Wi-Fi One v. Broadcom: Mine-Runs and Shenanigans in Inter Partes Review

Patent, , , ,

by Dennis Crouch

Wi-Fi One v. Broadcom (Fed. Cir. 2017)

First en banc order of the year: the Federal Circuit will review the following question:

Should this court overrule Achates Reference Publishing, Inc. v. Apple Inc., 803 F.3d 652 (Fed. Cir. 2015) and hold that judicial review is available for a patent owner to challenge the PTO’s determination that the petitioner satisfied the timeliness requirement of 35 U.S.C. § 315(b) governing the filing of petitions for inter partes review?

en banc order. Briefs of amicus curiae may be filed without consent.

One Year Filing Deadline: Section 315(b) creates a statute of limitations for inter partes review proceedings – indicating that the petition for IPR must be filed within one-year of “the date on which the petitioner, real party in interest, or privy of the petitioner is served with a complaint alleging infringement of the patent.”  Here, Wi-Fi argues that Broadcom was in privity with entities involved in parallel district court litigation involving challenged patents — creating a time bar under 315(b).

The PTAB rejected Wi-Fi’s argument and call for discovery on the issue — holding that the “privy” requirement could only be met if Broadcom had the right to control the District Court litigation.

No Appeal: On appeal, the Federal Circuit affirmed – holding Section 314(d) prohibits appellate review of the institution issue.  In particular Section 314(d) states that

The determination by the Director whether to institute an inter partes review under this section shall be final and nonappealable.

In Achates, the court ruled that the one-year-deadline determination is an institution decision – “even if such assessment is reconsidered during the merits phase of proceedins and restated as part of the Board’s final written decision.”

In the background stands the 2016 Supreme Court decision in Cuozzo.  In that case, the Supreme Court gave effect to the no-appeal provision of 314(d).  However, the Supreme Court noted that unusual questions – such as constitutional questions – might still be appealable.  The foundation for the en banc review decision will be its interpretation of the following Cuozzo excerpts:

We conclude that [314(d)], though it may not bar consideration of a constitutional question, for example, does bar judicial review of the kind of mine-run claim at issue here, involving the Patent Office’s decision to institute inter partes review. . . .

Nevertheless, in light of §314(d)’s own text and the presumption favoring review, we emphasize that our interpretation applies where the grounds for attacking the decision to institute inter partes review consist of questions that are closely tied to the application and interpretation of statutes related to the Patent Office’s decision to initiate inter partes review. See §314(d) (barring appeals of “determinations . . . to initiate an inter partes review under this section” (emphasis added)). This means that we need not, and do not, decide the precise effect of §314(d) on appeals that implicate constitutional questions, that depend on other less closely related statutes, or that present other questions of interpretation that reach, in terms of scope and impact, well beyond “this section.” . . .  Thus, contrary to the dissent’s suggestion, we do not categorically preclude review of a final decision where a petition fails to give “sufficient notice” such that there is a due process problem with the entire proceeding, nor does our interpretation enable the agency to act outside its statutory limits by, for example, canceling a patent claim for “indefiniteness under §112” in inter partes review. Such “shenanigans” may be properly reviewable in the context of §319 and under the Administrative Procedure Act, which enables reviewing courts to “set aside agency action” that is “contrary to constitutional right,” “in excess of statutory jurisdiction,” or “arbitrary [and] capricious.”

The question then for court is whether we have a shenanigan here.

 

 

When is the PTO’s claim construction “reasonable”?

Patent, , , , ,

dagostinoimageD’Agostino v. Mastercard (Fed. Cir. 2016)

John D’Agostino’s patents cover processes for creating limited-use transaction codes to improve credit card security. U.S. Patent Nos. 7,840,486 and 8,036,988.  The approach basically keeps the card number out of the hands of the merchant (where most scamming occurs).  After being sued for infringement, MasterCard filed for inter partes review and successfully challenged many of the claims as obvious and anticipated by Cohen (U.S. Patent No. 6,422,462). On appeal, however, the Federal Circuit has vacated – holding that the PTAB’s claim interpretation was unreasonable.

Claim construction continues its reign as a messy hairball.  Rather than looking to the “proper” claim construction as defined by Phillips v. AWH, the PTAB defines claims according to their Broadest Reasonable Construction (BRI). That approach largely follows Phillips, but allows the PTO to select the “broadest” construction for any given limitation from the potential set of reasonable constructions.  The express intent here is to broaden the claims in order to make it easier to invalidate them during the IPR process. The idea then is that claims which survive the IPR-scope-puffery-gauntlet will be strong – giving confidence to judges and juries and fear into the hearts of infringers.

Reasonable is a Question of Law: In most areas of law ‘reasonableness‘ is considered a factual conclusion and conclusions regarding reasonableness are given deference on appeal.  The Federal Circuit however has ruled that the reasonableness of claim construction in the BRI context is reviewed de novo on appeal. Unfortunately, the court has not provided much helpful guidance in terms of knowing when a given construction is reasonable.  Their koan states that – although the BRI construction need not be the correct interpretation, the chosen BRI construction may not be “a legally incorrect interpretation.” (Quoting Skvorecz 2009).

Here, the question was whether the claims required a temporal separation between two communications.  The PTAB said no – since it was not expressly required and broadened the claims.   On appeal, the court looked at the claims and found that the express language did in fact require two separate communications: A first request that occurs “prior to” the merchant being identified  and then a second communication that includes the merchant ID.  According to the court, the PTAB’s interpretation (allowing for a single communication) was simply not reasonable.

On remand, the PTAB will decide whether the prior art the claim elements as they are more narrowly defined.

= = = = =

PTO Bound by its own Prior Construction?: Interesting issue ducked by the Federal Circuit involved the prior reexam of the patent where the PTO expressly narrowly construed the same claim scope. Court did not remark on the patentee’s suggestion here that PTO should be bound by its prior express constructions.  Seems reasonable to me.

 

Guest Post: TC Heartland and Statutory Interpretation

Patent, , , , , ,

By: Michael Risch, Professor of Law, Villanova University Charles Widger School of Law

After the certiorari grant in TC Heartland, Dennis solicited a blog post from anyone who thought the case was not a slam dunk. Always the contrarian, I took him up on the offer. In a prior blog post at my own blog, Written Description, I detail some of the history of the statute and highlight why I think that Fourco does not necessarily answer the question. Colleen Chien and I flesh out the history and interpretation a bit more in our article, which we’ve blogged about here in the past.

I should note that the outset that I favor TC Heartland’s position from a policy point of view. I’ve long said in a variety of venues (including comment threads on this very blog) that there are significant problems with any system in which so much rides on where the case is filed. And I think that’s true whether you think they are doing a great or terrible job in the Eastern District of Texas.

Now, on to the interpretive issues. In general, I favor the application of longstanding original norms of statutory interpretation unless there’s good reason to depart from them (see, e.g., my new paper on reasonable royalties). I think this is doubly true where no one ever challenged the original interpretation (see, e.g. the ridiculous claims that common law copyright grants a performance right to sound recordings, despite the fact that no one ever thought so in the history of common law copyright). But in this case, I don’t think one can simply rely on the fact that no one challenged VE Holdings for 25 years. After all, the Supreme Court just overturned our understanding of design patent damages despite a tacit understanding that was more than 100 years old. As I noted here, this bothered me a bit given my general views, but I also think it was the correct statutory interpretation.

But, as I noted in my prior blog post, I don’t think one can just say “Fourco controls.” As I noted there: “Stonite and Fourco were statutory interpretation problems…. [T]his is a statutory interpretation problem. But the statute in Fourco is different from the statute today and has been amended twice since. We cannot rely on a supposed ‘rule’ about a statute that no longer exists.”

Instead, we have to return to first principles. In Stonite, the court clearly held that the patent venue statute was a special statute, to be specially applied differently than the general venue statute.  After Stonite, the general venue statute was amended. But let’s look at the statutes of the time. Right out of Fourco:

Section 1400 is titled “Patents and copyrights,” and subsection (b) reads:

“(b) Any civil action for patent infringement may be brought in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business.”

Section 1391 is titled “Venue generally,” and subsection (c) reads:

“(c) A corporation may be sued in any judicial district in which it is incorporated or licensed to do business or is doing business, and such judicial district shall be regarded as the residence of such corporation for venue purposes.”

The court ruled that not enough changed since Stonite: we still had two separate venue tracks, and the patent statute was separate. The question now: is there a way for Congress to have changed this? could it have done so unintentionally? Let’s look at the 1988 change to 1391(c):

“For purposes of venue under this chapter, a defendant that is a corporation shall be deemed to reside in any judicial district in which it is subject to personal jurisdiction at the time the action is commenced.”

There is a key change here: 1391(c) no longer talks about a “separate” track where corporations can be sued “for venue purposes.” Instead, it says that “for purposes of venue under this chapter…” the definition of resides has now been set (emphasis added). The question is whether the Fourco precedent means that Congress had to do more than this to change the meaning of 1400(b) (which is in the same chapter). In VE Holdings, the Federal Circuit said no, it didn’t – that the plain language modified 1400, and, essentially, that Congress had said there were no more tracks here.

And that, I think, is the core question here. This is not a Supreme Court policy. This is the Court interpreting the statute. What did Congress do? In Stonite and Fourco, the Court said that Congress intended two separate tracks. The Federal Circuit says that in 1988, Congress merged those tracks by changing the definition of “venue” “under this chapter.”

The only other information we have is that in 2011, more than 20 years after VE Holdings, Congress expanded 1391 again. Section 1391(a) says the section applies to all civil actions “except as otherwise provided by law” (and as we detail in our article, the legislative history is clear that this referred to a list of statutes compiled by the ALI, and 1400 is not among them.) Further, 1391(c) expanded from “under this chapter” to “all venue purposes.” In other words, knowing that the Federal Circuit had interpreted 1391(c) and 1400 to be in a single track, Congress further expanded 1391 even more broadly and did nothing to clarify that no, really, “resides” in 1400(b) was really intended to continue to have the narrow definition. We know from many other contexts, in patent law and otherwise, that Congress is fully capable of correcting erroneous court interpretations, and the agglomeration of cases in Texas was known in 2011. Indeed, the AIA was passed in close proximity, and it included special provisions to deal with filings in Texas, but never once attempted to clarify that VE Holdings interpretation was wrong. For Congress to have expanded the venue statute and pass the AIA without addressing this point is particularly salient.

I, frankly, have no idea how this statutory interpretation issue will or even should come out. I don’t think this is a statutory slam dunk either way. TC Heartland is represented by outstanding lawyers who make outstanding arguments to the contrary. And the Court even granting cert. says something. You could dismiss all I’ve written with a wave of the hand: Fourco stands for the proposition that 1400(b) is separate and the current 1391(c) is no different in structure than the 1391(c) that faced the court then. I am troubled by this argument, but I can see how others might reasonably embrace it.

Patentlyo Bits and Bytes by Anthony McCain

Patent

Get a Job doing Patent Law                  

The “Right” to Challenge a Patent

Patent, , ,

by Dennis Crouch

The Supreme Court in Lear, Inc. v. Adkins (1969) held that a licensee can challenge a patent’s validity — overruling the prior presumption of licensee estoppel found by Automatic Radio Mfg. v. Hazeltine Research (1950).

In his recent article, Antitrust Economist (and lawyer) Erik Hovenkamp argues that the “right to challenge a patent” should also be an important consideration in antitrust analysis.  Hovenkamp defines these “challenge rights” as “the (statutory) rights of third parties to challenge patents as invalid or uninfringed.” Antitrust comes into play when a license or settlement agreement includes challenge restraints that would contractually prevent the exercise of the challenge rights.

There are obvious collateral problems with the way that Hovenkamp identifies the ability to challenge a patent as a “right” – especially if we call it a property right. However, for antitrust-contract consideration, forbearing the ability-to-challenge at least fits the definition of a legal detriment incurred by the promisee.

Although patent licenses are entitled to substantial safe harbor from antitrust regulations, Hovenkamp argues that challenge restraints should not be so entitled “but rather exist within antitrust’s domain” and barred when impermissible anticompetitive.

A problem with the argument is the way that Hovenkamp lumps-together validity and non-infringement challenges as roughly equivalent.  However, I see the two as substantially distinct.

Read the Paper: Challenge Restraints and the Scope of the Patent

The contractual waiver of challenge rights has risen in importance since the Supreme Court’s decision in MedImmune (2007) (licensee retains right to challenge patent without breaching) and creation of the Inter Partes Review system following enactment of the AIA (2011).  Prior to the availability of IPRs (and CBM/PRG), settlement of an infringement lawsuit would effectively preclude later validity challenges even without specific contractual terms. (Res Judicata).  However, those estoppel principles do not apply the same way in AIA proceedings.

Chicken?: Test your Patent Test Taking Skills 2017

Patent,

Introduction: Although not a poultry expert, Prof Crunch recently designed and built his own back-yard chicken coop (Coop) (started and completed in August 2016).  Among its special features, the coop includes a translucent roof to allow additional winter light, a hinged trap-door in the floor for removing waste, and a vertically sliding door opening to the chicken-run.  The vertically sliding door is operated by a pulley system and can be controlled while standing next-to the nesting box door.   Thus, a user can provide access to the chicken-run at the same time as collecting eggs. The coop is also designed to be long-and-narrow in order to fit through a 40-inch wide gate while also providing at least 21 square feet of floor area.  While Crunch expects that many of these features are not unique, he believes that the combination is unique.  Crunch is an idea-man. Rather than production is looking to sell plans and instructions for making his Coop.

Crunch drafts the following two patent claims in his patent application filed December 5, 2016:

I claim:

1.     A poultry coop having a length, width, and height, said poultry coop comprising:

a roof made of a translucent material with at least 50% light transmission;

a floor having a hinged trap door and having an area of at least 21 square feet;

a first side wall that includes a nesting box with an externally hinged door; and

a second side wall that includes a vertically sliding door operated via a pulley system; wherein said pulley system is operable by a user standing near said nesting box and wherein said coop is configured with a width of less than 40-inches.

2.     A set of instructions comprising: instructions for making the poultry coop of claim 1.

Question 1. (120 words).  Crunch had considered adding an additional limitation that precisely defines the configuration of the pulley system and its components.  What are major pros and cons of adding these additional limitations to claim 1 (considering primarily the doctrines of patentability and infringement)?

Question 2. (200 words) Are these claims patent eligible subject matter?

Question 3. (60 words) Provide a concise argument that claim 1 fails for lack of definiteness.

Question 4. (80 words) Should Crunch be concerned that his back-yard prototype constitutes prior art that could be used against his own patent application?

Question 5. (240 words) Assume the following for this question: (a) the back-yard prototype is not prior art; and (b) Crunch’s expectations are correct that while many of the patented elements are known in the prior art, the combination as a whole is unique.  What can we say about the novelty/nonobviousness of the claims.

Question 6. (25 words) Assuming claim 1 is patented but not claim 2. Does Crunch have an infringement claim against a third party who begins teaching others how to make the coop?

Patentlyo Bits and Bytes by Anthony McCain

Patent

Get a Job doing Patent Law                  

Lee v. Tam and A Basket of Deplorable People

Patent

something-slanted-this-way-comes-album-cover1Of the briefs filed in Lee v. Tam, the most entertaining is the Libertarian Cato Institute brief filed by my classmate Ilya Shapiro.  The official caption:

BRIEF OF THE CATO INSTITUTE AND A BASKET OF DEPLORABLE PEOPLE AND ORGANIZATIONS AS AMICI CURIAE SUPPORTING RESPONDENT

Cato Brief. Shapiro also rewrites the question presented: “Does the government get to decide what’s a slur?”  Cato’s core argument:

Trying to stamp out “disparaging” speech is both misguided and unconstitutional. No public official can be trusted to neutrally identify speech that “disparages.”

With that in mind, the case provides dozens of examples making its point.

In the case, the Department of Justice and USPTO are appealing the Federal Circuit’s determination that the disparagement provision of the Lanham Act, 15 U.S.C. 1052(a) is facially invalid as in conflict with the Free Speech Clause of the First Amendment of the US Constitution.  The provision at issue provides for the PTO’s refusal to register marks that consist of “matter which may disparage . . . persons, living or dead, institutions, beliefs, or national symbols, or bring them into contempt, or disrepute.”  Mr. Tam’s band name – THE SLANTS – was refused under this provision.

 

Before you read, beware that the Cato brief does include offensive and disparaging remarks. Read the: Cato Brief.

= = = = =

On ScotusBlog, Prof Tushnet expands on her recent N.D. Law Review Article and explains that “There is no neutral, non-speech-suppressing choice when it comes to trademark registration, and the Federal Circuit’s failure to recognize this fact distorted its analysis in fundamental ways.”  While the Federal Circuit aptly explained how the disparaging provision was a limitation on speech, it did not consider how granting TM rights also limit speech (government granted and enforced right to silence speech of others).   Although bold, the Cato brief lacks some amount of nuance and fails to consider this point.

 

Idenix v. Gilead: $2.5 Billion for Patent Infringement

Patent

Merck’s sub Idenix was just awarded $2.54 billion for Gilead’s infringement of its Hep-C treatment patents.  Asserted patents include Nos. 6,914,054, 7,105,499, 7,608,597, and 8,481,712..  D.Del. Case No.14-cv-00846-LPS.  Merck announced that a patent right “guarantees a period of return on investment [and as such] patent protection provides the research-based pharmaceutical and biotechnology industries with an incentive to invest in research and development.”

Verdict copied below:

VerdictRoyalty

Verdict Form

 

 

Default Judgment for Major Discovery Failures

Patent,

TileTechPatentby Dennis Crouch

United Construction was won on default judgment and was awarded a permanent injunction to bar Tile Tech from ongoing infringement of its U.S. Patent No. 8,302,356.  Although Tile Tech had participated in the case, it had missed many discovery deadlines and had produced only two document – both of which were nonresponsive.  The district court issued an order to comply with a warning that failure to comply would result in default judgment.  Tile Tech did not respond to the order and the court then entered default judgment. (Tile Tech had also destroyed evidence …)

The patent at issue is covers a support pedestal used to secure tiles elevated above a flooring base.  Some folks use these to support a roof-top deck, for instance. (Tile Tech’s Website showing use).

On appeal here the Federal Circuit has affirmed – finding that the district court did not abuse its discretion in issuing the default judgment (following 9th Circuit law)

Here, the District Court gave ample warning to Tile Tech in its Order to Compel that it would enter default judgment if discovery responses were not forthcoming. . . . The District Court’s opinion demonstrates its thorough consideration of the Malone factors leading to the ultimate decision not to impose lesser sanctions in this case, a decision which we find was not an abuse of discretion. As the District Court explained, “[w]here a party so damages the integrity of the discovery process that there can never be assurance of proceeding on the true facts, a case dispositive [remedy] may be appropriate.”

Quoting Conn. Gen. Life Ins. Co. v. New Images of Beverly Hills, 482 F.3d 1091, 1097 (9th Cir. 2007).

The Federal Circuit’s one interpretative change involved a portion of the injunction that barred Tile Tech from using using images of the patentee’s products in “any marketing material.”  This portion of the injunction was not based upon the infringement claim but instead upon the parallel unfair competition claim.  Still, Tile Tech argued that the injunction was over-broad because it would bar legal activities such as competitive advertising where there is no likelihood of confusion. On appeal, the Federal Circuit agreed with Tile Tech that such a prohibition would be over broad.  However, instead of amending or vacating the injunction, the Federal Circuit determined that the injunction should simply be narrowly interpreted: “To the extent that in the future Tile Tech’s advertising clearly distinguishes its product from that of United’s in a comparative advertisement, in a way that is not ‘an act of unfair competition,’ we read the injunction to not prohibit such uses.”  With that limitation, the injunction fit within the proper bounds.

 

Goodbye E.D.Texas as a Major Patent Venue

Patent,

by Dennis Crouch

In a case with the potential to truly shake-up the current state of patent litigation, the Supreme Court has granted certiorari in the patent venue case TC Heartland v. Kraft Food (SCT Docket No. 16-341).  An 8-0 reversal of the Federal Circuit is quite likely, although my headline is likely premature.

The case centers on the patent litigation venue statute which states rather simply that patent infringement actions “may be brought” either (1) in “the judicial district where the defendant resides”; or (2) “where the defendant has committed acts of infringement and has a regular and established place of business.” 28 U.S.C. § 1400(b).  Under any normal interpretation of the provision, very few cases would be amenable to proper venue in the Eastern District of Texas because almost none of the accused infringers “reside” in that district or even have a place of business in that district.  However, the “normal” interpreation was seemingly thrown under the bus by a congressional provision that expands the definition of a corporation’s residence to all districts where the company has minimum contacts.  See 28 U.S.C. § 1391.  For its part, the Federal Circuit found that Section 1391 applies to expand the scope of 1400(b) to all for, inter alia, the filing of infringement lawsuits in the Eastern District of Texas.

It turns out that the Supreme Court has already decided almost this exact case in Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222 (1957). In Fourco, the Court held that “§ 1400(b) is not to be supplemented by § 1391(c), and that as applied to corporate entities, the phrase “where the defendant resides” in § 1400(b) “mean[s] the state of incorporation only.” (quoting from the certiorari petition). Although the provisions have been amended since 1957, non of the amendments appear to warrant such a dramatic change in the Supreme Court’s analysis of the statutes.

In its 1990 VE Holdings decision, the Federal Circuit rejected Fourco based upon some reasoning, but without any good reasons.  There are two reasons to stick with the Federal Circuit’s 26 year old rule: (1) The rule is 26 years old and well settled with almost every patents now in force applied-for after the rule change.  At this point, it is Congress’s turn (not the courts) to amend the statute if its wants a policy change. (2) The actual reasoning of Fourco is quite dodgy – not the most stellar statutory interpretation.  If the Supreme Court actually takes a fresh look at the statute it may well overturn Fourco of its own accord.   Still, I expect that these arguments will not carry the day and instead that the Supreme Court will reverse the Federal Circuit.  The result would then be a major redistribution of patent infringement cases.

More Reading:

Patent Venue at the Supreme Court: Correcting a 26 Year Old Legal Error

Guest Post: What Would Happen to Patent Cases if They Couldn’t all be Filed in Texas?

Guest Post: Recalibrating Patent Venue

TC Heartland Law Professor Amicus Brief

Guest Post: The Problematic Origins of Nationwide Patent Venue.

 

 

 

Returning to our Roots with Reasonable Royalties

Patent

A new draft paper by Professor Michael Risch (Un)Reasonable Royalties positions itself as a major reconsideration of the way that we calculate damages in patent cases.  This revolution has been brewing in academic circles, but I expect the spillovers into case law will be coming soon.  Over the past few years the Federal Circuit has pushed for more explicit discussion and explanation of damages. (See Lucent and Uniloc).  However, Risch argues that the result has been a “piling” of “rigid rules” rather than economic rationality.  (This rule versus rationality debate seems to keep coming up…)

Risch favors the economic and practical justification for the reasonable royalty floor for patent damages, but argues that courts have departed widely from the doctrine’s century-old origin — in ways that have “led to both over- and under-compensation.”  Big targets for Risch are the hypothetical negotiation and the Georgia-Pacific factors. He writes:

The hypothetical negotiation is a staple of reasonable royalty analysis by parties and courts, but it is not—as currently applied, at least—consistent with the traditional reasonable royalty framework. . . .

The [traditional] willing buyer/seller analysis might sound the same, but it is not. The negotiation includes many extraneous elements that have no place in a damages calculation, like bargaining power and a guarantee of profit. Furthermore, a focus on negotiation implies that the value of a patent must be fixed before the infringement, and successful patents should go uncompensated if the success was a surprise. Neither of these was contemplated in early cases. . . .

[R]easonable royalties are supposed to be compensatory in nature. The question isn’t what the parties would have negotiated, it is what the appropriate amount of compensation should be. . . . And that is hard enough; trying to also speculate [particulars such as] whether the parties would have negotiated a lump sum or a running royalty adds a layer of complexity that is unnecessary.

I am drawn to Risch’s approach of discarding rules for the sake of rules – especially when the rules are piled in ways that are complex and contradictory.  I like to keep in mind that a jury of non-experts will actually be deciding the damage values and so the approach also needs to be simple and logical enough for that body to rule upon.  Although my justification is that the law needs to be simplified for the jury –simple and logical rules benefit us in myriad ways.

For litigators – Professor Risch also does a nice job of explaining contradictions between current practice and older case-law that may well be ripe for court challenge.

Read the article: (Un)Reasonable Royalties

Yes, All Elements Rule Still Applies to Infringement

Patent,

Medgraph v. Medtronic (Fed. Cir. 2016)

Medgraph’s claims are directed to a set of methods “for improving and facilitating diagnosis and treatment of patients.” See U.S. Patent 5,974,124 and U.S. Patent 6,122,351.   The problem is that the claims require actions by both the computer system and also a patient/doctor.  This claim structure directly runs headlong into traditional requirement for direct infringement of a patent – that all steps of the claim be performed-by or attributable-to a single entity.

In its 2015 decision, the district court ruled that Medtronic could not be liable for infringement because there was no “showing that Medtronic itself directly infringed the method claims or that it acted as a ‘mastermind’ by controlling or directing anyone else’s direct infringement.” Citing Akamai Techs., Inc v. Limelight Networks, Inc., 786 F.3d 899 (Fed. Cir. 2015) (decision on remand from SCT).

Following the district court’s decision in this case, the Federal Circuit issued a per curiam en banc decision broadening the scope of potential attribution. Akamai Techs., Inc. v. Limelight Networks, Inc., 797 F.3d 1020 (Fed. Cir. 2015).  In this most recent en banc decision, the court held that the “single entity” theory of direct infringement can also be extended “when an alleged infringer conditions participation in an activity or receipt of a benefit upon performance of a step or steps of a patented method and establishes the manner or timing of that performance.”

On appeal here, Medgraph argued for remand to allow the district court to consider infringement under this broader theory.  However, the Federal Circuit rejected that suggestion.  The court held instead that Medgraph’s case fails on any and all theories of direct infringement because Medgraph failed to produce evidence that the missing steps were actually performed by the patient and doctor. In addition, Medgraph failed to identify evidence fitting within the new broader attribution guidelines.

“The district court also correctly concluded that Medtronic was not liable under a theory of indirect infringement, because indirect infringement is predicated on direct infringement. That rule was also unaffected by Akamai V, so the outcome would, again, not change if we were to vacate and remand. ”

Dismissal Affirmed

= = = =

I was curious how the patentee here thought it might win without proving infringement of each element. In its reply brief, Medgraph explained that (1) Medtronic instructed users to practice the claim steps; and (2) Medtronic ‘admits’ that about 20% of patients used the system in an infringing manner.  This admission came from Medtronic’s appeal brief that stated “the record shows that approximately 80 percent of customers in fact use the system in this non-infringing way.”  This evidence coupled with its expert testimony are, according to Medgraph, enough to prove infringement. See Vita-Mix Corp. v. Basic Holding, Inc., 581 F.3d 1317 (Fed. Cir. 2009) (circumstantial evidence sufficient); Moleculon Research Corp. v. CBS, Inc., 793 F.2d 1261, 1272 (Fed. Cir. 1986) (“[c]ircumstantial evidence is not only sufficient, but may also be more certain, satisfying and persuasive than direct evidence.”).

= = = =

Although the Federal Circuit’s most recent Akamai decision loosened the knot a bit on the strict single-entity requirement, it remains a tough requirement.  Here, for instance, it does not appear to be enough that an accused infringer instructed its customers on how to use its system in a way that infringes.  Rather, liability under Akamai will only be created if the alleged infringer requires that those steps be followed or receives some benefit upon their performance.

Power Integrations v. Fairchild Semiconductor

Patent, ,

By Jason Rantanen

Power Integrations, Inc. v. Fairchild Semiconductor International, Inc. (Fed. Cir. 2016) 15-1329.Opinion.12-8-2016.1
Panel: Prost, Schall, Chen (author)

This appeal is the latest in a long-running patent saga between Power Integrations and Fairchild.  Each asserted patents against the other; each won as to liability against the other. The most interesting aspect of this opinion is its discussion of inducement, in which the court rejects a jury instruction on inducement that expressly stated that the third party’s direct infringement “need not have been actually caused by the [accused inducer’s] actions.”

Background:  The complexity of this appeal is illustrated by the opinion’s 8 bullet-point summary of its holdings.   The jury found that Power Integrations’ Patent Nos. 6,107,851 and 6,249,876 were not anticipated and were directly and indirectly infringed by Fairchild and that Fairchild’s Patent No. 7,259,972 was not obvious and was infringed by Power Integrations under the doctrine of equivalents (but was not literally infringed or indirectly infringed by Power Integrations).  The jury also found Power Integrations’ Patent No. 7,834,605 neither anticipated nor obvious.  Following trial, the district court granted judgment as a matter of law that Fairchild directly infringed this patent.  The district court granted a permanent injunction against Fairchild and declined to grant an inunction against Power Integrations.

Fairchild appealed and Power Integrations cross-appealed.

Inducement: The indirect infringement issue involved 35 U.S.C. § 271(b), a one sentence provision at the heart of several significant opinions over the last few years.  Section 271(b) reads “[w]hoever actively induces infringement of a patent shall be liable as an infringer.”  Basic elements of an inducement claim include some type of action by the alleged inducer to encourage acts by a third party, an awareness that the third party’s acts would infringe a patent, and actual direct infringement by a third party.

The full jury instruction takes up almost a page and a half of the opinion.  The critical passage on appeal reads:

In order to establish active inducement of infringement, it is not sufficient that others directly infringe the claim. Nor is it sufficient that the party accused of infringement was aware of the acts by others that directly infringe. Rather, in order to find inducement, you must find that the party accused of infringement intended others to use its products in at least some ways that would infringe the asserted claims of the patent. However, that infringement need not have been actually caused by the party’s actions. All that is required is that the party took steps to encourage or assist that infringement, regardless of whether that encouragement succeeded, or was even received.

Slip Op. at 22 (emphasis in opinion).  The problem, in the court’s words, was that “[t]his instruction left the jury with the incorrect understanding that a party may be liable for induced infringement even where it does not successfully communicate with and induce a third-party direct infringer.”  Id. at 23.  Rather, inducement “requires successful communication between the alleged inducer and the third-party direct infringer.”  Id.  Quoting from Dynacore Holdings Corp. v. U.S. Philips Corp., 363, F.3d 1263, 1274 (Fed. Cir. 2004), the court observed “[w]e have further held that “[t]o prevail under a theory of indirect infringement, [plaintiff] must first prove that the defendants’ actions led to direct infringement of the [patent-in-suit].”  Id. at 24.  Thus, “a finding of induced infringement requires actual inducement.”  Id.  In terms of doctrine, the court situates this inquiry in the requirement of inducement itself.

Although the court does not come right out and say it, this is fundamentally a theory of causality in inducement.  In other words, it is not enough that the alleged inducer engage in acts intended to result in direct infringement by a third party and that the third party directly infringes.  At a minimum, there must be a successful communication between the two.  Attempted inducement is not enough; there must be “actual inducement.”  This interpretation  is further bolstered by the court’s rejection of the language in the jury instruction stating that “infringement need not have been actually caused by the party’s actions.”   That said, despite the invitation to address causality presented by the jury instruction, the court conspicuously avoids describing its holding in those terms.  Nowhere outside of the jury instruction and a few unrelated places does a permutation of “caus” appear.

Even as it recognized a requirement that there be some link between the acts of the alleged inducer and the directly infringing acts,  however, the Federal Circuit was not willing to go so far as to say that Fairchild did not induce infringement  as a matter of law.  After rejecting Fairchild’s argument on the lack of sufficiency of the evidence generally, the Federal Circuit dismissed its argument on nexus between Fairchild’s acts and the ultimate direct infringement.  Fairchild contended

that Power Integrations introduced evidence of only three acts of direct infringement—sales of an HP printer, Acer notebook computer, and Samsung notebook computer containing infringing Fairchild controller chips—and that Power Integrations was required to present evidence that Fairchild specifically induced HP, Acer, Samsung, or the retailers from which Power Integrations purchased the infringing products to incorporate the infringing controller chips into products bound for the United States.

Id. at 30.  The Federal Circuit rejected the argument that such specificity was required in the nexus.  “While none of [Power Integrations’  evidence can be directly linked to the particular HP printer, Acer notebook computer, or Samsung notebook computer Power Integrations
introduced at trial as representative acts of direct infringement, it was sufficient to allow the jury to find that Fairchild had induced its customers (including HP, Acer, and Samsung) to infringe as a class. This is all that we require.”  Id. at 31.  “Indeed, we have affirmed induced infringement verdicts based on circumstantial evidence of inducement (e.g., advertisements, user manuals) directed to a class of direct infringers (e.g., customers, end users) without
requiring hard proof that any individual third-party direct infringer was actually persuaded to infringe by that material.”  Id.

Thus, although some evidence of a link between inducer’s acts and the directly infringing acts is required, it need not be with the level of specificity that might need to be shown in other contexts.  Absolute precision of proof as to the machine in the courtroom is not necessary.  And yet, some proof of a link must be present.  Here, the court concluded, there was sufficient evidence for a reasonable jury to find that necessary link.

At this point you might be asking why all of this mattered, given that Fairchild did not appeal the jury verdict that it directly infringed the patents.  The reason is because the finding of inducement greatly expanded the scope of Fairchild’s liability beyond its direct infringement in the United States.  Based on its decision on inducement, the Federal Circuit vacated the district court’s grant of Power Integrations’ motion for a permanent injunction against Fairchild.  Of course, given that these issues are being remanded to the district court, it is conceivable that the outcomes of both could ultimately be the same.

Practice commentary: The opinion contains a simple articulation of the requirements of an inducement claim that rearranges the conventional elements.  Near the beginning of its discussion of the jury verdict, the court describes the elements as follows:

In other words, Power Integrations was required to prove that: (1) a third party directly infringed the asserted claims of the ’851 and ’876 patents; (2) Fairchild induced those infringing acts; and (3) Fairchild knew the acts it induced constituted infringement.

In my view, this version is much easier to understand than the usual way inducement is articulated.

Anticipation: The court’s review on anticipation of the ‘605 patent is also interesting as an example of a jury verdict of no anticipation being overturned on appeal.   Here, Fairchild bore a double-burden on Power Integrations ‘605 patent: not only did it bear the burden of proving that the presumptively-valid claims were anticipated, but it also had to convince the Federal Circuit on appeal that the jury’s finding to the contrary was unsupported by substantial evidence.  Fairchild was helped on appeal by the relative narrowness of the disputed evidentiary issue.  On that particular issue, the court concluded that Power Integrations’ own expert had testified that the critical element required by the claims was disclosed by the prior art reference.

Doctrine of equivalents: The main point here is Power Integrations’ successful claim vitiation argument.

Edit: Added the opinion itself.

JobDiva: Service Mark for Software

Patent

JobDivaby Dennis Crouch

Here, the Federal Circuit rejects the TTAB’s requirement for “something more” than selling software in order to protect a service mark. The court instead redirects the inquiry to ask whether provisioning of the software provides the indicated service. 

In re JobDiva (Fed. Cir. 2016) [JobDiva]

Service Mark: JobDiva holds two registrations for its name JobDiva for use in job placement services and computer services for facilitating job placement.

Tables Turned: After JobDiva brought an action to cancel its competitor’s JobVite mark, the Board turned the table and instead cancelled JobDiva’s marks — finding the marks abandoned because JobDiva had failed to prove use in connection with the appropriate classes.  Namely, although JobDiva did use its mark to identify its software — selling software is not providing a job placement service.

A term that only identifies a computer program does not become a service mark merely because the program is sold or licensed in commerce. . . . Such a mark does not serve to identify a service unless it is also used to identify and distinguish the service itself, as opposed to the [computer] program.

The Lanham Act provides for cancellation on grounds of abandonment. “Nonuse for 3 consecutive years shall be prima facie evidence of abandonment.”  Adding to this, the Federal Circuit has previously ruled that the abandonment question should focus on whether “the mark has not been used for the goods or services specified in the registration” during that time period. See On-Line Careline, Inc. v. Am. Online, Inc., 229 F.3d 1080 (Fed. Cir. 2000).

Software Service: On appeal here, the Federal Circuit has vacated the abandonment decision – holding that the Board asked the wrong question about JobDiva’s use.

The Board required JobDiva to prove that it used its marks on more than just software because its software sales alone could not, in the Board’s view, constitute personnel and recruitment services. We disagree with the Board’s approach. The proper question is whether JobDiva, through its software, performed personnel placement and recruitment services and whether consumers would associate JobDiva’s registered marks with personnel placement and recruitment services, regardless of whether the steps of the service were performed by software.

The decision here makes sense and takes a practical approach that fits with the ongoing trend of providing software as a service rather than a product.

Coming in 2017: Reforms to Copyright Law and the Copyright Office

Patent

First proposal:

  • While keeping the Copyright Office within the Legislative Branch, separate it from the Library of Congress.  I have previously suggested the more dramatic action of joining the Copyright Office with the Patent & Trademark Office to allow for better coordination of rights. 
  • Modernize copyright office technology. PLEASE DO THIS! 
  • [Copyright-Reform.pdf]

Mike Masnik (Techdirt) writes: Congress Proposes First Stages Of Copyright Reform, And It’s Not Good.