only the revenue attributable to the patented technology and Mr. Milani’s calculation of a royalty rate that was not supported by the evidence. In addition, the Court held that MLC had failed to disclose the factual underpinnings of its reasonable royalty claim in discovery, and excluded much of Mr. Milani’s opinion on that ground. MLC asserts that it was not required to disclose those facts because the determination of a reasonable royalty is the province of expert opinion. All of these questions are controlling questions of law as to which there is substantial ground for difference of opinion. … Absent interlocutory review, the parties and the Court will be required to proceed with an expensive trial focused solely on liability, as MLC concedes that it has no damages case to present at trial.

Interlocutory review of the Damages Orders will result in either the ultimate conclusion of this case (if the Federal Circuit affirms) or a single trial on liability and damages (in the event of reversal); either way, interlocutory review is in the interest of judicial economy and will save the parties a considerable amount of time and expense.

Dct Opinion.

The parties have jointly requested and have now been granted a stay in the district court litigation pending the outcome of the appeal (as well as the outcome of an appeal in a parallel reexamination).  1292(b) indicates that the appeal does not automatically stay proceedings, but suggests that a stay is available if ordered by “the district judge or Court of Appeals.” Id.

MLC’s claimed invention is a method of calibrating a camera-laser-unit using the Tsai algorithm.

Other Recent 1292(b) Cases: The Federal Circuit decided one other 1292(b) cases over the past year. In Heat Techs., Inc. v. Papierfabrik August Koehler Se, 2019 WL 3430477 (Fed. Cir. July 18, 2019), the court denied the petition to hear an interlocutory appeal on the question of whether a “§ 256 claim for correction of inventorship can proceed not-withstanding other potential challenges to the patent’s validity.”  In Heat Techs, the appellate panel found several faults with the district court certification order — most notably was the reality that there was not “substantial ground for difference of opinion.” Rather, the answer was a simple “yes” – inventorship and ownership are separate from validity and there are important implications that can flow from owning a patent – even if invalid.

The Court of Appeals also decided a 28 U.S.C. § 1292(d)(2) case. Laturner v. U.S., 933 F.3d 1354 (Fed. Cir. 2019). 1292(d)(2) is substantially parallel to 1292(b) — difference being that (d)(2) allows for interlocutory appeals from the Court of Federal Claims whereas (b) is focused on district court orders.

by Dennis Crouch

Philips v. Google & Microsoft (Fed. Cir. 2020)

Google & Microsoft teamed-up to challenge Phillips’ U.S. Patent 7,529,806 in an inter partes review (IPR).  The Board complied and cancelled claims 1-11 — finding the claimed quasi-streaming method unpatentably obvious.  On appeal here, the Federal Circuit has affirmed — adding important context to obviousness determinations based upon general knowledge.

In KSR, the Supreme Court indicated that the obviousness analysis should consider the “background knowledge possessed by a person having ordinary skill in the art.” KSR Int’l Co. v. Teleflex, Inc., 550 U.S. 398 (2007).   Under KSR, information deemed within PHOSITA’s general knowledge is more powerful than that found buried in a prior art reference because we assume that PHOSITA would consider using their general knowledge in combination with the prior art — even absent any express motivation to do so. Because of its potential power, the Federal Circuit has been somewhat concerned that the approach could serve as an end-run around traditional obviousness analysis.  Here though, the court found that Google had presented enough evidence to assume that the pipelining (see next paragraph) was part of the general knowledge of PHOSITA.

The invention: The claims call for downloading the “next file” in the background while playing the prior file. This setup is effectively a form of buffering (also known as pipelining or stream emulation).  The approach uses a client-side “control information file” that facilitates sequential file retrieval.  The claims have an additional feature of having a variety of media file formats, and the client device is able to “choose the format compatible with the client’s play-out capabilities.”

In its petition, Google alleged (1) anticipation based upon SMIL 1.0 (Synchronized Multimedia Integration Language 1.0 Specification); and (2) obviousness based upon SMIL 1.0 when combined with the general knowledge of PHOSITA.  In describing the general knowledge that “pipelining is well known”, Google cited a prior art reference (Hua) and also an expert declaration.

Extra Ground on Institution: Before getting to the obviousness issue, I’ll note an appeal/SAS issue decided by the Court.  The Board instituted the IPR on both grounds raised by Google, but also added a third ground: SMIL in view of Hua.  On appeal, the Federal Circuit found the third-ground improper — quoting the Supreme Court’s decision in SAS to the effect that the AIA does not “contemplate a petition that asks the Director to initiate whatever kind of inter partes review he might choose.” SAS Inst. Inc. v. Iancu, 138 S. Ct. 1348, 1355 (2018).  Under the statute as interpreted in SAS, the petitioner decides how to structure the IPR, and the initiation stage is a yes/no determination.  The Federal Circuit did not address the no-appealability-of-institution-decisions provision of Section 314(d).

Role of General Knowledge in IPR Obviousness: The first Obviousness-focused question that the court considered was an interesting albeit fruitless contention — that “obviousness” in IPR proceedings should be treated differently than in other areas of patent practice. In particular, the patentee noted that Section 311(b) of the AIA limits IPR considerations to only “prior art consisting of patents or printed publications.” As such, Philips argued that “general knowledge” could not be considered in the analysis.  On appeal, the Federal Circuit rejected that argument — holding that the 311(b) limits the types of prior art available in an IPR, but does not otherwise alter the obviousness analysis of Section 103.

Although the prior art that can be considered in inter partes reviews is limited to patents and printed publications, it does not follow that we ignore the skilled artisan’s knowledge when determining whether it would have been obvious to modify the prior art. Indeed, under 35 U.S.C. § 103, the obviousness inquiry turns not only on the prior art, but whether “the differences between the claimed invention and the prior art are such that the claimed invention as a whole would have been obvious . . . to a person having ordinary skill in the art to which the claimed invention pertains.” 35 U.S.C. § 103. Regardless of the tribunal, the inquiry into whether any “differences” between the invention and the prior art would have rendered the invention obvious to a skilled artisan necessarily depends on such artisan’s knowledge.

Slip Op.  The implication here is that “general knowledge” is not “prior art” but instead part of the definition of PHOSITA under Graham.

General Knowledge: A primary case in tension with broad use of general knowledge is Arendi S.A.R.L. v. Apple Inc., 832 F.3d 1355, 1361 (Fed. Cir. 2016).  In that case, the court warned against invoking “common sense . . . to supply a limitation that was admittedly missing from the prior art” and that was not “supported by evidence and reasoned explanation.”  On appeal here, the Federal Circuit distinguished Arendi — holding that Google’s argument for general knowledge was supported by evidence and reason: 

In Arendi, the Board [improperly] relied on nothing more than “conclusory statements and unspecific expert testimony” in finding that it would have been “common sense . . . to supply a limitation that was admittedly missing from the prior art.” Conversely, here the Board relied on expert evidence, which was corroborated by Hua, in concluding that pipelining was not only in the prior art, but also within the general knowledge of a skilled artisan. Moreover, Philips offered no evidence to rebut the conclusion that a skilled artisan would have known about pipelining.

Id. “Pipelining” was the only claim feature not found in the asserted prior art reference.  However, since pipelining was part of the “general knowledge,” then its use was proper to invalidate the claims.

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.

Fote v. Iancu (Supreme Court 2020)

In this case, the PTO refused to grant Charles Fote’s patent covering a Broker-Mediated Payment System after concluding that the claims lacked eligibility.  On appeal, Fote argued otherwise — especially considering the PTO’s new (limited) approach to eligibility examination.  The Federal Circuit though refused to bite and simply affirmed the PTO determination without issuing any opinion under its internal R. 36.

In a recent request for extension of time, Fote has indicated his plans to ask the Supreme Court to review the propriety of the Federal Circuit’s no-opinion judgments:

The petition for certiorari will contend that in cases like this one, where the administrative agency arguably erred in its analysis of the proposed patent claims and failed to properly apply the law, the use of one-word summary affirmances under Federal Circuit Rule 36, which effectively prevents review of the merits of the panel decision en banc or by this Court, is impermissible.

[Fote petition to Supreme Court for extension of time]  Although the patent application appears to be unpublished, the file-history was included in the Federal Circuit briefing. [JointAppx].

Representative claim 8 is directed to a “telecommunication system” that includes a brokerage server, a funding server, and also an electronic communications devices that are designed to provide certain authentication signalling to facilitate a payment. The claim itself is 1,200+ words 5x longer than a typical independent claim. In briefing, Fote explained that:

By dividing responsibilities for the payment and the information among multiple third parties, the payment system invented by Fote avoids the privacy and security vulnerabilities that would otherwise arise if a conventional third-party intermediary were employed in an electronic environment. . . .

[Although the] system involves conventional computer components[;]… [t]he system’s
novelty and inventiveness, which have been acknowledged by the Patent Office, lie
in the specific payment techniques it implements.

In its briefing, the PTO responded that the claims can be seen as parallel to the settlement risk mitigation system in Alice Corp. and that the Board’s decision was correct:

The Board properly concluded that the claimed invention is directed to patent ineligible subject matter. Claim 8 recites a system for transferring electronic payment from a payer to a payee that utilizes a third-party intermediary to prevent disclosure of the payer’s confidential information (i.e., the identity of the payer’s
funding source and real account) to the payee.

Under step one of the Supreme Court’s two-step framework, the Board rightly determined that the claim is directed to a fundamental economic practice, which is an abstract idea. As the Board found, the use of a third-party intermediary to securely transfer funds between two parties is akin to the use of a third party to mitigate settlement risk, which was held to be abstract in Alice. . . .

At step two of the eligibility analysis, the Court rightly determined that the additional claim limitations do not transform the abstract idea into an inventive concept. Each of those limitations merely recite conventional computer components that perform generic computer functions. Although the Board did not cite to this Court’s decision in Berkheimer v. HP Inc., 881 F.3d 1360 (Fed. Cir. 2018), the Board did provide factual support in the specification to support its findings that the claim elements were well-known, routine, and conventional.

Gov’t Brief before the Federal Circuit.  The actual merits are rough here for the petitioner, but these are the cases that often make good procedural law.

by Dennis Crouch

I have written a few posts about the design patent infringement case  Columbia Sportswear North America, Inc. v. Seirus Innovative Accessories, Inc.  In November, the Federal Circuit vacated the lower court’s summary judgment of infringement — holding that logo placement in this case might allow the defendant to avoid an infringement judgment.  This holding is in tension with the court’s 1993 decision in L.A. Gear, Inc. v. Thom McAn Shoe Co., 988 F.2d 1117 (1993).

In the last post, I included an image of my Seirus glove liner.  My first update is that the glove liner has completely fallen apart — apparently it is a liner and not intended simply as a biking glove.

Second update is that Columbia (the patentee) has petitioned the court for en banc rehearing to address issues of design patent infringement.  Questions presented:

1. When conducting a design-patent infringement analysis under Gorham v. White, may a fact-finder consider the addition of brand names or other labeling on an otherwise infringing design?
2. When conducting a design-patent infringement analysis under Gorham v. White, should the fact-finder compare the overall appearance of the claimed design (i) to the overall appearance of the accused design, or (ii) to the overall appearance of the entire accused product, which may include aspects extraneous to the claimed design (e.g., logos, tradenames, color, size, etc.)?

[Columbia-petition].  The new petition added design patent expert Christopher Carani representing Columbia. The Court has requested a responsive brief from Seirus due January 30, 2020.  Several amici are also planning to submit briefs, although there is some fight over whether the court will allow them an extension of time.  Amici include a “Group of Interested Practitioners” including Tracy-Gene Durkin, Robert Katz, and Perry Saidman. The Industrial Designers Society of America, Inc. (represented by Damon Neagle) and Bison Designs / Golight (represented by Ian Walsworth) are also expected to support the petition. In opposing the extension, Seirus explained that “there is no reason a group comprised of at least seven design patent attorneys from at least six law firms cannot draft a 2,600 word brief in the time allotted.”  In my contrary experience, a group of seven patent attorneys rarely accomplish anything within the time allotted.

Logo Placement Relevant for Infringement in Design Patent Cases

by Dennis Crouch

When I first wrote about Amgen v. Amneal, I focused on the patent law issue regarding Markush groups in the patent claims.  Here, I want to circle back to the question appellate jurisdiction. I’ll be teaching the 2nd semester of Civil Procedure at Mizzou this spring and appellate jurisdiction is the the first topic up for grabs.

Most patent infringement litigation reaches the Federal Circuit under the “final judgment rule” which creates appellate jurisdiction over cases “appealed from a final decision of a district court.” 28 U.S.C. 1295(a)(1).  Final decisions “are decisions that end litigation on the merits and leave nothing for the court to do but execute the judgment.” Slip op.; Coopers & Lybrand v. Livesay, 437 U.S. 463, 467 (1978).  Thus, in a patent case involving infringement claims and invalidity defenses, both must be resolved before appeal.  (Note here, that there are some, albeit limited, options for interlocutory appeals prior to final judgment).

In Amgen, the district court issued an infringement decision (against Zydus) but did not resolve questions of whether the asserted patent is valid and enforceable — explaining that:

The Court has not yet held trial on Zydus’ bifurcated invalidity counterclaims and defenses. . . . An invalidity trial will be scheduled by this Court if necessary following disposition of appeal proceedings.

Amgen Inc. v. Amneal Pharm. LLC., No. 1:16-cv-00853-MSG (Oct. 9, 2018), ECF No. 405.  Because the invalidity issues were still unresolved, the decision was not final.  Still, Zydus appealed and included only a conclusory jurisdictional statement that jurisdiction is proper under  28 U.S.C. § 1295(a)(1) since the district court issued its final judgment:

The district court then issued a final judgment on October 9, 2018, in favor of Amgen against Zydus. . . . This Court has jurisdiction over the cross-appeal under 28 U.S.C. § 1295(a)(1).

Zydus brief.   Amgen also did not challenge jurisdiction in its briefing.  However, the appellate court is obligated to ensure itself of jurisdiction before moving forward.

At oral arguments, the appellate panel recognized the problem and questioned Zydus’s attorney during oral arguments who – after consulting with his client in the courtroom – agreed to “give up” its invalidity defense. [Oral arguments beginning at min 18].   In its decision, the Federal Circuit found that concession sufficient to cure jurisdiction. “Zydus’s representation effectively cures the jurisdictional defect in its notice of appeal because the contingency identified by the district court—Zydus’s potential invalidity defense and claim—is nullified.”

Too Short Analysis: The Federal Circuit did not cite any precedent or statute to support its conclusion that the oral-argument waiver can cure the lack of final judgment.  The procedure principles here fall within the umbrella of “cumulative finality.”  Most courts have accepted the notion that a premature appeal can be cured by a subsequent entry of final judgment by the district court.  However, some courts have taken an alternative approach. Here is how Prof. Lammon explained the situation in his recent article:

[The cumulative finality] rule of appellate jurisdiction allows certain subsequent events to save a premature notice of appeal filed after certain district court decisions.

The general rule cannot be stated any more precisely, however, because the cumulative finality doctrine is currently a mess.

Bryan Lammon, Cumulative Finality, 52 Ga. L. Rev. 767 (2018).   In his article, Lammon explains that the Eighth Circuit along with the Federal Circuit have traditionally held the narrowest views of cumulative jurisdiction and has previously required appellants to re-file their case after a proper final judgment rather than curing appellate jurisdiction on the fly.  Lammon does not address whether the Federal Circuit should be following its own law on this issue or instead be applying the law of the regional circuit court of appeals.  In a separate paper on finality, Lammon also explains that the meaning of “final decision” is not quite the simple definition that I used above.

The federal courts have given the term “final decision” a variety of meanings. Those meanings often deviate from–and are occasionally inconsistent with–the standard definition…

Bryan Lammon, Finality, Appealability, and the Scope of Interlocutory Review, 93 Wash. L. Rev. 1809 (2018).

= = = = =

Let me note one failure of lawyering in the case: Although district court’s purported final judgment was not actually a final judgment as to Zydus, it did include a permanent injunction against Zydus as shown in the image below. The injunction is relevant because it fits within one of the exceptions to the final judgment rule. In particular, a district court’s decisions involving injunctive relief are directly appealable even if not part of a final judgment. “[T]he courts of appeals shall have jurisdiction of appeals from: (1) interloctutory orders of the district courts . . . granting, continuing, modifying, refusing or dissolving injunctions, or refusing to dissolve or modify injunctions…” 28 U.S.C. 1293(a).

Thus, it looks to me like Zydus’ attorney had a proper grounds for jurisdiction without giving-up its invalidity defense.

= = = = =

Opening a Closed Markush Group

If you want it, Claim it

by Dennis Crouch

Molon Motor and Coil Corp. v. Nidec Motor Corp. (Fed. Cir. 2020)

In a divided opinion, the Federal Circuit affirmed the district court’s summary judgment against the patentee Molon — holding that a 2006 covenant-not-to-sue remained in force despite a subsequent 2007 settlement agreement stating that prior covenants “concerning the subject matter hereof” are “of no further force or effect.”

The Subject Matter of a Contract: The majority opinion penned by Judge Lourie and joined by Judge Hughes concludes “that the two agreements concern different subject matter” and and thus finds the merger and cancellation clause inapplicable.  Writing in dissent, Judge Reyna came to the opposite conclusion since both the 2006 covenant and the 2007 settlement agreement focused on a license to practice the ‘915 patent.

In the 2006 Covenant, Molon granted Merkle-Korff [Nidec’s predecessor] a bare license to practice the ’915 patent in any market. In the 2007 Settlement, Molon granted Merkle-Korff an exclusive license to practice the ’915 patent in the Kinetek Exclusive Market only. Both licenses relate to the same subject matter—the right to practice the ’915 patent. Thus, the 2007 Settlement’s merger clause, which wiped away all prior covenants with the same subject matter, wiped away the 2006 Covenant.

Judge Reyna in dissent. Judge Reyna appears to have the better argument — although not good enough to convince Judges Lourie and Hughes.  Further, Nidec’s counsel Rudy Telscher did an excellent job marshaling Illinois cases that supported his client’s position.

The difference in interpretation between these judges is a matter of contract interpretation under Illinois law. Unfortunately, the majority’s statement of Illinois law is not too helpful: “Illinois courts have cautioned against defining ‘subject matter’ too broadly or too narrowly.”

Some Background on the First Lawsuit: Molon sued Markle-Korff on family-member patent (US6054785), and the defendant responded with a declaratory judgment couinterclaim against Molon’s Patent (US6465915).  At that time, Molon was not interested in litigating the ‘915 patent and issued the 2006 covenant-not-to-sue.

Molon hereby forever covenants not to sue Merkle-Korff for patent infringement … under …
the ’915 patent … with respect to any and all products previously or presently made,
used or sold by Merkle-Korff in the United States. …

2007 Covenant. The district court dismissed the ‘915 patent claims but that first lawsuit continued with Molon’s originally filed infringement claims regarding the ‘785 patent.  In 2007 the parties settled the ‘785 lawsuit with an exclusive license agreement that extended beyond the original lawsuit itself to include more than a dozen Molon patents (including foreign patents and the ‘915 patent).  A difference between the 2006 covenant and the 2007 settlement was the scope of license.

• 2006 covenant – non-exclusive license to “any and all products previously or presently made, used or sold by Merkle-Korff.”
• 2007 settlement – exclusive license restricted to the “Kinetek Exclusive Market.”  (The briefing explains that the “Kinetek Exclusive Market” is a specific confidential customer list that the licensee is allowed to sell to.)

As mentioned above, the 2007 agreement also states that prior agreements “concerning the subject matter hereof” are “merged” and “of no further force or effect.”  However, the 2007 agreement does not particularly and explicitly revoke the 2006 agreement.

Fast forward to 2016 — Molon filed a new lawsuit against Nidec — successor in interest to Merkle-Korff.  The new suit alleges that Nidec is selling beyond the Kinetek market and the big question here is whether the original broad covenant is still in effect.

For the majority, the big difference between the two promises is exclusivity:

There are fundamental differences between an exclusive license and a nonexclusive license, particularly in the context of standing to assert a claim for patent infringement. In essence, an exclusive licensee has an interest in the patent sufficient to establish an injury when a third party infringes, akin to an ownership interest, while a nonexclusive licensee has no such interest in the patent and merely enjoys freedom from suit. Under this framework, it cannot be said that an exclusive license and a nonexclusive license necessarily concern the same subject matter, even though both licenses include the same patent.

Id.  The holding here then is that the original covenant was not cancelled — and so the patentee has no case.

= = = = =

One interesting additional issue not addressed here is the extent that a unilateral covenant-not-to-sue can be revoked, even by agreement. If we think of the covenant as a conveyance (of property rights), a revocation would ordinarily be insufficient to transfer rights back to the patentee. Rather, we would need an express conveyance or release.  A covenant-not-to-sue could also be seen as an abandonment of rights — something like a ‘release.’  Historically courts have distinguished between a release and a covenant-not-to-sue, although that distinction appears to have lifted based as covenants now operate as a complete bar to a subsequent underlying action rather than their historical role of only creating a breach of contract action. See Skilstaf, Inc. v. CVS Caremark Corp., 669 F.3d 1005, 1017 (9th Cir. 2012).

Eko Brands v. Adrian Rivera Maynez Enterprises (Fed. Cir. 2020)

ARM’s US Patent 8,720,320 covers a Keurig coffee-machine adapter.  Typical cartridges are single-use — rendered ineffective after being pierced by the brewer during operation. ARM’s device isn’t pierced and so retains its effectiveness over multiple uses.

ARM filed an ITC complaint against Eko and others. Although the ITC ruled that several claims were invalid for lacking written description (e.g., claim 5), Eko defaulted with respect to claims 8 and 19 and the ITC issued an exclusion order with respect to those claims.

Subsequently, Eko filed a district court declaratory judgment action to collaterally attack the ITC ruling as to claims 8 and 19. The district court complied and found the claims not-infringed (summary judgment) and invalid as obvious (jury verdict).  The district court also awarded attorney fees to Eko as the prevailing party in what it found to be an exceptional case.

5. A beverage brewer, comprising:

a brewing chamber;

a container, disposed within the brewing chamber and adapted to hold brewing material while brewed by a beverage brewer, the container comprising:

• a receptacle configured to receive the brewing material; and
• a cover;
• wherein the receptacle includes a base, having an interior surface and an exterior surface, wherein at least a portion of the base is disposed a predetermined distance above a bottom surface of the brewing chamber, and at least one sidewall extending upwardly from the interior surface of the base,
• wherein the receptacle has at least one passageway that provides fluid flow from an interior of the receptacle to an exterior of the receptacle;
• wherein the cover is adapted to sealingly engage with a top edge of the at least one sidewall, the cover including an opening, and
• wherein the container is adapted to accept input fluid through the opening and to provide a corresponding outflow of fluid through the passageway;

an inlet port, adapted to provide the input fluid to the container; and

a needle-like structure, disposed below the base;

wherein the predetermined distance is selected such that a tip of the needle-like structure does not penetrate the exterior surface of the base.

8. The beverage brewer of claim 5, wherein the container is reusable.

Note here that claim 8 adds a quite minor limitation that is probably already implied within the scope of claim 5.

On appeal, the Federal Circuit has affirming the claim construction and thus the resulting non-infringement and obviousness decisions.  In the process, the appellate panel reiterated the lower court’s statement that “ARM’s insistence on trying [the case] was largely a charade used for the purpose of extending the life of the earlier ITC . . . order.”

Normal preclusion rules do not apply to interactions between the ITC and District Court. See, Tandon Corp. v. U.S. Int’l Trade Comm’n, 831 F.2d 1017, 1018 (Fed. Cir. 1987) (even appellate treatment of an ITC decision “does not estop fresh consideration by other tribunals”); S.Rep. No. 1298, 93d Cong., 2d Sess. 196 (“it seems clear that any disposition of a Commission action by a Federal Court should not have a res judicata or collateral estoppel effect in [infringement] cases before such [district] courts.”).

An invalidity decision in district court does not automatically cancel an ITC exclusion order. Rather, the ITC can rescind its decision based upon evidence that “the conditions which led to such exclusion from entry or order no longer exist.” Section 337(k)(1).  Following the district court decision, the ITC issued a temporary rescission order that will likely be made permanent now — allowing Eko to keep importing.

= = = =

Note here that Judge Reyna dissented from Judge Dyk’s majority decision on claim construction of claimed “passageway that provides fluid flow from an interior of the receptacle to an exterior of the receptacle.”

The district court erred in its construction of “passageway” by rewriting the claims, including adding a negative limitation that is unsupported by the specification. . . .

The district court construed the term “passageway” as “a narrow space of some depth or length connecting one place to another.” This construction is not supported by the specification. The district court also interpreted “passageway” to exclude a receptacle “that utilized a broad, thin mesh.” This exclusion was raised sua sponte by the court and not argued by either party.

The majority suggested that the district court might have erred a bit in its construction but that Eko didn’t infringe either way.

= = = =

In a turn of events, Eko also sued ARM for infringement and the jury sided with Eko. U.S. Patent No. 8,707,855.  Although Eko won on infringement, the jury found no willful infringement. On appeal, Eko asked for a retrial of willfulness based upon improper jury instructions.

The jury instructions:

Eko argues that ARM willfully infringed the Eko
855 patent. . . . Willfulness requires you to determine whether Eko proved that it is more likely than not that the infringement was especially worthy of punishment. You may not determine that the infringement was willful just
because ARM knew of the Eko 855 patent and infringed it. Instead, willful infringement is reserved for egregious behavior, such as where the infringement is malicious, deliberate, consciously wrongful, or done in bad faith.

On appeal, the Federal Circuit found some fault with the jury instructions here — concluding that the instructions improperly intermix enhanced damages issues that are left for the judge. Rather, the jury’s role here is to address willfulness.

[T]he inclusion of the phrases “especially worthy of punishment” and “reserved for egregious behavior” in Jury Instruction 40 was erroneous.

However, on appeal, the Federal Circuit refused to order a new trial — holding that jury instructions must be considered as a whole – “we think that the instruction taken as a whole provides reasonable clarity as to the correct test for willful infringement.”  In particular, the instructions allow for a finding of infringement that is simply “deliberate.” Later, the instructions also focus jury attention on intentional copying and belief of non-infringement. Those elements of the instructions were sufficient to cure the problematic language since “[t]he jury was reasonably informed that it could make a finding of willful infringement if it found that ARM deliberately or
intentionally infringed the ’855 patent.”

Affirmed

By Jason Rantanen

While most commentators are focusing on year-in-reviews, I thought it would be fun to do a decade-in-review using data from the Compendium of Federal Circuit Decisions, the publicly-accessible dataset that we’ve developed at Iowa Law containing information about all decisions by the Federal Circuit since 2008.  You can access the Compendium via empirical.law.uiowa.edu/.

1. Decisions by origin

Recently, we updated the Compendium to include all decisions arising from origins other than the District Courts and USPTO.  This lets us compare decisions across all origins along a variety of dimensions.

Figure 1 shows the distribution of Federal Circuit decisions by major source.  A “decision” in the Compendium is defined as an opinion or Rule 36 affirmance.  I’ve grouped origins with small numbers of appeals, including the Board of Contract Appeals, Department of Justice, and Department of Veterans’ Affairs, into the “other” category. (The figures link to larger versions.)

Figure 1

Or if strata are more your thing:

Figure 2

These graphs show the well-known increase in decisions arising from the USPTO (mostly from inter partes review proceedings), but also a decline in decisions arising from the MSPB. (These outputs match the inputs: the Federal Circuit’s statistics page indicates a decline in the number of docketed appeals arising from the MSPB.)  While decisions arising from the district courts and the USPTO have crossed paths over the past few years, the number of decisions originating from the district courts is about where it began the decade. Overall, the court’s total output has risen by about 100 decisions/year during this time.

2. Precedential opinions by origin

Another way to assess a court’s output is in terms of its precedential opinions, as these constitute law on which future courts and parties rely.  Below is a chart showing the Federal Circuit’s annual number of precedential opinions by major source of origin.  The “other” group here includes the “other” category from the above graphs plus the Court of Appeals for Veterans’ Claims, Court of International Trade, and International Trade Commission.

Figure 3

Figure 3 shows precedential opinions in appeals arising from the district courts peaking at about 100 in 2014 and 2015, before falling to about 75 for the last few years. At the same time, the number of precedential opinions in appeals arising from the USPTO has risen substantially, from under 20 in 2013 to about 50-60 for the last few years.

3. Types of Decision by Origin

The below pie charts show the distribution of precedential opinions, nonprecedential opinions and summary affirmances under Rule 36.  by source of origin for the entire period 2010-2019.  About 30% of the Federal Circuit’s decisions consist of Rule 36 affirmances.

Figure 4

The lion’s share of precedential opinions and Rule 36 affirmances come from appeals from the District Courts and USPTO, nearly all of which involve patent issues.  For nonprecedential opinions, it’s the opposite: about half of these of these are written in appeals from the MSPB and CAVC.

One other way of looking at the data on decision types by court of origin for the entire decade:

Figure 5

4. District court and PATO opinions: precedential, Rule 36 and nonprecedential

The final set of graphs for today are annual decisions from the USPTO and District Court by decision type.

Figure 6

Figure 7

If there are particular graphs of Federal Circuit decisions from the last decade that you’d like to see, send me an email and if we have the data I’ll try to generate them.

You’re welcome to play around with the data on your own.  If you do use it for something that you publish, please include a citation to the Compendium.  There’s a convenient cite form on the landing page for the database.  You’re also welcome to use the above graphs in presentations, provided that you give credit to PatentlyO and the Compendium of Federal Circuit Decisions (https://empirical.law.uiowa.edu/compendium-federal-circuit-decisions).

More reading on the Compendium of Federal Circuit Decisions and methodology & cautions for case count data generally:

• http://Empirical.law.uiowa.edu (Compendium website, with details and a copy of the Codebook)
• Rantanen, J., The Landscape of Modern Patent Appeals, 67 Am. U. L. Rev. 985 (2018) (https://digitalcommons.wcl.american.edu/cgi/viewcontent.cgi?article=2013&context=aulr)
• Rantanen, J., Empirical Analyses of Judicial Opinions: Methodology, Metrics and the Federal Circuit, 49 Conn. L. Rev. 227 (2017) (https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2774307)
• Rantanen, J., Administering Patent Law, 104 Iowa L. Rev. 2299 (2019) (https://ilr.law.uiowa.edu/print/volume-104-issue-5/administering-patent-law/)

Thanks to my research assistants for their work on the Compendium, especially Will O’Brien, Lindsay Kriz, Madison Murhammer-Colon, John Miscevich and Joseph Bauer.