This pending petition for certiorari involves a trademark registration dispute between Kaszuba (HOLLYWOOD BEER) and Hollywood Vodka LLC (HOLLYWOOD VODKA). Kaszuba first registered his mark (albeit on the Secondary Register). Later, HVL was denied registration — in part because of the existence of the Kaszuba’s mark. HLV then filed a cancellation proceeding before the Trademark Trial & Appeal Board (TTAB). After a drawn-out process, the Board eventually sided with HLV—entering judgment against Kaszuba as a sanction for discovery violations.
I’ll note that neither of these brands stand-up to the more popular Hollywood Brewing Co. (Hollywood, FL).
Kaszuba’s new petition for writ of certiorari to the U.S. Supreme Court asks three interesting questions:
Whether the Federal Circuit erred in finding that Hollywood Vodka had standing under Lexmark and 15 U.S.C. § 1064.
Whether the Federal Circuit err in allowing Intervention by the USPTO Director under, the patent law provision of 35 U.S.C § 143.
Whether Administrative Trademark Judges are, for purposes of the Appointments Clause, Principal Officers who must be appointed by the President with the Senate’s advice and consent.
The second question is where plain error lies. In its decision, the Federal Circuit allowed the U.S. Gov’t to intervene in the case based upon Section 143 (Hollywood Vodka did not participate in the appeal). That section of the Patent Act does provide for intervention, but only specifically for appeals from the PTAB, and only in derivation, IPR, or post-grant review proceedings.
The Director shall have the right to intervene in an appeal from a decision entered by the Patent Trial and Appeal Board in a derivation proceeding under section 135 or in an inter partes or post-grant review under chapter 31 or 32.
Section 143 obviously does not provide authority for the PTO to intervene in an appeal from the TTAB. However, that may be harmless error as the Federal Circuit has previously allowed intervention in trademark cases. See In re Bose Corp., 580 F.3d 1240, 1243 (Fed. Cir. 2009) (“Because the original appellee Hexawave did not appear, the PTO moved, and the court granted leave to the Director, to participate as the appellee.”).
Note there are lots of brewing Hollywood TM disputes. Below is a screenshot of a few TM cases at the PTO.
The Federal Circuit’s new decision in Trimble Inc. v. PerDiemCo LLC reads like my recent Civil Procedure final exam.[1] The topic is personal jurisdiction–when may a Federal Court exercise its power over an out-of-state patentee in a declaratory judgment action challenging the patent’s validity. The holding is important–repeated and specific threats of litigation by an out-of-state patentee can be sufficient to establish personal jurisdiction for a declaratory judgment action.[2] The decision relies upon the an expanded notion of purposeful availment from the Supreme Court’s 2021 decision in Ford,[3] but should also be seen as further limiting the holding of Red Wing Shoe.[4]
In the U.S., personal jurisdiction is handled on a state-by-state basis, even if the case is filed in Federal Court. “Due process” requires a defendant to have sufficient connection with the forum state before a court can exert power over the defendant or the defendant’s assets.[5] This lawsuit was filed in California against PerDiemCo, and so the personal jurisdiction question boils down to whether PerDiemCo has directed its activities toward California in a way that makes jurisdiction fair, just, and reasonable according to our traditions.[6]
PerDiemCo, the patentee, is a Texas LLC with rented office space in Marshall, TX. Its sole employee is Robert Babayi–a patent attorney practicing in Washington DC who has apparently never visited the Texas office. PerDiemCo owns a number of U.S. patents covering the electronic logging of hours for commercial vehicles and also a process known as geofencing.[7] (Geofencing is the process of electronically “monitoring whether a vehicle enters or leaves” an area.) PerDiemCo’s only apparent business is licensing its patents.
Trimble is a Delaware corporation with its headquarters in N.D. Cal. (Sunnyvale). Trimble is traded on NASDAQ and has a current market cap of $18.75 billion. (TRMB) — most of its business is related to geospatial technology. ISI has does business and has offices throughout the United States. Innovative Software Engineering, LLC (ISI) is also involved in the lawsuit. ISI is a subsidiary of Trimble that is both incorporated and headquartered in Iowa.
The Purposeful Availment: Back in 2018 PerDiemCo’s Babayi mailed a letter to a ISI’s corporate HQ in Iowa, accusing ISI of infringing PerDiemCo’s patents. ISI is a subsidiary of Trimble, and so forwarded the letter to Trimble’s Chief IP Counsel Aaron Brodsky located in Colorado. The parties then began to conduct some amount of negotiation: “Throughout these negotiations, PerDiemCo communicated with Trimble via letter, email, or telephone at least twenty-two times.” The communications apparently included express threats to sue Trimble for patent infringement. However, all the communications were apparently via Brodsky in Colorado.
PerDiemCo exchanged twenty-two communications with Trimble in California over a period of three months, some through its subsidiary ISE in Iowa and others through its Chief IP Counsel in Colorado.[8]
In 2019, Trimble and ISE sued for declaratory judgment. Rather than choosing Iowa or Colorado, the companies chose the Northern District of California, which is Trimble’s home court.
The Question: On these facts, may the California district court exercise personal jurisdiction over the defendant?
The Answer: The district court dismissed the case, finding that it would be unreasonable to assert personal jurisdiction.[9] On appeal, however, the Federal Circuit reversed—finding no problem with the case proceeding in California. In particular, the Federal Circuit found (1) sufficient minimum contacts with the state of California related to the cause of action and (2) that exercise of jurisdiction by a California court would be reasonable.
= = =
Directed to California: If you recall, PerDiemCo repeatedly communicated with Trimble, but only through individuals residing outside of California. These were seen as contacts directed to California because they are “communications sent to Trimble, a California resident.”[10] The court did not spend much time on this particular issue, but addressed it in a footnote:
The [District] court held that PerDiemCo’s communications with Mr. Brodsky in Colorado were, for personal jurisdictional purposes, directed to Trimble in California, rather than in Colorado. This focus is consistent with our cases. Maxchief Investments Ltd. v. Wok & Pan, Ind., Inc., 909 F.3d 1134, 1139 (Fed. Cir. 2018) (holding that, for personal jurisdiction purposes, a letter sent to a company’s counsel is directed to the company at its headquarters, not the location of counsel); Inamed Corp. v. Kuzmak, 249 F.3d 1356, 1360 (Fed. Cir. 2001) (same); Akro Corp. v. Luker, 45 F.3d 1541, 1546 (Fed. Cir. 1995) (same).
Thus, we have contacts and threats of litigation directed toward a resident of California; and these threats relate directly to the eventual cause of action.
What about Red Wing: One big hurdle for Personal Jurisdiction is the Federal Circuit’s 1998 decision in Red Wing Shoe Co.[11] In that case, court held that a patentee does not open-itself to personal jurisdiction in a particular state simply by accusing an in-state resident of infringement. According to the court, that result would be unfair.
Principles of fair play and substantial justice afford a patentee sufficient latitude to inform others of its patent rights without subjecting itself to jurisdiction in a foreign forum. A patentee should not subject itself to personal jurisdiction in a forum solely by informing a party who happens to be located there of suspected infringement. Grounding personal jurisdiction on such contacts alone would not comport with principles of fairness.[12]
In Red Wing, there were three warning letters sent by the patentee HHI to the DJ Plaintiff Red Wing. These letters apparently accused Red Wing of infringement and also offered to license the patents. In addition, HHI’s prior licensees sold licensed products in the forum state (Minnesota), but HHI did not control those sales. After reviewing those facts, the Federal Circuit found those connections insufficient to for Personal Jurisdiction. In particular, the court suggested that the minimum contacts prong had likely been met, but that it remained unfair that those limited contacts would lead to a court proceeding.
In Trimble, the Federal Circuit purported to uphold Red Wing Shoe, but limited the case situations with a small number of communications. Rather, the court found that PerDiemCo’s contacts were “extensive” and went beyond simply “informing” Trimble of its infringement and seeking a license agreement.
PerDiemCo amplified its threats of infringement as the communications continued, asserting more patents and accusing more of Trimble and ISE’s products of infringement. Indeed, PerDiemCo went so far as to identify the counsel it retained to sue Trimble and ISE and the venue in which it planned to file suit. PerDiemCo’s twenty-two communications over the course of about three months fall well outside the “sufficient latitude” we sought to grant patentees “to inform others of [their] patent rights without subjecting [themselves] to jurisdiction in a foreign forum” on the basis of three letters sent over a similar time period in Red Wing.
The Trimble court found that the PerDiemCo communications should be collectively termed “a negotiation” rather than merely providing information. “And Trimble is headquartered in California, connecting California to Trimble’s claims, which is a consideration the Court in Ford found relevant in distinguishing its earlier decision in Bristol-Myers.” In the end, the court found that the minimum contacts were “easily satisfied.” And, any fairness concerns were also overcome.
In its 1985 Burger King Decision,[13]the Supreme Court expanded upon the five fairness elements highlighted by World-Wide Volkswagen Corp. v. Woodson.[14]Trimble walks through these same elements, concluding that it is indeed fair to haul PerDiemCo into a California court.
Burden on the defendant. Although PerDiemCo has a Texas office, the courts found that office “pretextual” and certainly a distance from Washington DC where Babayi is located. Still, the company has repeatedly filed lawsuits in Texas. According to the appellate court, if Texas is OK, so is California. The basic decision here is that PerDiemCo does not really have any home because it is merely the owner of intangible assets. If PerDiemCo was instead an operating company, then outcome would have been totally different.[15]
Forum state’s interest in adjudicating the dispute. On this second point, the court found that N.D. Cal. Has a significant interest in hearing the dispute because Trimble is a “resident” of Northern District of California.
Plaintiffs’ interest in obtaining convenient and effective relief. Nearby federal court is helpful to the plaintiff Trimble.
Interstate judicial system’s interest in obtaining the most efficient resolution of controversies. On this point, the court did not find any favor one way or the other.
The shared interest of the several states in furthering fundamental substantive social policies. This does not appear to apply directly.
As you can see, the BK bullet points did not reveal any fairness concern, and thus the appellate panel reversed the lower court’s dismissal for lack of personal jurisdiction.
= = = =
Personal Jurisdiction as Patent Law Specific but Not Patent Law Specific.
The Federal Circuit has for many years applied its own law to personal jurisdiction questions even though the doctrine is procedural in nature. Unlike questions of inconvenient venue, the court has found that jurisdiction is “intimately involved with the substance of the patent laws.”[16] For convenient venue questions, the court applies the law of the regional circuit court of appeals.
This patent-focused personal jurisdiction doctrine goes back several decades. In Trimble though the court explains that since that time the Supreme Court has “made clear that the analysis of personal jurisdiction cannot rest on special patent policies.”[17] In Particular, in its 2017 SCA Hygiene decision, the Supreme Court stated that “[p]atent law is governed by the same … procedural rules as other areas of civil litigation.”[18] The appellate panel also notes other areas where the Supreme Court “has repeatedly rejected special rules for patent litigation in the context of rules governing civil litigation generally.”
In its decision, the appellate panel only takes this change toward generalism halfway. In particular, the court uses the Supreme Court’s guidance to narrow its application of Red Wing. But, the court does not question the underlying premise that Federal Circuit law should prevail on the question of personal jurisdiction. This seems to be a bit of doublespeak or perhaps a lack of coherence that could be resolved by an en banc rehearing.
= = = =
[1]Trimble Inc. v. PerDiemCo LLC, 2019-2164, 2021 WL 1898127, at *1 (Fed. Cir. May 12, 2021).
[2] See, Silas K. Alexander and Nicole R. Townes, Repeated and Specific Litigation Threats – Sufficient Minimum Contacts, Knobbe Martens Blog (2021).
[3]Ford Motor Co. v. Montana Eighth Jud. Dist. Ct., 141 S. Ct. 1017, 1024 (2021).
[4]Red Wing Shoe Co. v. Hockerson-Halberstadt, Inc., 148 F.3d 1355 (Fed. Cir. 1998); See also Jack Henry & Associates, Inc. v. Plano Encryption Technologies LLC, 910 F.3d 1199 (Fed. Cir. 2018).
[6] See Int’l Shoe Co. v. Washington, 326 U.S. 310, 316–17 (1945) and Bristol-Myers Squibb Co. v. Superior Ct. of Cal., 137 S. Ct. 1773, 1779 (2017).
[7] Patents at issue here include: (1) U.S. Patent No. 8,149,113; (2) U.S. Patent No. 9,485,314; (3) U.S. Patent No. 9,621,661; (4) U.S. Patent No. 9,680,941; (5) U.S. Patent No. 9,871,874; and (6) U.S. Patent No. 10,021,198; (7) U.S. Patent No. 9,319,471; (8) U.S. Patent No. 9,954,961; (9) U.S. Patent No. 10,104,189; (10) U.S. Patent No. 10,148,774; and (11) U.S. Patent No. 10,171,950.
[13] Burger King Corp. v. Rudzewicz, 471 U.S. 462 (1985)
[14] World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286 (1980).
[15] See Xilinx, Inc. v. Papst Licensing GmbH & Co. KG, 848 F.3d 1346 (Fed. Cir. 2017) (treating non-practicing entity differently than operating company who also owns patents).
[16]Akro Corp. v. Luker, 45 F.3d 1541, 1543 (Fed.Cir.1995).
Earlier this year, the US Supreme Court decided this case in favor of Google’s fair use argument and rejecting the Federal Circuit’s opposite conclusion. On remand, the Federal Circuit has now issued a short order in the case sending it back down to the District Court.
In its order, the Federal Circuit recalled its mandate in the case “solely with respect to fair use.” That means that its judgment favoring Oracle on the question of copyrightability still stands. Finally, the “district court’s final judgment in favor of Google is affirmed.” Neither party had filed additional briefs in the appeal following the Supreme Court’s decision.
New Vision Gaming & Development, Inc. v. SG Gaming, Inc. (Bally Gaming) (Fed. Cir. 2021)
In a pair of CBM decisions, the PTAB found New Vision’s patent claims ineligible under Section 101. New Vision had proposed alternative claims, but those were also found to be invalid. On appeal, the Federal Circuit did not review the merits, but instead vacated and remanded on Arthrex grounds.
New Vision requests that we vacate and remand the Board’s decisions in light of Arthrex, Inc. v. Smith & Nephew, Inc., 941 F.3d 1320 (Fed. Cir. 2019). Because Arthrex issued after the Board’s final-written decisions and after New Vision sought Board rehearing, New Vision has not waived its Arthrex challenge by raising it for the first time in its opening brief before this Court. Thus, we vacate and remand for further proceedings consistent with Arthrex, and we need not reach any other issue presented in this case.
Slip. Op.
Judge Newman authored an opinion that dissents in-part. In particular, Judge Newman argued that the choice-of-forum clause in a contract between the parties required any dispute over the patent to be resolved in a Nevada-based court, not in the USPTO. “The Board refused to respect the forum selection agreement, and proceeded to final decision of the petitions.” Judge Newman argued that the appellate panel should consider the issue before remanding.
Judge Newman particularly wanted to decide this issue here with her colleague Judges Moore on the panel (along with Judge Taranto). A parallel question is question under consideration in Kannuu Pty Ltd., v. Samsung Electronics Co., Ltd. (Fed. Cir. 2021). Oral arguments are expected in that case in July 2021 before a yet-to-be-disclosed panel.
U.S. Patent Nos. 7,451,987 and 7,325,806. The parallel litigation (filed in Nevada) is stayed pending outcome of the CBM review. New Vision Gaming & Development, Inc. v. Bally Gaming Inc., No. 2:17-cv-01559-APG-BNW (D.
Nev.).
Profs. Sarah R. Wasserman Rajec and Andrew Gilden recently posted a draft of their new article “Patenting Pleasure.” If you cannot discern the topic from their title, Prof Nicholson Price has also just published a review essay titled Illegal Sex Toy Patents. Price describes the “central tension” from the article:
Because of the utility doctrine, patentees must say what their inventions are for—but because US law has been generally quite hostile to sex and sex tech, pleasure patents have to say they are for something other than, well, pleasure. In the heart of the piece, Rajec and Gilden carefully catalog these descriptions over time, revealing a changing picture about what sorts of purposes were considered acceptable sex tech—at least, in the eyes of the USPTO.
Price. Some amount of obfuscation will be familiar to patent attorneys today across various fields. Although not illegal, most patents avoid detailing the core invention — what really is the improvement over the prior art. Likewise, some patent attorneys will have walked the tight-line between the patentability disclosure requirement and client-interest in keeping certain trade secrets. Some patent attorneys are hard at work attempting to beat the PTO’s AI system that routes patent applications to the various art units (some of which are seen as more favorable than others). Many are also trying to figure out ways to patent inventions that are close to the abstract-idea line without sending the case back to the inventors for more inventing. Perhaps all of this goes along with traditional core roles of attorneys — advocating and keeping secrets.
In any event, Rajec-Gilden do not include any of the patent drawings and should be safe for reading on the train.
On May 11, 2021, the USPTO issued US Patent Number 11,000,000. Eleven million. Don’t forget that the office has issued another 1,000,000 design+plant patents and an additional 10,000 patents from 1791 to 1836 before the current numbering system was established. I was a junior in college at Princeton when Patent No. 5,500,000 issued to John Feagin covering a zip-tie method for suturing. Over the past 25 years, the number of U.S. patents has effectively doubled.
U.S. Patent No. 11,000,000 is one of a family of inventions owned by 4C Medical Tech. of Minneapolis directed to heart surgery tools. The inventors are Saravana Kumar and Jason Diedering. The patent claims a method of delivering and also repositioning a prosthetic heart-valve (AltaValve) that is used to repair a leaky-valve issue experienced by several million Americans (typically over age 75).
The invention itself is quite simple — basically, there is a catheter tube with a set of wire pairs. Each pair includes one wire with a looped end and a second with a straight end. The pairs work together to deliver, release, and position the prosthetic valve within the heart. The claims were rejected as obvious and then allowed after a fairly minor amendment.
The patent and its family have been prosecuted by Jeff Stone and his team at Barnes & Thornburg (Minneapolis). Check back here in Spring 2024 when I’m expecting an announcement for Number 12,000,000.
GREE, Inc. v. SuperCell Oy (Fed. Cir. 2021) (nonprecedential)
SuperCell is a Finnish company that makes and distributes the mobile game “Clash of Clans.” SuperCell is owned primarily by the Chinese multinational Tencent, the “world’s largest video game vender.” The patentee GREE is a Japanese mobile game developer and holds a number of mobile-device game related patents.
On May 7, 2021 a jury sided with Gree in a patent infringment lawsuit, holding SuperCell liable and awarding $92 million in infringement damages.
GreeSuperCellVerdictForm. The jury also found the infringement willful and that the patent claims were not invalid. In the coming months, Judge Gilstrap will rule on the soon-to-be-filed JMOL motions and also rule on the question of enhanced damages associated with the adjudged willful infringement. GREE also asked for injunctive relief in its final pre-trial contention and so that will come up as well.
Today, the Federal Circuit decided a parallel case involving a separate GREE patent — not one subject to the recent jury verdict. U.S. Patent Number 9,897,799. For this patent, SuperCell filed a petition for Post Grant Review. The PTO granted the petition and eventually found the claims invalid under Section 101. On appeal here, the Federal Circuit has affirmed that judgment. In particular, the appellate panel agreed that the claims are directed to “the abstract idea of associating game objects and moving one or more of the objects.” Further, the claims did not include any inventive step going beyond the routine and conventional.
The most important part of this decision is where the court (effectively) says “Claim It.” There is some suggestion in the caselaw that a patentee might describe specific improvements within the detailed description and then include broader claims that encompass those improvements, but at a more general level. Here, GREE described particular syntax of touches and swipes within the specification. ON appeal, the Federal Circuit found that those elements didn’t count for the Alice analysis because they were not claimed.
The Board also correctly explained that none of the syntax of touches and swipes that GREE cites as its inventive step are captured in any of the elements of the claims.
Slip Op.
= = = = =
1. A computer-implemented method for operating a computer game, the method comprising:
storing, in a storage module, a plurality of virtual objects and the arrangements of those virtual objects on a game field;
accepting, via an input face configured to detect a touch operation, operation information regarding a touch operation performed by a user;
associating, using a processor, a plurality of virtual objects as a group; determining, using a processor, whether the operation information comprises a direction operation;
upon determining that the operation information comprises a direction operation, moving, using a moving processor, one or more of the plurality of associated objects as a group in the direction indicated by the direction operation;
storing, in a storage module, the new arrangements on the game field of the one or more of the plurality of associated objects moved with the moving processor;
displaying, on a computer screen, the game field and the plurality of virtual objects arranged on the game field; and
displaying, on a computer screen, the new arrangement on the game field of the one or more of the plurality of associated objects moved with the moving processor.
= = = = =
Going back to the $92 million case, The following patents are at issue.
Claim 3 of U.S. 10,328,346
Claim 8 of U.S. 10,335,689
Claim 1 of U.S. 10,076,708
Claims 2 and 3 of U.S. 10,413,832
Claims 1 and 6 of U.S. 9,079,107
Claims 1 and 5 of U.S. 9,561,439
On appeal, SuperCell will likely argue that these are all invalid as ineligible (along with other issues)
In TracFone, the Federal Circuit issued two strongly worded strongly worded mandamus opinion relating to venue.
In re TracFone Wireless, Inc., 2021-118, 2021 WL 865353 (Fed. Cir. Mar. 8, 2021) (remanding for a ruling on venue); and
In re TracFone Wireless, Inc., 2021-136, 2021 WL 1546036 (Fed. Cir. Apr. 20, 2021) (ordering transfer under 1404(a)).
The March 2021 decision orders W.D.Tex. Judge Albright to immediately decide TracFone’s venue motions (and write a reviewable opinion). Judge Albright immediately complied by denying TracFone’s motion to dismiss or transfer the case. The Federal Circuit’s April 2021 decision concluded that Judge Albright had “abused [his] discretion.” The appellate panel then ordered the case to be transferred to Florida.
Although the April 2021 decision provides finality, it is actually the March 2021 decision that is perhaps more interesting. The appellate panel ordered immediate action on the venue question and generally suggested that a district court should drop-everything to decide venue motions. The judge’s familiarity with the facts/law of a particular case is typically seen as relevant the outcome of an inconvenient venue motion under 1404(a). In its decision though, the court held that the district court should not consider any familiarity it has gained after the filing of the complaint:
[W]e remind the lower court that any familiarity that it has gained with the underlying litigation due to the progress of the case since the filing of the complaint is irrelevant when considering the transfer motion and should not color its decision.
Slip Op.
One problem with this decision is that it is non-precedential. Thus, the clear language has limited value going forward. Now, a group of law professors have petitioned to reissue the decision as precedential.
This Court should reissue its TracFone order as precedential to definitively establish the law regarding improper delays in ruling on transfer motions and requests for stay pending the resolution of such motions. Absent clear precedential guidance, courts may continue to disregard this court’s nonprecedential instructions and make procedural errors that force parties to settle or to litigate in an inappropriate, inconvenient, and costly forum.
Within sixty (60) days after the court issues a nonprecedential opinion or order, any person may request through motion filed in the case that the opinion or order be reissued as precedential. The request will be considered by the panel that rendered the disposition. The motion must identify any case that person knows to be pending that would be determined or affected by reissuance as precedential. Parties to pending cases having a stake in the outcome of a decision on the motion must be given an opportunity to respond. If the request is granted, the opinion or order may be revised as appropriate.
Rules. The motion was filed by Stanford’s IP Clinic (Philip Malone) on behalf of a group of law professors led by Mark Lemley.
I’ll note here as an aside that some of the language here could also be applied in the context of stays of litigation pending outcome of an AIA trial. Judge Albright has generally taken an approach of refusing stays in most cases.
= = = =
In re Western Digital (Fed. Cir. 2021). In a separate decision today, the Federal Circuit denied Western Digital’s petition for writ of mandamus to escape from W.D. Tex. The appellate panel did find that Judge Albright had applied the wrong legal standard by stating Western-Digital faced a “heavy” and “significant” burden before a case would be moved for convenience.
To be sure, the district court incorrectly overstated the burden on WDT as “heavy” and “significant.” but see Volkswagen, 545 F.3d at 314–15 (explaining that Congress intended to grant transfer under section 1404(a) upon a lesser showing of inconvenience than the “heavy burden” traditionally required under the forum non conveniens doctrine).
Slip Op. Still, the court found no abuse of discretion in denying transfer:
Although we may have evaluated some of the factors differently, we are not prepared to say that the district court’s ultimate conclusion that the transferee venue was not clearly more convenient amounted to a clear abuse of discretion.
Id.
= = = = =
One issue with this exercise has to do with the Federal Circuit’s approach to non-patent issues that come before the court. Motions to transfer under 1404(a) (inconvenient forum) are not patent-specific and so the Federal Circuit applies the law of the regional circuit court of appeals rather than its own precedent. For these cases out of W.D.Tex., the court applies 5th Circuit law regarding transfer of venue rather than its own precedent. Likewise, lower courts follow 5th circuit law rather than Federal Circuit law. Thus, we have a question of what role a precedential opinion on this point would actually serve.
By Sapna Kumar, Law Foundation Professor of Law at the University of Houston Law Center
While COVID-19 cases continue to drop in the United States, many countries are fighting resurgences of the virus and struggling to obtain vaccines and medical supplies. Back in October, India and South Africa petitioned the World Trade Organization (WTO) to waive all IP protection surrounding drugs and medical products needed to combat the pandemic. The petition also called for “the unhindered global sharing of technology and know-how.”
Existing safeguards regarding IP rights during public health emergencies have some issues. TRIPS Article 31 permits countries to issue compulsory licenses of patented technology, but the process for importing patented drugs is cumbersome under Article 31bis. Countries must also pay “adequate remuneration in the circumstances of each case” to the patent holder. Moreover, the U.S. government has a lengthy history of punishing countries that utilize compulsory licensing with trade-related sanctions.
It was therefore significant that President Biden announced on Wednesday that he will support waving IP protections for COVID-19 vaccines. U.S. Trade Representative Katherine Tai released a statement noting that “the extraordinary circumstances of the COVID-19 pandemic call for extraordinary measures,” and pledging to help expand vaccine manufacturing and distribution. This reversal in the Biden Administration’s position may be in response to increasing pressure from various groups and the unfolding crisis in India.
However, many questions still remain. First, will a waiver pass in the WTO? Although the European Union has stated that it is willing to reconsider the proposal, Germany remains staunchly opposed. Germany helped fund the Pfizer/Bio-N-Tech vaccine and has expressed concern that a broad waiver could undermine innovation. Chancellor Angela Merkel’s government has also noted that the real obstacle to widespread vaccination is production capacities.
Another issue relates to the know-how surrounding the COVID-19 vaccines. As I and others have written, vaccines are notoriously difficult to reverse-engineer because they are derived from living organisms and are structurally complex. One of the keys to rapid production is for the manufacturers to share proprietary knowledge regarding manufacturing processes that are typically protected as trade secrets. However, neither TRIPS nor U.S. law appear to provide mechanisms for compelling unwilling companies to do so. Nor are there any contractual provisions in the funding agreements under Operation Warp Speed that require such a disclosure.
It is also unclear whether a waiver of IP rights will make a difference. Take, for example, India, which has underinvested in health care for decades. Just a few months ago, India was giving away millions of vaccine doses in an attempt to compete with China in vaccine diplomacy, falsely believing that India had achieved herd immunity. In April, Prime Minister Narendra Modi was speaking unmasked before packed crowds at political rallies. An argument can be made that complacency is playing a far greater role than IP rights in India’s second wave.
Furthermore, as others have pointed out, IP rights are only a piece of what is needed to produce vaccines. There is currently a global shortage of raw materials and proper manufacturing facilities. The spoiled vaccines from Emergent BioSolutions’ plant in Baltimore furthermore illustrate the difficulties of bringing new manufacturing facilities online. Because the Moderna and Pfizer vaccines both require storage at low temperatures and utilize novel mRNA technology, they pose further challenges in countries that lack necessary infrastructure for manufacturing and for distribution of vaccine doses.
Ultimately, any waiver of TRIPS obligations that passes is likely to be modest in reach, perhaps reducing the procedural burdens currently surrounding the use of compulsory licensing. It is unlikely that Biden will somehow force U.S.-based vaccine manufacturers to turn over know-how. Overall, the greatest benefit of the Biden Administration’s support for the waiver is that it signals a departure from the prior approach of punishing countries facing health crises and that it might spur pharmaceutical companies to voluntarily increase out-licensing and donations of vaccines.
* Image above comes from the plague of Ashdod, 1630, Artist Nicolas Poussin
Nagui Mankaruse is a former Raytheon engineer and also a patentee. U.S.
Patent No. 6,411,512. While an employee, he sued Raytheon for employment discrimination and was later fired. (“Laid off due to a workforce reduction”). He later sued Raytheon in California state for various claims, including trade-secret misappropriation, breach of contract, discrimination, etc. California Code allows for a litigant to be defined as a “vexatious litigant” and Mankaruse was so-named. In one case he posted a $10,000 bond as required by the court (and lost the money after losing the case).
In the present case before the Federal Circuit. Nagui Mankaruse filed a pro se lawsuit against Raytheon alleging patent infringement and trade-secret misappropriation. Raytheon asked the US District Court (C.D.Cal.) to deem Mankaruse a “vexatious litigant” under Federal Law and require a bond before he proceeds with the case. The district court agreed and ordered Mankaruse to pay $25k bond and also seek pre-filing approval from the court of any future lawsuit. He did not pay the money and the case was dismissed. On appeal, the Federal Circuit has affirmed.
The Federal Rules of Civil Procedure do not speak to the “vexatious litigant” designation, but the courts have self-identified an inherent power to protect the judicial process that is also supported by the all writs act. Further, courts have power to order litigants to pay a security-deposit associated with potential future costs or sanctions.
[T]he court properly declared Mr. Mankaruse a vexatious litigant. And the bond amount of $25,000 was not excessive. The purpose of the bond is to provide a defendant security that, if it were to prevail in defending against a suit, would enable it to recoup its costs from a plaintiff, and the parties here do not meaningfully dispute that, at the time the bond was required, predicted costs of further litigation would have exceeded $25,000.
Slip Op. Mankaruse argued that he does not have $25k and so the requirement of the bond effectively excludes him from the court. On appeal, the Federal Circuit found no abuse-of-discretion even if it priced Mankaruse out of the market.
The USPTO recently issued U.S. patent No 10,999,961. That means the old odometer is about to roll over. On Tuesday, May 11, 2021, at 12:01 a.m., we can expect Patent No. 11,000,000.
Fast 101 lived up to its name. Soon after the case was filed, Judge Andrews (D.Del.) dismissed the complaint for failure to state a claim. You guessed it, the claimed invention is directed to an abstract idea and therefor invalid under 35 U.S.C. 101. Fast 101.
Fast 101’s five asserted patents are all part of a single family and claim “an invoiceless trading system that creates incentives for customers to pay suppliers within a predetermined period of time, such as a settlement period.” Basically, you get some discount or coupon (10% off at Saks) if you pay immediately or on-time. U.S. Patent Nos. 8,515,867, 8,660,947, 8,762,273, 9,811,817, and 10,115,098.
On appeal, the Federal Circuit affirmed finding (1) the “claims are directed to the abstract idea of an intermediated settlement system that employs a discount for early payment”; and (2) “the claims do not recite any inventive concept to render them patent eligible.”
In the briefing, Fast 101 argued that a number of factual issues preclude judgment as a matter of law. On appeal, however, the Federal Circuit only wrote that Fast 101’s arguments regarding factual allegations were not “identified with specificity.”
Now, Fast 101 has petitioned to the Supreme Court with two questions:
1. When analyzing patent claims for subject matter eligibility “as a whole,” does a court need to evaluate the differences between prior art allegations and the alleged inventive concept in order to fully appreciate the claim language selected by the patent drafter?
2. When the plaintiff alleges either that the claims are “directed to” an “improvement” or that the “inventive concept” is found in an “ordered combination” of claim elements, do the relevant steps of the Alice/Mayo Test become questions of fact because a technical analysis of prior art is required, thus precluding a 12(b)(6) dismissal?
3. Whether it is appropriate for a court to dismiss a complaint (and thus invalidate all asserted patents) using Rule 12(b)(6) without amendment to the complaint or oral argument by making factual findings and rejecting the plaintiff ’s detailed factual assertions inconsistent with Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007).
Truthfully, I don’t see the petition as having any shot at Supreme Court review, and am primarily writing about the case because of the cute name. I’ll note here that the company Fast 101 is an Australian that has been using the name for more than 20 years.
Zinus is the owner of U.S. Patent No. 8,931,123, which covers a particular bed frame that can assembled at home. A key feature of the invention is that back-side of the headboard includes a zippered compartment that can hold all of the pieces. Rather than simply a bed-in-a-box, it is a bed-in-a-headboard.
The district court first sided with the patent challenger and awarded sua sponte summary judgment of obviousness based upon a bed-in-a-box reference. That decision was vacated by the Federal Circuit in a 2018 non-precedential decision since Zinus lacked notice and an opportunity to present evidence prior to the summary judgment determination. On remand, the district court reversed itself — awarding summary judgment the other way — that the bed-in-a-box reference did not invalidate. The court entered final judgment, awarding $1.1 million in damages and issued a permanent injunction.
One problem: The president of Zinus (Colin Lawrie) had given false testimony regarding the prior art (Lawrie was testifying both as a fact witness and a testifying technical expert). In particular, Lawrie testified that he had never “seen a bed that was shipped disassembled in one box.” Later, Lawrie testified again and explained that his original testimony was “incorrect” but that at the time he was not intending to answer falsely. In particular, it turned out that a Zinnus-related company had purchased/sold hundreds of beds in boxes that had not been found by Cap’s prior art searchers. Lowrie’s later explanation was that he was focusing on the novel features of his company’s patent — a bed shipped disassembled with all of the components in the headboard. The district court found Lourie’s explanation “wholly implausible.”
After learning of the falsity, Cap filed a R. 60(b) motion — asking the court to reconsider the case based upon the patentee’s fraud on the court.
On motion and just terms, the court may relieve a party or its legal representative from a final judgment, order, or proceeding for the following reasons: . . . (3) fraud, misrepresentation, or misconduct by an opposing party;
FRCP 60(b). The district court complied and set-aside the judgment. The court found that Lawrie’s statements – as president of the company – counted as fraud by the party itself. On appeal, the Federal Circuit has affirmed.
Fraud on the court does not require that the party show that the outcome would change but-for the fraud. In this case, there is some dispute about whether the prior sales would invalidate the patent. Here, it was enough to show that the fraud was material to central issues in the case.
In its conclusion, the Federal Circuit reached back to the hey-day of patent invalidation/unenforceability decisions from the Supreme Court in holding that the rules regarding fraud-on-the-court are particularly important in the patent infringement context:
“It is the public interest which is dominant in the patent system.” Mercoid Corp. v. Mid-Continent Inv. Co., 320 U.S. 661 (1944). “The far-reaching social and economic consequences of a patent . . . give the public a paramount interest in seeing that patent monopolies spring from backgrounds free from fraud or other inequitable conduct and that such monopolies are kept within their legitimate scope.” Precision Instrument Mfg. Co. v. Auto. Maint. Mach. Co., 324 U.S. 806 (1945). The functioning of the patent system requires that “everything that tends to a full and fair determination of the matters in controversy should be placed before the court.” Keystone Driller Co. v. Gen. Excavator Co., 290 U.S. 240, 244 (1933) (quoting 1 Joseph Story, Commentaries on Equity Jurisprudence § 98 (W.H. Lyon, Jr. ed., 14th ed. 1918)). Here, Lawrie, Zinus’s president and expert witness, misrepresented his knowledge of highly material prior art. The district court properly declined to condone such conduct. The district court did not abuse its discretion in granting the motion to vacate the judgment under Rule 60(b)(3), and we affirm.
In the USA, COVID vaccines have been widely distributed and are now available at no cost almost on-demand for anyone seeking vaccination. Vaccines are not widely available in most other countries and global COVID cases are again at an all-time high.
And, people around the world don’t really trust that Pfizer, Moderna, and J&J are going to be serving them anytime soon. That is where the TRIPS waiver comes into play.
TRIPS: Countries around the world are asking for a waiver of some aspects of the international intellectual property (IP) agreement known as TRIPS as part of their response to the global COVID pandemic. This IP Waiver would be a first step toward countries and companies around the world manufacturing, distributing, and importing already developed vaccines, such as those now being distributed in the USA by J&J, Pfizer, and Moderna. Without the IP waiver, a country could suffer trade penalties if they permitted production or importation in violation of rights. The penalties are setup in a country-versus-country bases and do not allow for any private action by the individual rights holders. Thus, the TRIPS dispute resolution process does not provide Pfizer standing to sue India for violating IP rights guaranteed under TRIPS; Rather Pfizer could only lobby to the U.S. Government to bring a case, which traditionally might have done.
The U.S. Government is reportedly going to support the waiver proposal, although there are current ongoing negotiations over its actual text and content. Even without a WTO waiver, the US can also act unilaterally to announce that it would not bring any TRIPS cases associated with violations. This is a major change of policy under President Biden and his new U.S. Trade Representative Katherine Tai. In the past, the US has always been on the side of stronger IP rights and more enforcement.
Trade Secrets + Patents: In the short-run, the big difference is more about trade-secrets than patents. In the longer run, patents may become equally important.
If we take India as an example, right now there are no patents that have been granted in India tied directly to the COVID response. So, allowing India to waive its promise to enforce patents does not generate any short-term gains. Here, by short-term, I’m really talking about the next two years or so. Hopefully by that time the pandemic will be gone.
Trade secrets are different, most of the “intellectual property” wrapped up in COVID vaccine manufacture is currently being held as trade secrets. Obviously the companies manufacturing the product have the information. Many countries also have information that they received in the process of (1) funding the research and (2) determining whether to allow the vaccines to be distributed. International espionage is also a major element here that will put the information in the hands of various governmental agencies.
TRIPS require that countries protect trade secrets, and also keep secret the information provided as part of regulatory approval.
Article 39
1. In the course of ensuring effective protection against unfair competition … Members shall protect undisclosed information in accordance with paragraph 2 and data submitted to governments or governmental agencies in accordance with paragraph 3.
2. Natural and legal persons shall have the possibility of preventing information lawfully within their control from being disclosed to, acquired by, or used by others without their consent in a manner contrary to honest commercial practices (10) so long as such information: (a) is secret in the sense that it is not, as a body or in the precise configuration and assembly of its components, generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question; (b) has commercial value because it is secret; and (c) has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret.
3. Members, when requiring, as a condition of approving the marketing of pharmaceutical or of agricultural chemical products which utilize new chemical entities, the submission of undisclosed test or other data, the origination of which involves a considerable effort, shall protect such data against unfair commercial use. In addition, Members shall protect such data against disclosure, except where necessary to protect the public, or unless steps are taken to ensure that the data are protected against unfair commercial use.
The original proposed WTO waiver would have waived this trade secret protection requirement — a really big deal.
Waiver of the requirement does not force the companies to actually conduct any technology transfer — to provide the information to others who want to manufacture. BUT, it does open the door to governments sharing the information and also to a major WIKILEAKS style sharing of data and information. I believe that a whistle-blowing is actually quite likely because so many scientists and business insiders are wanting to do everything they can to spread the vaccine, but don’t believe that it will be permitted by the CEOs and Shareholders.
The other thing that this does is substantially shift the negotiation positions. This waiver signals to the current vaccine-makers to speed-up global access.
We’ll be looking for President Biden’s action on this as we move forward. As I mentioned above, negotiations are ongoing and I expect a focus on timelines (when does the waiver end) and scope (exactly what is being waived).
Here is the outcome of a twitter poll on prisoner lawsuits. The poll was prompted by the pending lawsuit of Tormasi v. Western Digital. Tormasi is a patentee and has sued Western Digital for patent infringement. The district court dismissed his case and that finding was affirmed by the Federal Circuit. Both courts held that as a prisoner in N.J. state prison, Tormasi has lost his right to conduct any business, including enforce his patent rights. The case is pending on a petition for writ of certiorari before the U.S. Supreme Court.
The Federal Circuit denied MFA’s petition for mandamus on a discovery dispute, and Chief Judge Prost but wrote an interesting short opinion explaining the panel’s reasoning. In the case, MFA has asserted its U.S. Patent No. 9,886,421 that covers a method of displaying “non-standard fonts” on your handheld device when accessing a network-document.
Alaska Airlines is the defendant in this case and submitted a discovery request of MFA’s prior settlement agreements. In civil litigation discovery requests are generally guided by three pillars: privilege, relevance, and proportionality.
FRCP 26(b)(1) Parties may obtain discovery regarding any nonprivileged matter that is relevant to any party’s claim or defense and proportional to the needs of the case.
Prior settlement agreements tend to be quite relevant to for any damages calculations, but MFA refused to comply with the request based upon privilege. Although the prior agreements had been shared between litigating parties, with the settlement agreement the parties became unified (at least with regard to the agreement) and the result is “common interest privilege.”
The magistrate judge ordered disclosure, confirmed by the district court, and now the Federal Circuit has refused to act on the mandamus petition (other than denying it). Most appeals are taken after final judgment in a case. Mandamus is a shortcut to get an immediate decision from an appellate court on an interlocutory issue (such as discovery disclosure), but is only rarely granted. The court notes that it will only grant mandamus in cases involving a “clear and indisputable right to relief [where there are] no other adequate means to attain the relief.” Slip op., quoting Cheney v. U.S. Dist. Ct. for D.C., 542 U.S. 367 (2004). Even where those elements are met, the district court also has discretion to decide whether granting the writ is “appropriate under the circumstances.” Id.
In its opinion, the court did not fully decide the issue of common interest privilege in the settlement context, but noted that the Federal Circuit has previously declined to recognize the form of privilege. See In re MSTG, Inc., 675 F.3d 1337 (Fed. Cir. 2012) (holding that pre-settlement communications were not privileged). The court went on to note that even if common interest privilege were adopted in this context, the parties must still show that the withheld documents are “communications by a client to an attorney made in order to obtain legal assistance from the attorney in his capacity as a legal advisor.”
The outcome here makes sense and also begs the question — why is MFA trying to hide its prior settlement agreements?
I’ll note that neither of these brands stand-up to the more popular Hollywood Brewing Co. (Hollywood, FL). 
