Wrongly Affirmed Without Opinion: At the Supreme Court

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Similarly in Broadband ITV v. Hawaiian Telecom, respondents have waived their right to respond to Broadband’s challenge to quick-look eligibility denials.

Supreme Court: Challenging Quick-Look Eligibility Denials

The court here holds that claim construction “prosecution disclaimer” applies to statements made by the patentee in a preliminary response to an IPR proceeding.  This holding makes sense and was entirely expected — however it also sets yet another trap for patentees seeking to enforce their patent rights.

The appeal here involves Aylus infringement lawsuit against Apple that alleges AirPlay infringes U.S. Patent No. RE 44,412.  After Aylus sued Apple for infringement, Apple responded with two inter partes review (IPR) petitions challenging all of the patented claims.  However, the Director (via the PTAB) refused to grant the petition as to several claims, including 2, 4, 21, and 23.

Back in the litigation, Aylus amended its complaint to only allege infringement of those non-instituted claims.  In its subsequent motion for summary judgment of non-infringement, Apple argued for a narrow interpretation of the claimed use of “CPP logic . . . negotiate media content delivery between the MS and the MR.”  As evidence for the narrow interpretation, Apple and the district court focused on statements by the patentee (Aylus) in its preliminary response to Apple’s IPR petition.  On appeal here, the Federal Circuit has affirmed:

[S]tatements made by a patent owner during an IPR proceeding, whether before or after an institution decision, can be relied on to support a finding of prosecution disclaimer.

Those of us closely following IPR doctrine will raise some hairs at this statement since the Federal Circuit has previously held that “IPR does not begin until it is instituted.” Shaw Indus. Grp., Inc. v. Automated Creel Sys., Inc., 817 F.3d 1293, 1300 (Fed. Cir. 2016).   Here, the court recognized that general holding, but found that it dies not apply “for the purposes of prosecution disclaimer.” Rather, for this situation, the court found that the proceedings begin with the IPR petition.

If I were writing the opinion, I would have come to the same result – that statements by the applicant to the PTO can form prosecution disclaimer.  However, I would have reached the conclusion without upsetting and further complicating the definition of an IPR proceeding.

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An oddity of all of this is that the Federal Circuit appears quite concerned in this case about the linkages between claim construction during inter partes review and subsequent litigation, but previously ignored that issue during the prior cuozzo debate.   My take has long been that we should be applying the actual claim construction in both situations.

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This case focused on prosecution disclaimer and the finding of a clear and unmistakable disclaimer of claim scope.  However, the same approach should also apply in applying IPR statements as primary intrinsic evidence used in the claim construction analysis even when short of disclaimer.

1. May patentable subject matter under § 101 properly be assessed by over-generalizing patent claims to a “gist”?
2. May a district court properly assess patentability under § 101 prior to authoritatively construing the patent’s claims?
3. May a district court adjudicating a motion for judgment on the pleadings on § 101 patentability grounds properly consider questions of patent enablement under 35 U.S.C. § 112?

We have an interesting case here where the district court expressly stated its approach to Mayo/Alice Step 1 is to distill the claimed invention to its “gist” and ask whether that gist is an abstract idea.

In its lawsuit against Google, Blue Spike asserted five related patents: U.S. Patent Nos. 7,346,472 (the “’472 Patent”), 7,660, 700 (the “’700 Patent”), 7,949,494 (the “’494 Patent”), 8,214,175 (the “’175 Patent”), and 8,712,728 (the “’728 Patent”).  Looking at asserted claim 1 of the ‘472 patent as an example: the claim requires comparing a query signal with a reference signal.  The process involves creating an “abstract” (essentially a hash or digital fingerprint) of each signal that uses “perceptual qualities” of each signal, and then comparing those abstracts.

The district court dismissed the case on the pleadings – holding that the asserted claims were all invalid as a matter of law for effectively encompassing an abstract idea.  On appeal, the Federal Circuit affirmed without opinion.

In its decision, the district court expressly “distill[ed] the gist of the claim[s]” and found that the gist of the claims is to “model, on a computer, ‘the highly effective ability of humans to identify and recognize a signal’ [using a method that] mirrors the manner in which the human mind undertakes the same task.” (quoting the patent specification).   Essentially, the court found, all of the claims are directed to the abstract idea – “the idea of comparing one thing to another.”  Moving on from there, the court recognized the computer implementation, but found no inventive concept in that implementation.  The patentee argues here that the court erred in its gist analysis, and compounded that error by failing to construe the claims prior to the gisting process:

[M]any trial courts have adopted the practice of reducing patent claims to a highly general “gist,” then assessing that gist to determine whether it is so abstract as to be unpatentable. Because distillation to a “gist” inherently abstracts from a patent’s specific claims, this approach builds in a bias towards invalidity. . . . Deciding eligibility before claim construction exacerbates the tendency noted above to ignore a patent’s specific claims and over-generalize its “gist.”

The petition also spends substantial time discussing the Federal Circuit’s new status quo of issuing a substantial number of no-opinion judgments under Rule 36:

[T]he Federal Circuit appears unwilling to shoulder the responsibility for clarifying the Alice/Mayo analysis. That court’s use of summary Rule 36 affirmances seems to be both commonplace and increasing. This is particularly true in cases concerning patentable subject matter under § 101. One recent report identified a dozen Federal Circuit appeals raising this issue decided by Rule 36 affirmances in 2016 alone. . . . [P]recedential opinions in § 101 cases are important not just for trial courts reviewing issued patents, but also for the PTO’s examiners who must determine whether to issue patents in the first place. When the Federal Circuit fails to write a written opinion, it fails to provide the USPTO with necessary examples to use in granting patent applications.

In this particular case, the R.36 judgment is not a law violation (since the case arose from the district court rather than the PTO) but should also not be an excuse for failing to properly resolve the case – certainly the issues raised are not resolved and there is need for explanatory precedent.

[Blue Spike Petition (April 6 2017)]

The Federal Circuit has denied Leak Survey’s petition for rehearing en banc on the issue R.36.  Perhaps ironically, the court has continued to remain silent on its justification for issuing judgments without opinion.  Although the Supreme Court has generally empowered appellate courts to issue summary affirmances without explaining reasoning for their judgment, the statutes provide special rules for cases arising from patent and trademark cases.  On the patent side, 35 U.S.C. § 144 requires the Federal Circuit to hear appeals from the PTO, “review the decision,” and, once a decision is reached “the court shall issue to the Director its mandate and opinion.”

First Rehearing Request Challenging No-Opinion Judgments

I argue (as did Leak Survey) that Section 144 requires the court to write opinions in these cases — as was the longstanding standard practice of both the Federal Circuit and its predecessor court the CCPA before the 1989 internal rule changes by the Federal Circuit.

In my article on the topic, I recognize the argument’s weakest point: since the statute requires issuance of “its opinion”, the requirement might only only kick-in if the court actually has an opinion.  In his thoughtful challenge to my approach, Matthew J. Dowd argues that the statute only requires issuance of an opinion once such an opinion exists — but absent an opinion, the statute only requires issuance of the mandate. Matthew J. Dowd, An Examination of the Federal Circuit’s Use of Rule 36 Summary Affirmances (Feb. 19, 2017). Thus, Dowd would clarify that the statutory requirement that, after reviewing the case, “the court shall issue … its … opinion” only kicks-in if the court decides to write an opinion.  I think Dowd is wrong.

In my article, I write:

For a patentee, providing the written description is part of the quid pro quo exchange for receiving patent rights. In the same way, forming a reasoned decision is the role of every appellate court, and the statute simply requires that those reasons be written and released.

Reaching a judgment in each merits case is both an inherent duty of the appellate court and a statutory requirement, and that judgment requires the court to at least form a reasoned opinion that justifies the outcome. In other words, the court must make its judgment based upon the law at hand applied to the facts presented. Even when issuing a judgment without releasing an opinion, the court must have formed reasons for its judgment that are at least self-satisfyingly sufficient. Anything less would be a reversible arbitrary judgment and likely a violation of the due process rights of the parties.

The statutory requirement of issuing “its … opinion” is not an illusory request that can be avoided by simply not writing an opinion. Rather, the statute requires a transformation of the court’s internal decision justifications into a document that becomes part of the record of the case as it returns to the PTO.

By now, the court has had many opportunities to justify its approach.  It is now becoming more than simply ironic that the Federal Circuit continues to avoid explaining its justifications for a lack of transparency.

In this nonprecedential decision by Judge Chen, the Federal Circuit has partially-vacated and remanded – finding that the Board (PTAB) had failed to explain its obviousness decision.

Although obviousness is a question of law, essentially all of the building blocks to that conclusion are factual queries.  The result then is that obviousness decisions by the PTAB are difficult to overturn on appeal – since an agency’s factual findings are given substantial deference on appeal.  Unlike a jury, the PTAB has to actually make the necessary factual findings that lead to its obviousness findings.  In addition, the PTAB must explain how the evidence-presented led to its particular conclusion:

First, the Board must “make the necessary findings and have an adequate ‘evidentiary basis for its findings.'” [Quoting In re Nuvasive (Fed. Cir. 2016), internally quoting In re Lee (Fed. Cir. 2002)].  Second, the Board “must examine the relevant data and articulate a satisfactory explanation for its actions including a rational connection between the facts found and the choice made.” Id.

Thus, although a low standard, the PTAB must have at least a rational basis for connecting the evidence to its factual findings.  In its analysis, the Board must also consider counter-arguments.

In this case, the Board “failed to articulate any reasoning for reaching its decision” as to claims 3, 8, 14-15, 17, 19 22-32, and 34-36.  (emphasis in original). Considering the PTAB Decision [IPR2014-01278-FWD-20160121], the Court looks to be absolutely correct that it fails to particularly explain the invalidity of these claims.

There continues to be an internal debate within the Federal Circuit on how the PTAB should handle IPR Failures by the PTAB.  Here, the court vacated and remanded for further consideration.  Other panels have simply reversed without providing the PTAB opportunity to correct its errors (if possible).

Focus on Procedure: Judge Chen’s decision here was careful to focus on procedure since the substance is almost totally lacking.  The ‘222 Patent’s Claim 1 is directed to a communications system whose invalidity was easily affirmed by the Federal Circuit.  Disputed Claim 3 depends from Claim 1 and adds the requirement that “communications between individuals comprise telephone calls.”  Without any prior art, one skill in the art of communications systems would find it obvious to use a telephone to communicate.  Further, the actual prior art relied upon by the Board (U.S. App. Pub No. 2004/0081296) discloses telephones for this purpose.  All this also helps to explain the remand.

In a new petition for writ of certiorari, patent attorney and inventor Michael Shore has challenged the propriety of the Federal Circuit’s continued approach of affirming patent office decisions without opinion. In a forthcoming article titled “Wrongly Affirmed Without Opinion” (Wake Forest Law Review), I raise the previously unnoticed requirement of 35 U.S.C. § 144 that the Federal Circuit issue an opinion in appeals from the Patent Office (PTO).  Although the Supreme Court generally permits its lower appellate courts to issue summary affirmances, I argue that the Patent and Trademark statutes take precedence in this particular situation.  The issue has come to a head with the large number of no-opinion judgments being issued by the court since the creation of the system of administrative patent trials (IPR/PGR/CBM).

Running with that argument, Shore raises the following three questions:

1. Does the Federal Circuit’s affirmance without opinion of the PTO’s rejection of Petitioner’s patent application violate 35 U.S.C. § 144?
2. Does the statute’s requirement that the Federal Circuit issue a “mandate and opinion” govern over Federal Rule of Appellate Procedure 36’s general permission for appellate courts to render judgment without opinion?
3. Assuming that the Federal Circuit can issue an affirmance without opinion despite the language of § 144, does the Federal Circuit act within its discretion by issuing an affirmance without opinion that does not meet any of the criteria listed in Fed. Cir. R. 36(a)-(e)?

[Read the petition: 2017_WL_1406097]

Certainly, if the PTAB had issued its judgment without opinion, the Federal Circuit would have immediately vacated that decision. However, the appellate court suggests that the rules of opinion writing should not be self applied.

In the underlying case, Shore’s patent application (with co-inventor Charles Attal – founder of Austin City Limits Festival) covers a method for creating a custom video track of a live musical performance.  The claims were rejected as obvious – affirmed by the PTAB.  On appeal, Shore raised several challenges regarding both interpretation of the prior art and claim construction.  Rather than working through those arguments, the Federal Circuit simply affirmed without opinion.

Broadband ITV v. Hawaiian Telecom (Supreme Court 2017)

A newly filed petition for writ of certiorari offers a substantial challenge to the quick-look eligibility decisions that have been so popular among district courts.  The challenge here is especially focused on no-evidence eligibility decisions that serve as a substitute for an obviousness determination.

In the case, the claims of BBiTV’s U.S. Patent No. 7,631,336 have been repeatedly upheld as non-obvious before a Hawaii district court ruled them ineligible on summary judgment.  In its 103 analysis, the Hawaii court also denied summary judgment of obviousness – finding questions of material fact regarding whether (1) elements of the claims were found in the prior art or (2) PHOSITA would have been motivated to combine those elements.  In its simultaneous 101 decision, however, the court determined as a matter of law that those same elements were “well-understood, routine, conventional activities previously known to the industry” that lack the “inventive concept” required by Alice.  The decision was (as is now common) affirmed without opinion by the Federal Circuit.

The petition challenges the decision and the newly-popular approach of using eligibility as a shortcut to more difficult and fact-intensive obviousness analysis. The three three questions:

1. Evidence for Underlying Factual Findings: Whether the statutory presumption of validity set forth in 35 U.S.C. § 282 applies to claims challenged under 35 U.S.C. § 101, as set forth by this Court in Microsoft Corp. v. i4i L.P., 564 U.S. 91 (2011), when the ultimate legal conclusion relies upon underlying findings of fact, such as whether the additional novel and non-obvious elements of the claims are merely well-understood, routine, and conventional or whether they add an inventive concept.

2. Standard for Summary Judgment: Whether, unlike every other area of law involving motions for summary judgment, as set forth by Fed. R. Civ. P. 56 and Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986), and its progeny, a district court may resolve material underlying fact disputes against the non-movant party on a summary judgment motion for lack of patent-eligibility under § 101.

3. Not All Abstraction Are Abstract: Whether the judicially-created exception for “abstract ideas” broadly includes any abstraction of a claim (including novel business practices or methods of organizing human activities) or only “fundamental” and “long-standing” (i.e., pre-existing) practices and methods, as recognized by this Court in Bilski v. Kappos, 561 U.S. 593, 611 (2010) and Alice Corp. Pty. v. CLS Bank Int’l, 134 S. Ct. 2347, 2356- 57 (2014).

The questions begin with the implicit understanding that, although a question of law, eligibility decisions are based upon a set of factual determinations that should be treated like any other factual determination by the court.  This approach is directly contrary to the approach often taken these days that follows Judge Mayer’s concurring opinion in Ultramercial, Inc. v. Hulu, LLC, 772 F.3d 709 (Fed. Cir. 2014).

An important legal question here is how close the link should be between obviousness and eligibility.  Post-KSR and Alice, there does appear to be substantial connection between the obviousness analysis associated with combining-old-elements and the eligibility analysis of elements that are “well-understood, routine, and conventional.”  The two should often correlate, the court here may have the opportunity to explain the differences both in doctrine and procedure.

Read the petition here: [LINK]

Amicus Briefs in support of the Petition are due by May 17, 2017.

Rembrandt Wireless v. Samsung

A jury found for Rembrandt and awarded $15.7 million in damages. On appeal, the Federal Circuit has affirmed on infringement and validity – but rejected the lower court’s finding that the patent had been properly marked.

Back-damages for patent infringement is a bit interesting. The marking statute creates a constructive notice regime for sales of ‘patented articles’ and then cuts-off damages for failure to mark those articles: 

In the event of failure so to mark, no damages shall be recovered by the patentee in any action for infringement, except on proof that the infringer was notified of the infringement and continued to infringe thereafter, in which event damages may be recovered only for infringement occurring after such notice. Filing of an action for infringement shall constitute such notice.

35 U.S.C. § 287.  The marking requirement does not apply only to patentees, but also to “any persons” making or selling the invention “for or under” the patentee.  The courts have interpreted this requirement then as applying to a patent licensee — “thereby limiting the patentee’s damage recovery when the patented article is not marked” by the licensee.  Quoting Amsted Indus. Inc. v. Buckeye Steel Castings Co., 24 F.3d 178, 185 (Fed. Cir. 1994).

Here, Rembrandt had previously licensed the patent at-issue (U.S. Patent No. 8,023,580) to Zhone Tech who sold unmarked products allegedly embodying claim 40 of the patent.  (Zhone was not required to mark under the license agreement).

As soon as Samsung sought to limit its potential damages to the date of actual-notice, Rembrandt dropped its allegations that Samsung infringed claim 40 and also filed a statutory disclaimer with the USPTO disclaiming claim 40.  Samsung was later found to infringe other remaining claims of the patent – and the district court ruled that the disclaimer was sufficient to cure the marking problem.

On appeal, the Federal Circuit disagrees:

Rembrandt’s position, adopted by the district court, effectively provides an end-run around the marking statute and is irreconcilable with the statute’s purpose. Allowing Rembrandt to use disclaimer to avoid the consequence of its failure to mark undermines the marking statute’s public notice function. . . .

The marking statute protects the public’s ability to exploit an unmarked product’s features without liability for damages until a patentee provides either constructive notice through marking or actual notice.

Disclaiming a patent claim does not later erase the fact that the claim was previously in effect and had not been properly marked.

The Court suggested a potential question of whether the focus should be claim-by-claim rather than patent-by-patent, but declined to rule on that issue because it had not been properly raised on appeal.   On remand, the district court will be asked to look into that question and – if needed – recalculated the damage award.

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The case here offers an important distinction – in my mind – between a patent license and a covenant-not-to-sue. Any reasonable license that covers an ‘article’ would include the marking requirement.   In my mind (although perhaps not the court’s) a mere covenant-not-to-sue should not fall under the marking requirement.

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Typical Marking License Language: Licensee mark all Licensed Products made or sold in the United States with an appropriate patent marking. All Licensed Products shipped to or sold in other countries must be marked in such a manner as to provide notice to potential infringers pursuant to the patent laws and practice of the country of manufacture or sale.  Licensor shall have the right to inspect Licensee’s Licensed Products to determine if Licensee is marking in accordance with this paragraph.

by Dennis Crouch

Phil-Insul Corp. (IntegraSpec) v. Airlite Plastics (Fed. Cir. 2017) [IntegraSpec].

IntegraSpec’s U.S. Patent No. 5,428,933 covers an insulated concrete form (Styrofoam molds) used in building construction.

Back in 2011, IntegraSpec sued Reward Wall and Nudura Corp. for infringing the ‘933 patent. In that case, the district court sided with the defendants – finding no infringement. That decision was affirmed in 2014 by the CAFC without opinion.  During the interim, the USPTO also confirmed the patentability of several claims of the patent.

Meanwhile, IntegraSpec sued Airlite in May 2012 alleging infringement, but the district court dismissed the case in 2014 (after a two year stay) finding them precluded based upon the common law doctrine of collateral estoppel (these days usually called issue preclusion).  Here, we might term this non-mutual defensive collateral estoppel.

Basically, IntegraSpec was asking for a different claim construction in the second case than what was awarded in the first case.  The district court saw the problem with this since accused products were virtually identical and the narrow claim construction in the original case was critical to the non-infringement outcome.

Collateral estoppel kicks-in to prevent a party from re-litigating an already decided issue when:

(1) Same Party: the party being precluded was a party (or in privity with a party) in the prior action.

(2) Same Issue: the issue being precluded is the same as the issue in the prior action;

(3) Actually Litigated: the issue being precluded was actually litigated in the prior action;

(4) Final Judgment: the issue being precluded was determined by a valid final judgment; and

(5) Essential: the determination of the issue in the prior action must have been essential to the prior judgment.

The list above is 8th Circuit law, but is fairly standard.  The Federal Circuit has created some additional patent-specific rules regarding issue preclusion – For infringement, two infringement claims are “the same” if the accused products are “essentially the same,” i.e., differences are either “merely colorable” or else unrelated to the limitations of the asserted patent claims. Roche Palo Alto LLC v. Apotex, Inc., 531 F.3d 1372 (Fed. Cir. 2008)

On appeal, the Federal Circuit has affirmed – specifically holding that its prior R.36 Judgment may be used in support of an issue preclusion conclusion so long as only a single dispositive issue was appealed in that prior appeal.

The second issue – in the first case claim 1 was asserted. Meanwhile, claim 1 was cancelled in a reexam and formerly dependent claim 2 rewritten to include all of the prior limitations.  In this new action, claim 2 is asserted.  In the appeal, the Federal Circuit confirmed that collateral estoppel applies even though the original court interpreted claim 1.  The court based this upon its bare statement that “It is well-established, however, that claim terms are to be construed consistently throughout a patent.”

The Federal Circuit has updated its original decision in Asetek, with Judge Prost deleting her dissent and her points being incorporated into the majority opinion.  The change here relates to the injunction pending remand.

Asetek sued CMI/Cooler-Master for infringing its computer fan patents. U.S. Patent Nos. 8,240,362 and 8,245,764 (“cooling systems”).  A jury sided with Asetek and the patentee was awarded damages as well as an injunction against specific Cooler Master products.  The problem – is that the injunction was awarded against CMI USA as well as “Cooler Master Co., Ltd.”, a Taiwanese company who was no longer a party to the lawsuit.   On appeal, the Federal Circuit substantially affirmed but remanded on the injunction since it applied to a non-party and went beyond that non-party’s ‘abetting a new violation’ by the adjudged infringer.

The oddity of the original Judge Taranto opinion was that it did not actually vacate the injunction but kept it in-force until modified by the lower court. “We do not think it appropriate to vacate the injunction at present.”  Writing in dissent, Chief Judge Prost argued that “The correct course of action would be to vacate the portions of the injunction that improperly reach Cooler Master.”

Following the original opinion, CMI filed for rehearing and that has been partially granted today with a new opinion from the original panel.  The new opinion here adopts Chief Judge Prost’s position and her partial dissent is deleted as is the panel’s non-vacatur.  The new opinion now partially vacates the injunction so that it no longer applies to the non-party (except for aiding and abetting).  The new paragraph:

Two final, related points. First, the need for further proceedings to determine the proper reach of the injunction in this case leads us to vacate the injunction, effective upon issuance of our mandate, insofar as the injunction reaches conduct by Cooler Master that does not abet new violations by CMI. The district court is to conduct those proceedings in as reasonably prompt a fashion as possible. Our partial vacatur of the injunction does not foreclose Asetek from pursuing reinstatement of the vacated portion of the injunction should there be unjustifiable delay by Cooler Master in completing the proceedings, or from pursuing any other remedies against Cooler Master, if otherwise authorized by law.

The en banc court simultaneously released its denial of rehearing after noting that the panel had revised its opinion.  CMI’s en banc petition began as follows:

The Panel Majority’s precedential opinion has promulgated a new rule that a pre-liability permanent injunction against a non-party is permissible pending a determination of liability under the “legally identified with” theory. There are three issues with this opinion. First, it violates the rule that everyone has a right to his day in court. Second, it violates the rule that actual success on the merits must precede entry of a permanent injunction. Third, its remand of further proceedings to determine the “legal identity” issue is an impermissible advisory opinion.

I believe that the revised decision here is legally correct, but it always gives me pause to watch companies and owners divide-up the structure of their firms without substantially dividing management and control — and then use that division to partially avoid legal liability.  The end result is that the potential corporate complexity can substantially raise the costs of enforcement without providing any social benefit.  In this case, Asetek writes that “the precise historical and corporate relationship between CMI and Cooler Master is murky; not even their counsel is sure of it.”  The parties always had the same attorneys, and CMI distributes all of Cooler Master’s products in the US, and assists with US marketing.

• Original opinion (AsetekOriginalOpinion)
• Partial grant of panel rehearing with explanation of changes (AsetekPanelGrant)
• Modified opinion (AsetekModifiedOpinion)
• Denial of rehearing en banc (AsetekEnBancDenial)