Tag Archives: Federal Circuit En Banc

Joint Infringement Case Moves Toward Supreme Court Review

Patent,

By Dennis Crouch

Limelight Networks, Inc. v. Akamai Technologies, Inc., Docket Nos. 12-786 and 12-960 (Supreme Court 2013)

Limelight and Akamai have proposed dueling questions to the Supreme Court. Limelight, the accused infringer, asks: “Whether the Federal Circuit erred in holding that a defendant may be held liable for inducing patent infringement under 35 U.S.C. § 271(b) even though no one has committed direct infringement under § 271(a).” The patentees Akamai and MIT ask: “Whether a party may be liable for infringement under either section of the patent infringement statute, 35 U.S.C. §271(a) or § 271(b), where two or more entities join together to perform all of the steps of a process claim.” These questions involving the fundamental definitions of patent infringement have been stewing for a number of years, and this case stems directly from the Federal Circuit’s fractured en banc decision in 2012.

The Supreme Court today has indicated some interest in the case by calling for the views of the US Solicitor General. The Supreme Court may see the case as an extension of its decision in Global-Tech Appliances, Inc. v. SEB, S.A, 2011 U.S. LEXIS 4022 (U.S. May 31, 2011). That case focused on the intent requirements infringement-by-inducement.

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The asserted claim from U.S. Patent No. 6,108,703 is below:

19. A content delivery service, comprising:

replicating a set of page objects across a wide area network of content servers managed by a domain other than a content provider domain;

for a given page normally served from the content provider domain, tagging the embedded objects of the page so that requests for the page objects resolve to the domain instead of the content provider domain;

responsive to a request for the given page received at the content provider domain, serving the given page from the content provider domain; and

serving at least one embedded object of the given page from a given content server in the domain instead of from the content provider domain.

Apparently in practice, the “tagging” step is performed by Limelight’s customers and limelight therefore argues that there cannot be infringement because no single entity practices each and every step of the claimed invention.

Thus, the basic setup is that Limelight performs all-but-one of the elements of the claimed invention and then encourages its customers to perform the missing stem. Limelight wins this case with a holding of non-infringement under the BMC/MuniAuction line of cases because infringement under 271(a) requires a single entity that causes performance of each and every element of the claimed invention and since Limelight did not cause its customers to perform the missing step. Likewise, under those cases inducement under 271(b) fails because the cause-of-action requires proof of underlying direct (271(a)) infringement. On the other hand Akamai argues that the BMC/MuniAuction rules are too restrictive. Rather, Akamai argues that the single-entity requirement of 271(a) direct infringement is too narrow and that inducement under 271(b) should not require underlying direct infringement. For its part, the Federal Circuit took a somewhat middle-ground and only held that inducement does not require underlying direct infringement so long as a single entity induced all of claimed elements.

Bosch v. Pylon: 1292(c)(2) CAFC Jurisdiction

Patent,

By Jason Rantanen

Robert Bosch, LLC v. Pylon Manufacturing Corp. (Fed. Cir. 2013) (en banc) Download Bosch v Pylon

Majority opinion written by Judge Prost, joined by judges Rader, Newman, Lourie, and Dyk.  Judges Moore and Reyna concurred and dissented-in-part in separate opinions.  Judges O'Malley and Wallach dissented.

This case deals with the question of whether the Federal Circuit has jurisdiction to entertain appeals from patent infringement liability determinations when damages and willfulness issues remain outstanding.  The court held that 28 U.S.C. § 1292(c)(2) confers jurisdiction in both situations.

Background on the case is available here.  The Federal Circuit requested that the parties brief the following issues:

  1. Does 28 U.S.C. § 1292(c)(2) confer jurisdiction on this Court to entertain appeals from patent infringement liability determinations when a trial on damages has not yet occurred?
  2. Does 28 U.S.C. § 1292(c)(2) confer jurisdiction on this Court to entertain appeals from patent infringement liability determinations when willfulness issues are outstanding and remain undecided.

Section 1292(c) states that "The United States Court of Appeals for the Federal Circuit shall have exclusive jurisdiction— (2) of an appeal from a judgment in a civil action for patent infringement which would otherwise be appealable to the United States Court of Appeals for the Federal Circuit and is final except for an accounting."  At issue was whether a trial on damages and willfulness is an "accounting" for purposes of this section.  

An "accounting" includes the determination of a patentee's damages (7-2): The majority, joined by Judge Moore (and in its conclusion by Judge Reyna), first held that an accounting includes the determination of a patentee's damages.  This approach was consistent with both the historical meaning of an "accounting" and the legislative history for the predecessor statute to § 1292.  "The statute’s interpretation through history is clear. An “accounting” in the context of § 1292(c)(2) includes the determination of damages and cannot be limited to a traditional equitable accounting of an infringer’s profits."  Slip Op. at 13. 

Nor does the a request for a jury trial to establish damages change this result: "While we agree with Bosch that an accounting was historically available in equity, we do not agree that a trial on damages falls outside the scope of the accounting described in § 1292(c)(2)."  Id.  The court's summary of its rationale:

We base our conclusion on four points. First, in 1948, Congress expanded jurisdiction over interlocutory appeals from cases in equity to “civil actions for patent infringement which are final except for accounting.” Second, the issues which were historically decided in accountings are the same as those decided during damages trials today. Third, the reasons articulated by Congress for allowing interlocutory appellate jurisdiction over patent cases that are final except for an accounting apply with equal force to a modern damages trial. Finally, stare decisis militates in favor of allowing interlocutory appeals where liability has been established and a damages trial remains.

Slip Op. at 12-13.  The last point in particular caught my eye.  The majority's argument is that the principle of stare decisis should be given weight by the court sitting en banc even when the precedent consists of panel decisions, particularly when dealing with issues of statutory interpretation.

Nonetheless, “because [our precedent] represents the established law of the circuit, a due regard for the value of stability in the law requires that we have good and sufficient reason to reject it at this late date.” Bailey, 36 F.3d at 110. [D.C. Cir sitting en banc] Indeed, panel opinions, like en banc opinions, invoke the principle of stare decisis. Panel opinions are, of course, opinions of the court and may only be changed by the court sitting en banc. It has been the law of this court for at least twenty-five years that an “accounting” under § 1292 includes a trial for the determination of damages under § 284.

Slip Op. at 20.

An "accounting" includes willfulness determinations (5-4): The majority, this time without Judges Moore or Reyna, also concluded that Section 1292(c)(2) confers jurisdiction on the Federal Circuit to hear appeals from patent infringement liability determinations while willfulness issues are still outstanding.  As with damages, the court held that an "accounting" includes willful infringement determinations.  This, the majority wrote, was also consistent with the historical understanding of an "accounting."  "Long before the enactment of § 1292(c)(2)’s predecessor statute in 1927, accounting proceedings included the determination of willfulness by a special master."  Slip Op. at 23.  Post-1927 cases confirmed this view.  "Indeed, after the enactment of § 1292(c)(2)’s predecessor statute in 1927, courts continued to determine willfulness as part of an accounting, which occurred after the finding of liability." Id. at 24. 

Bifurcation is a decision within the district court's discretion: A common refrain in the court's opinion is its comment that it is deciding only the appellate jurisdictional issue; it is not issuing a broader decision on bifurcation of damages and willfulness.  For example, near the end of the opinion the court notes: 

Finally, we wish to make clear that district courts, in their discretion, may bifurcate willfulness and damages issues from liability issues in any given case. District courts have the authority to try these issues together or separately just as they have the authority to try all issues together at the liability stage. They may decide, for example, for reasons of efficiency due to the commonality of witnesses or issues in any particular case, that bifurcation is not warranted. District court judges, of course, are best positioned to make that determination on a case-by-case basis. Today, we answer only the question of whether § 1292(c)(2) grants this court jurisdiction over appeals where the district court has exercised its discretion to bifurcate the issues of damages and willfulness from those of liability.

Judge O'Malley's Dissent: Writing in dissent, and joined by Judge Reyna, Judge O'Malley disagreed with the broad interpretation of Section 1292(c)(2) adopted by the majority.  "As an exception to the final judgment rule, § 1292(c)(2) is to be interpreted narrowly…Because I believe the term “accounting” only applies to a limited class of proceedings before special masters or to those instances in which the trier of fact has decided all matters relevant to a damages determination save the application of those decisions to an undisputed set of numbers, I do not believe § 1292(c)(2) justifies the exercise of jurisdiction over this appeal."  Slip Op. at 54-55. 

In the dissent's view, the majority erred by asking the wrong historical question.  "What we should ask is not what questions may be considered during the course of an “accounting” but whether the procedure that was an “accounting” as of 1927—the one contemplated in § 1292(c)(2)—is the same as or encompasses a jury trial on any of those same questions."  Id. at 56.  This distinction matters because the historical meaning of an "accounting" was tied to the determination by a special master not by a jury. With regard to the majority's historical argument, the dissent wrote:

The majority’s only attempt at a statutory analysis to support its holding is its claim that, by substituting the phrase “civil actions” for “suit[s] in equity” in the jurisdictional grant of § 1292, Congress somehow intended to expand the concept of an accounting to include jury trials on damages. The disregard for the importance of the right to a jury trial and misunderstanding of what a jury trial entails which is evident in this proposition is stunning.

Id. at 57.  Even less defensible, in the dissent's opinion, was the majority's conclusion as to willfulness.  Indeed, even requiring infringement and willfulness determinations to take place before separate juries may be impermissible in itself.  "A bifurcation order which requires that two different juries visit the interwoven issues and overlapping facts involving infringement and validity on the one hand and willfulness on the other would violate the defendant’s Seventh Amendment right to a jury trial."  Id. at 79.

Judges Moore and Reyna: Judges Moore and Reyna wrote separate opinions expressing their views that an "accounting" does not include a willfulness determination but can include the damages enhancement step that occurs following a willfulness determination.  The result is a court in relative agreement on the question of whether Section 1292(c)(2) confers jurisdiction while damages issues remain pending but sharply decided on the question of whether it confers jurisdiction when a willful infringement determination has yet to be made. 

What Is Happening In Vermont? Patent Law Reform From The Bottom Up

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Guest post by Camilla A. Hrdy, Resident Fellow at the Yale Law School Information Society Project.

Although there have been various proposals for curbing abusive threats of patent litigation by Patent Assertion Entities (PAE’s), or so-called patent “trolls,” and the Federal Circuit appears willing to sanction PAE’s for baseless lawsuits, the U.S. Patent Act does not directly address the problem. Dissatisfied with this situation, the state of Vermont has just passed a new and innovative law amending its Consumer Fraud statute to prohibit “bad faith assertions of patent infringement” against individuals or companies based in Vermont. The law creates a factor-based test for courts to determine when acts constitute “bad faith assertions,” and lists several non-exhaustive factors that courts may consider as evidence of bad faith, including sending demand letters that lack basic information about the infringement claim or that seek payment of unreasonable royalty fees. Targets of bad faith assertions can bring actions (in state or federal district court1) to obtain compensatory damages and exemplary damages, plus costs and fees. Vermont’s Attorney General simultaneously filed a complaint under existing Vermont consumer protection law against a PAE that sent out demand letters to thousands of small businesses in Vermont and around the country.

Some commentators suggest Vermont’s new law is preempted by federal patent law. This is not necessarily the case – so long as courts apply the law in a way that satisfies the Federal Circuit’s standard for a finding of “bad faith.” This requires, at minimum, “clear and convincing evidence” that the infringement assertions are “objectively baseless” to avoid dismissal on summary judgment or a motion to dismiss. As the Federal Circuit explained in Globetrotter, the idea is that patent holders should not be penalized simply for asking the government to enforce their patent rights. That said, as Vermont Attorney Justin McCabe points out, if courts do adhere to the Federal Circuit’s current standard, this will certainly weaken the Vermont law’s utility as a supplement to current options.

Putting aside the question of whether the Vermont law will be preempted, should it be? According to Eric Goldman, we should be wary of state-by-state contributions to patent law (and IP law in general) for numerous reasons, including higher costs for patent owners to enforce their rights and comply with different or inconsistent state standards. Goldman concludes that while he would “enthusiastically favor a nation-wide threats action,” if the choice is between no threats action at all versus state-level threats actions, he might favor the former.

I disagree.

There are certainly costs to introducing decentralization into the patent system, just as there are for any area of law where state and federal governments have concurrent power (immigration, tax, corporate law, to name just a few). But the creation of a novel, state-level solution to the problem of unfounded patent assertions highlights the reasons we accept some of these costs by continuing to support a system of dual sovereignty. Robust federalism can produce a range of benefits, including involvement from local officials in designing policies to support their jurisdictions’ development goals, promoting intergovernmental competition and experimentation, and diffusing authority among different sovereigns in order to avoid consolidation of power in a single lawmaking body or administrative agency (i.e. the U.S. Patent & Trademark Office).

But for federalism to actually benefit patent law and innovation policy generally, states require some autonomy to disagree with federal patent policy and to use state law to grow local innovation ecosystems, like California has with Silicon Valley. According to the preamble of the new law, Vermont is “striving to build an entrepreneurial and knowledge based economy.” State representatives decided the law will facilitate their goal of attracting IT and other knowledge based companies facing costly threats of litigation from PAE’s. Vermont has every right to make this attempt, and we should encourage other states to do the same.

Obviously, as the Supreme Court has made clear, state laws should be preempted when they interfere with the goals and objectives of federal patent law. But Vermont’s law doesn’t: like U.S. patent law, it strives to promote innovation and does not interfere with inventors’ decision to file for U.S. patents and disclose information about their inventions to the public.2 Far from needlessly raising the cost for patent owners to enforce their rights, Vermont’s local solution to a national problem is a prime example of how federalism is supposed to work.

As I argue in a forthcoming article and a recent essay, given the benefits of state involvement in patent law and innovation policy, federal courts should be wary of preempting state laws that attempt to influence national patent policy. I hope the Vermont law is the first, not the last, of its kind, and that it inspires other states to take a greater role in helping federal institutions fix the patent system’s problems. Meanwhile, innovators themselves – whether businesses aggrieved by PAE’s or inventors who are dissatisfied with patent law’s emphasis on propertization versus free access to knowledge – should begin to actively encourage their state and local governments to dissent against federal patent norms by experimenting with laws to make the system work better for everyone. We may ultimately decide that some, or even all, state patent policy innovations are not workable in practice. But the results of a bottom up reform movement will inevitably surprise us. And this is the point.

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1. Federal district courts have exclusive jurisdiction over patent cases, and the jurisdiction statute was recently amended to clarify that “[n]o State court shall have jurisdiction over any claim for relief arising under any Act of Congress relating to patents, plant variety protection, or copyrights.” 28 U.S.C. §    338(a). However, if none of the claims for relief under the Vermont law necessarily requires the resolution of a patent law issue, then federal district courts would not have jurisdiction absent diversity citizenship. See ClearPlay, Inc. v. Nissim Corp., 602 F.3d 1364, 1369 (Fed. Cir. 2010).

2. The same cannot be said for state trade secret laws, which we permit despite the risk that inventors of patentable inventions will keep their inventions secret, due to the independent benefits derived from more information sharing within companies and protection of valuable, if not always patentable, information from misappropriation by competitors. See Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470, 490-93 (1974).

Supreme Court Looks More Closely at Reviewing Therasense

Patent, ,

By Dennis Crouch

Sony Computer v. 1st Media LLC, Docket No 12-1086 (on petition for writ of certiorari 2013)

In a recent order, the Supreme Court has asked the Solicitor General to file a brief in this expressing the views of the United States in this pending inequitable conduct case. (CVSG). The case is essentially a challenge of the Federal Circuit’s en banc decision in Therasense that strongly cabined-in the doctrine of inequitable conduct. In this case, the Federal Circuit rejected a district court holding of inequitable conduct in a failure-to-submit case. According to the lower court, three references used to reject the equivalent foreign cases were never submitted for consideration by the US examiners. Nevada district court Judge Mahan found that both the patent attorney and the listed inventor were at fault for failing to submit the references and consequently held the patent unenforceable due to inequitable conduct.

On appeal, the Federal Circuit reversed – making clear (again) that in a failure-to-disclose situation, the defendant must prove that individuals with a Rule 56 duty “made a deliberate decision to withhold” the references. Further, that deliberate decision element must be proven with clear and convincing evidence and that proof of intent cannot be inferred merely from the fact that the individuals had knowledge of the references and their materiality. The Federal Circuit wrote:

A court can no longer infer intent to deceive from non-disclosure of a reference solely because that reference was known and material. Moreover, a patentee need not offer any good faith explanation for his conduct unless and until an accused infringer has met his burden to prove an intent to deceive by clear and convincing evidence. . . . Moreover, it is not enough to argue carelessness, lack of attention, poor docketing or cross-referencing, or anything else that might be considered negligent or even grossly negligent. To sustain a charge of inequitable conduct, clear and convincing evidence must show that the applicant made a deliberate decision to withhold a known material reference. Whatever one might conclude about Lewis’s and Sawyer’s conduct and interactions relating to the Bush reference, and the nature of Sawyer’s practice at the relevant time, the record does not support the inference that Lewis and Sawyer deliberately chose to withhold Bush.

Because one element of the inequitable conduct charge is missing, the court concluded that the charge cannot be proven. Of course, “carelessness, lack of attention, [or] poor docketing” will still lead to malpractice claims.

In the petition for writ of certiorari, the accused infringer asks the following question:

Did the Court of Appeals for the Federal Circuit err in restricting district courts’ equitable discretion in evaluating patent unenforceability, contrary to this Court’s precedent in Keystone Driller, Hazel-Atlas, and Precision Instrument, by applying a rigid test that (a) forecloses district courts from considering the entire circumstantial record; and (b) precludes district courts from granting equitable remedies where a patent applicant has violated the PTO’s duty of candor.

In Therasense, the Federal Circuit added some flexibility to its analysis in cases involving sufficiently egregious misconduct. Sony responds that the limited carve-out “is flawed because it creates a rigid threshold [of an egregious affirmative act of misconduct] as a prerequisite to the equitable discretion called for by this Court’s precedent. The flexibility embodied in this Court’s precedent should apply in all cases, not just those involving affirmative egregious misconduct.”

Supreme Court has a history of hearing fraud cases and this CVSG adds to the likelihood that it will hear this case.

CLS Bank v. Alice Corp: Court Finds Many Software Patents Ineligible

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by Dennis Crouch

CLS Bank v. Alice Corp. (Fed. Cir. 2013) (en banc)

In a much awaited en banc decision, the Federal Circuit has affirmed the patent ineligibility of Alice Corp’s claims to a computerized method, a computer-readable medium containing computer instructions, and a computer system that implements those instructions.  The ten-member en banc panel released seven different decisions. While none of the opinions garnered majority support, seven of the ten judges agreed that the method and computer-readable medium claims lack subject matter eligibility.  And, eight of the ten concluded that the claims should rise and fall together regardless of their claim type.

All of the judges recognized that the test for patent eligibility under section 101 should be “a consistent, cohesive, and accessible approach” that provides “guidance and predictability for patent applicants and examiners, litigants, and the courts.”  However, the judges hotly disagree as to the pathway that will lead to that result.

The leading five-member opinion written by Judge Lourie provides three guideposts for its analysis:

  • First and foremost is an abiding concern that patents should not be allowed to preempt the fundamental tools of discovery—those must remain “free to all . . . and reserved exclusively to none.” . . . [T]he animating concern is that claims should not be coextensive with a natural law, natural phenomenon, or abstract idea; a patent-eligible claim must include one or more substantive limitations that, in the words of the Supreme Court, add “significantly more” to the basic principle, with the result that the claim covers significantly less. Thus, broad claims do not necessarily raise § 101 preemption concerns, and seemingly narrower claims are not necessarily exempt. What matters is whether a claim threatens to subsume the full scope of a fundamental concept, and when those concerns arise, we must look for meaningful limitations that prevent the claim as a whole from covering the concept’s every practical application.
  • Next, the cases repeatedly caution against overly formalistic approaches to subject-matter eligibility that invite manipulation by patent applicants. . . . Thus, claim drafting strategies that attempt to circumvent the basic exceptions to § 101 using, for example, highly stylized language, hollow field-of-use limitations, or the recitation of token post-solution activity should not be credited.
  • Finally, the cases urge a flexible, claim-by-claim approach to subject-matter eligibility that avoids rigid line drawing.

Abstract Ideas are Disembodied Concepts: Alice Corp’s claims are drawn to methods of reducing settlement risk by effecting trades through a third party intermediary (a supervisory institution) empowered to verify that both parties can fulfill their obligations before allowing the exchange to be completed.  This essence, the method is a form of third-party escrow that helps overcome the risk of fraud and non-payment. In thinking about that method, the court determined that it is an abstract idea because it is a “disembodied” concept that is a basic building block of human ingenuity and untethered from any real-world application.  Lourie writes:

CLS describes that concept as “fundamental and ancient,” but the latter is not determinative of the question of abstractness. Even venerable concepts, such as risk hedging in commodity transactions, see Bilski, 130 S. Ct. at 3231, were once unfamiliar, just like the concepts inventors are unlocking at the leading edges of technology today. But whether long in use or just recognized, abstract ideas remain abstract. The concept of reducing settlement risk by facilitating a trade through third-party intermediation is an abstract idea because it is a “disembodied” concept, In re Alappat, 33 F.3d 1526, 1544 (Fed. Cir. 1994) (en banc), a basic building block of human ingenuity, untethered from any real-world application. Standing alone, that abstract idea is not patent-eligible subject matter.

After identifying the portion of the claim directed to an abstract idea, Judge Lourie then looked to see whether “the balance of the claim adds ‘significantly more.’” Answering that question in the negative, the court found the claims lack eligibility.

Writing in Dissent, Chief Judge Rader disagreed with the court’s decision. He writes:

I enjoy good writing and a good mystery, but I doubt that innovation is promoted when subjective and empty words like “contribution” or “inventiveness” are offered up by the courts to determine investment, resource allocation, and business decisions. Again, it is almost . . . well, “obvious” . . . to note that when all else fails, it makes sense to consult the simplicity, clarity, and directness of the statute.

As I start my next quarter century of judicial experience, I am sure that one day I will reflect on this moment as well. I can only hope it is a brighter reflection than I encounter today.

 


 

 

Liveblogging PatCon 3: A Conversation with Industry

Patent, , , ,

By Jason Rantanen

Today I'll be liveblogging from PatCon 3.  For those who are interested, the substance will be after the break.  I'm told that video recordings will be available for the plenary presentations.

A conversation with industry

Jim Trusell – Chief IP counsel at BP
Karen Nelson – attorney at AbbVie 
Jon Wood – Chief IP Counsel at Bridgestone
Paul Rodriguez – Chief IP Counsel at RR Donnelly
Stephen Auten – Cozen O'Conner (moderator)

(more…)

Awaiting the Outcome of CLS Bank v. Alice Corp.

Patent, , ,

by Dennis Crouch

Pollin Patent Licensing v. Commerce Bancshares (E.D.Mo 2013)

The following is a recent Court Order from Judge Audrey Fleissig.

IT IS HEREBY ORDERED that this matter shall be stayed pending the decision of the Federal Circuit in CLS Bank Intl v. Alice Corp., 685 F.3d 1341, 1356 (Fed. Cir. 2012), vacated, rehg granted, 2012 WL 4784336 (Fed. Cir. Oct. 9, 2012).

In the lawsuit, Pollin is asserting U.S. Patent No. 7,117,171.  Although the company has asserted the patent in at least 17 different lawsuits, it does not appear that any of the accused infringers has filed a request for rexamination or inter partes review. Instead almost all of the cases have ended in settlement.

Pollin’s invention claims priority back to a 1992 application. That means that the patent is now expired. However, Pollin may still be able to collect substantial back damages – so long as the patent is not renedered invalid by CLS Bank.  The 1992 invention focused being able to use a checking account to pay for a service without actually writing a check. The claims are broadly written to encompass the operation via the internet (without actually using those words).

Interestingly, it was Pollin who asked for the stay in this case. 

= = = = =

Pollin’s Claim 1 is as follows:

1. A system for generating authorized payments from financial accounts belonging to a plurality of payers, in payment of debts to a payee, comprising:

input means for performing an electronic information input process wherein a system operator contemporaneously enters information sufficient to identify a new payer previously unknown to the system and information specifying a payment to be generated from an account of that payer,

said information including a financial institution identification number, payer account identifier, and an amount to be paid from said payer’s account to said payee;

an institutional database comprising financial institution identification information;

institution verification means associated with said input means for receiving said financial institution identification number and comparing said financial institution identification number to entries in said institutional database,

wherein when said financial institution is found in the institutional database, the institution verification means retrieves identifying information about the institution and verifies the accuracy of said financial institution identification number, and

wherein when said financial institution is not found in the institutional database, an error indication is generated; and

output means connected to said input means for receiving said information specifying a payment and generating in electronic information form instructions for said payment to said payee.

The Federal Circuit Table of Authorities

Patent, ,

By Dennis Crouch

For the following list I parsed through all precedential patent related opinions at the Federal Circuit for the past three years. The resulting list are the fifteen most frequently cited cases in Federal Circuit patent decisions:

  1. Phillips v. AWH, 415 F.3d 1303 (Fed. Cir. 2005) (en banc)
  2. Cybor Corp. v. FAS Technologies, Inc., 138 F.3d 1448 (Fed. Cir. 1998) (en banc)
  3. KSR Intern. Co. v. Teleflex Inc., 550 U.S. 398 (2007)
  4. Graham v. John Deere Co. of Kansas City, 383 U.S. 1 (1966)
  5. Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986)
  6. Vitronics Corp. v. Conceptronic, Inc., 90 F.3d 1576 (Fed. Cir. 1996)
  7. Ariad Pharmaceuticals, Inc. v. Eli Lilly and Co., 598 F.3d 1336 (Fed. Cir. 2010) (en banc)
  8. Lucent Technologies, Inc. v. Gateway, Inc., 580 F.3d 1301 (Fed. Cir. 2009)
  9. Markman v. Westview Instruments, Inc., 52 F.3d 967 (Fed. Cir. 1995) (en banc)
  10. ICU Medical, Inc. v. Alaris Medical Systems, Inc., 558 F.3d 1368 (Fed. Cir. 2009)
  11. Bilski v. Kappos, 130 S.Ct. 3218 (2010)
  12. In re Gartside, 203 F.3d 1305 (Fed. Cir. 2000)
  13. MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118 (2007)
  14. In re Seagate Technology, LLC, 497 F.3d 1360 (Fed. Cir. 2007) (en banc)
  15. Star Scientific, Inc. v. R.J. Reynolds Tobacco Co., 537 F.3d 1357 (Fed. Cir. 2008)

For cases decided within the past year, the only new entrant on the list is Microsoft Corp. v. i4i Ltd. Partnership, 131 S.Ct. 2238 (2011)

En Banc Review in Checkpoint v. All-Tag?

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By Jason Rantanen

In December, the Federal Circuit denied a request for rehearing en banc in Highmark v. Allcare Health Management Systems.  The request focused on the de novo standard of review that the panel in Highmark applied in reviewing the objectively baseless element of the district court's exceptional case determination.  The denial was narrow, however, with five of the eleven judges dissenting from the decision to deny en banc review.  I previously wrote about the denial here.

Since the Federal Circuit denied rehearing en banc in Highmark, however, its composition has changed significantly.  Two of the six panel members who did not vote in favor of en banc review have since assumed senior status and Judge Taranto has joined the court.  Consequently, there are five judges who have expressed a view that the de novo standard applied in Highmark was erroneous (Chief Judge Rader and Judges Moore, O'Malley, Reyna and Wallach) and four judges who either definitely or likely believe that the de novo standard is correct (Judges Newman, Lourie, Dyk and Prost).  As a result, the court's decision whether to grant en banc review on this issue probably depends on the views of the newest member of the court, Judge Taranto.  If Judge Taranto joins with the dissenters in Highmark, there would be a 6-4 majority in favor of en banc review; if he joins with the decision not to grant en banc review, there would be a 5-5 tie, which would be insufficient to trigger en banc review. 

This is significant because the Checkpoint decision that I wrote about earlier this week provides an opportunity for the court to review this issue en banc.  Notably, the three judges on the panel in Checkpoint were not among the dissent in the denial to rehear Highmark en banc.  As several of the comments to Thursday's post pointed out, however, it doesn't seem likely this case would have come out differently even under a more deferential standard of review. 

International Patent Exhaustion

Patent

The Supreme Court has denied NineStar’s petition for writ of certiorari in its bid to change the law of international patent exhaustion. The non-decision leaves simmering the apparent conflict between the Federal Circuit’s recent patent decisions (rejecting international exhaustion of patent rights) and the Supreme Court’s recent copyright decision in Kirtsaeng (finding international exhaustion of copyrights). 

Although the Federal Circuit’s own internal rule requires an en banc hearing to overturn its own precedent. That rule can be set aside when, as here, the Supreme Court calls-to-question prior precedent.  It appears that NineStar’s appeals have been exhausted, but the next-up challenger will have a good shot (depending upon the panel assigned).

Challenging the PTO for Issuing Patents

Patent

by Dennis Crouch

Pregis Corp. v. Kappos and Free Flow Packaging (Fed. Cir. 2013)

Pregis was feeling the pinch of its competitor Free-Flow's air-packaging patents and so, in 2009, Pregis sued Free-Flow for declaratory judgment of invalidity and non-infringement. In the same lawsuit, Pregis also sued the USPTO in order to prevent the agency from issuing two of Free-Flow's pending applications. When those two patents issued, Pregis amended its complaint to allege that the PTO's action in issuing the patents was "arbitrary, capricious, an abuse of discretion or otherwise not in accordance with law." Under the Administrative Procedures Act (APA), Pregis argued, such an action should be nullified by the court.

The district court rejected those claims against the USPTO as lacking subject matter jurisdiction and that decision was affirmed by the Federal Circuit in December 2012. – holding that "a potential infringer cannot sue the USPTO under the APA to attack the validity of an issued patent." In February, Pregis filed its petition for rehearing en banc and focuses its argument on the Supreme Court's recent decision in Sackett v. EPA, 132 S. Ct. 1367 (2012) that held that the statute's silence as to judicial review and some allowance for limited judicial review were insufficient "to overcome the APA's presumption of reviewability for all final agency action." Pregis writes in its petition for rehearing:

The Supreme Court has repeatedly rejected "implied" preclusion arguments similar to what the PTO asserted and the panel accepted here. See generally Stephen G. Breyer et al., Administrative Law and Regulatory Policy 777 (6th ed. 2006) ("Implicit preclusion is rare."). The case for "implied" preclusion of judicial review is especially weak in context of the Patent Act, since that statute's text expressly precludes judicial review of certain patent-related administrative agency actions. See 35 U.S.C. § 282 ("A due diligence determination under section 156(d)(2) is not subject to judicial review."). Section 282 demonstrates that Congress well knows how to provide for preclusion of judicial review of patent-related administrative agency actions, and did not include any such provision in the Patent Act for PTO grant decisions.

The Sackett decision demonstrates the strength of the presumption in favor of judicial review. . . . [In that case t]he Court specifically rejected the government's argument that, by affording regulated parties a right to challenge the validity of a compliance order in a subsequent enforcement action, the Clean Water Act impliedly precluded judicial review of the agency's decision to issue such an order. The Court reasoned, "the APA provides for judicial review of all final agency actions, not just those that impose a self-executing sanction." The parallel between Sackett and the present case is clear: like the agency action at issue in Sackett, the issuance of a patent imposes legal obligations and exposes regulated persons to enforcement actions (i.e., infringement actions) for non-compliance. In both cases, judicial consideration of the legality of the initial agency action in a later enforcement action does not provide a good reason to foreclose judicial review of the initial action.

The Sackett decision also rejected the government's argument that express grants of judicial review elsewhere in the Clean Water Act provided a solid basis for overcoming the presumption of judicial review. Rather, as the Sackett Court unanimously instructed, "if the express provision of judicial review in one section of a long and complicated statute were alone enough to overcome the APA's presumption of reviewability for all final agency action, it would not be much of a presumption at all."

The Federal Circuit's reaction to this latest move will be interesting. 

Federal Circuit to Reconsider De Novo Review of Claim Construction

Patent,

By Jason Rantanen

In a per curium order issued a short time ago, the current sitting judges of the Federal Circuit (Chief Judge Rader and Judges Newman, Lourie, Dyk, Prost, Moore, O'Malley, Reyna, and Wallach) have granted Lighting Ballast Control's petition for rehearing en banc.  As Hal Wegner has pointed out, this comes just hours before Judge Taranto's swearing in. 

The parties have been instructed to address of deference in reviewing district court claim constructions:

a. Should this court overrule Cybor Corp. v. FAS Technologies, Inc., 138 F.3d 1448 (Fed. Cir. 1998)?
b. Should this court afford deference to any aspect of a district court’s claim construction?
c. If so, which aspects should be afforded deference?

It goes without saying that these questions have tremendous significance for patent law.  One peripheral thought – will the court hold all appeals involving issues of claim construction in abeyance until it issues its en banc opinion?

The order: Download Lighting ballast 2012-1014 3 15 13 final en banc grant order

Previous PatentlyO coverage of the petition:

Aristocrat Technologies v. Int’l Game Technology

Patent,

By Jason Rantanen

Aristocrat Technologies Australia PTY Limited v. International Game Technology (Fed. Cir. 2012) Download 10-1426.Opinion.3-11-2013.1
Panel: O'Malley (author), Bryson and Linn

Aristocrat and IGT compete in the casino gaming machine industry; Aristocrat was the patent holder here.  After construing the claims, the district court granted summary judgment of noninfringement under Muniauction v. Thomson, 532 F.3d 1318 (Fed. Cir. 2008), because no single actor performed all of the claimed steps.  On appeal, the Federal Circuit affirmed the district court's claim construction and summary judgment of no direct infringement but remanded for further proceedings on inducement of infringement in light of its intervening en banc decision in Akamai Technologies, Inc. v. Limelight Networks, Inc., 692 F.3d 1301 (Fed. Cir. 2012).  This is the second case this month to address the issue of joint/divided infringement.

The patents-in-suit relate to a gaming system in which an additional prize is awarded to a player through a secondary feature game appearing after the main game is completed.  Most of the claim limitations relate to steps that would performed by the casino itself, such as "initiating a first main game at said particular gaming machine" and "awarding said one progressive prize from said plurality of progressive prizes that has been won." 

One limitation, however, requires "making a wager at a particular gaming machine in the network of gaming machines."  The district court interpreted this limitation to mean "betting, which is an act performed by the player."  Aristocrat challenged this construction on appeal, contending that "making a wager" is merely "carrying out a bet" (and thus could be performed by the same actor that carried out the other steps).  The Federal Circuit disagreed, noting the overwhelming support for the district court's construction.  It rejected Aristocrat's other claim construction challenge based on similarly overwhelming amounts of contrary evidence.  This opinion is a great example of what happens when a party tries to twist the meaning of a claim term far beyond what is reasonable or supportable. 

Divided infringement (direct): Turning to the divided infringement problem the construed claims raised, the Federal Circuit began by affirming summary judgment of no direct infringement.  The court first noted that Akamai expressly did not revisit the law of divided infringement as it applies to 271(a); to be liable for direct infringement of a method claim, a party must perform "all the steps of the claimed method, either personally or through another acting under his direction or control."  Slip op. at 25, quoting Akamai.  Under Muniauction, “the control or direction standard is satisfied in situations where the law would traditionally hold the accused direct infringer vicariously liable for the acts committed by another party that are required to complete performance of a claimed method.”  Here, no single actor performed all the claimed steps and the Federal Circuit declined to conclude that the alleged conduct satisfied the "direction or control requirement.  In doing so, it expressly rejected Aristocrat's argument that this requirement was satisfied due to the player's actions being "the 'natural, ordinary, and reasonable consequences of' IGT's conduct."  Slip op. at 27.

Divided infringement (indirect): Applying Akamai, the Federal Circuit vacated the district court's summary judgment with regard to indirect infringement, an issue that neither the parties nor the district court expended significant time on.  The Federal Circuit's opinion provides no substantive discussion on this issue but does highlight two key parts of Akamai that nicely sum it up: 

As we stated in Akamai, “[r]equiring proof that there has been direct infringement as a predicate for induced infringement is not the same as requiring proof that a single party would be liable as a direct infringer.” Akamai, 692 F.3d at 1308-09 (emphasis in original). Thus, “[a] party who knowingly induces others to engage in acts that collectively practice the steps of the patented method—and those others perform those acts—has had precisely the same impact on the patentee as a party who induces the same infringement by a single direct infringer; there is no reason, either in the text of the statute or in the policy underlying it, to treat the two inducers differently.” Id. at 1309.

Slip op. at 28. Here, Aristocrat deserved the opportunity to argue its indirect infringement theory with the benefit of the Federal Circuit's clarification regarding inducement. 

Update on petitions for certiorari in Akamai and Epic v. McKesson: As noted by Dennis earlier this month, petitions for certiorari were filed in both Akamai and Epic v. McKesson.  However, Epic and McKesson recently settled and Epic has withdrawn its cert petition. (Thanks to Tim Holbrook for pointing this out). Clarification: Both Limelight's petition and Akamai's conditional cross-petition remain pending.

Revisiting Inequitable Conduct at the Supreme Court

Patent, ,

By Dennis Crouch

The US Supreme Court has decided a number of patent cases that raise questions of unenforceability. Perhaps most notable among these are:

  • Keystone Driller Co. v. Gen. Excavator Co., 290 U.S. 240 (1933);
  • Hazel-Atlas Glass Co. v. Hartford-Empire Co., 322 U.S. 238 (1944); and
  • Precision Instrument Mfg. Co. v. Auto. Maint. Mach. Co., 324 U.S. 806 (1945).

This trio of cases explains that inequitable conduct fits within the scope of the traditional equitable doctrine of unclean hands.

Keystone involved a patentee paying another party to lie about its prior use of a patented invention where that use might have been a prior public use. Similarly, in Hazel-Atlas, the patentee wrote an article and had it published under the name of a well-known expert (with the expert's consent). After seeing how the article lauded the invention (and without knowing the connection), the PTO was willing to issue the patent. Precision involved perjury in the course of an interference proceeding. In each of these cases, the Supreme Court held that that the unclean hands doctrine could be used to render the patent unenforceable.

For many years, the doctrine of unclean hands (and, as we call it now inequitable conduct) was a powerful in-court tool for accused infringers to challenge patent enforcement. Almost since the Federal Circuit beginning, Federal Circuit judges have been on a crusade to limit the doctrine. The court's most recent pronouncement found in Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276 (Fed. Cir. 2011) (en banc) continues this trajectory and strongly limits the scope of inequitable conduct allegations.

In Therasense, the Federal Circuit offers two pathways for proving inequitable conduct in the patent prosecution process. The first and primary pathway clear and convincing proof of (1) intentional misconduct and (2) that the misconduct is a but-for cause of the patent issuing. As shorthand, we speak of (1) intentionality and (2) materiality. The Therasense majority, also offered a second pathway for proving inequitable conduct based upon "egregious affirmative acts of misconduct." According to the court, the mere non-disclosure or omission of required information will always fit within the primary pathway while intentional affirmative misstatements that go beyond attorney argument could fit within the second pathway if sufficiently egregious. In reading the trio of Supreme Court cases, the Federal Circuit found that Keyston, Hazel-Atlas, and Precision all fit the definition of egregious misconduct.

Writing in dissent Judge O'Malley criticized the majority opinion as unduly rigid in its formulation of the unclean hands doctrine.

[B]oth the majority and [other] dissenting opinions eschew flexibility in favor of rigidity. Both opinions suggest tests for materiality to apply in all cases. Their respective materiality inquiries are black or white, while equity requires judicial consideration of shades of gray.

The majority defines materiality under a but-for test, with an exception for intentionally false affidavits filed with the PTO. The dissent, on the other hand, defines materiality according to Rule [37 C.F.R. 1.56]. Both tests fail to provide district courts with flexibility to find inequitable conduct in an extraordinary case where the conduct in question would not be defined as such under either test. This result is contrary to the very nature of equity and centuries of Supreme Court precedent. I cannot, accordingly, lend support to either of the immutable tests proposed by my colleagues.

= = = = =

Sony Computer v. 1st Media LLC (on petition for writ of certiorari 2013)

In a recently filed petition for writ of certiorari, Sony and Viacom have asked the Supreme Court return the law to the flexible tests of its old precedent. Raising the following question:

Did the Court of Appeals for the Federal Circuit err in restricting district courts' equitable discretion in evaluating patent unenforceability, contrary to this Court's precedent in Keystone Driller, Hazel-Atlas, and Precision Instrument, by applying a rigid test that (a) forecloses district courts from considering the entire circumstantial record; and (b) precludes district courts from granting equitable remedies where a patent applicant has violated the PTO's duty of candor.

The Federal Circuit intended that the second pathway for egregious misconduct add sufficient flexibility to fit within the Supreme Court's doctrine. Sony responds that the limited carve-out "is flawed because it creates a rigid threshold [of an egregious affirmative act of misconduct] as a prerequisite to the equitable discretion called for by this Court's precedent. The flexibility embodied in this Court's precedent should apply in all cases, not just those involving affirmative egregious misconduct."

Read Sony's Petition:  Download 1st Media Certiorari Petition

Related articles
Unenforceability
Despite Therasense: Federal Circuit Finds Aventis Patent Unenforceable
Unenforceable Patents
Therasense v. BD: En Banc Federal Circuit Raises Bar for Proving Inequitable Conduct and Unenforceability
Therasense: Encouraging Intentional Deception?
Predicting En Banc Issues

Limited Equitable Estoppel for 4 ½ Year Delay in License Pursuits

Patent, ,

By Dennis Crouch

Radio Systems Corp. v. Lalor (Fed. Cir. 2013) (Moore (majority author), Reyna, & Newman (in partial dissent)).

In a split decision, the Federal Circuit has affirmed that the judicial doctrine of equitable estoppel applies to block a patentee from alleging patent infringement following a five-year delay in pursuing charges. Writing in partial dissent, Judge Newman argued that estoppel should additionally apply to family members of the patent in question.

In the 1992 en banc decision of Aukerman v. Chaides Constr., the Federal Circuit identified three elements of the equitable estoppel doctrine applicable here:

  1. Misleading Silence: The patentee, through misleading conduct (or silence), leads the alleged infringer to reasonably infer that the patentee does not intend to enforce its patent against the alleged infringer;
  2. Reliance: The alleged infringer relies on that conduct; and
  3. Prejudice: The alleged infringer will be materially prejudiced if the patentee is allowed to proceed with its claim.

As background, the patentee (Bumper Boy) sent a demand letter to Innotek back in 2005. The letter indicated that Innotek's "UltraSmart" dog collar infringed Bumper Boy's U.S. Patent No. 6,830,014. Innotek quickly responded with a letter claiming that the patent was invalid. Following that, there was no communication between the parties for 4 ½ years. In fact, Bumper Boy never again communicated with Innotek because that company was acquired by Radio Systems. Radio Systems continued to develop the UltraSmart and other dog collar product lines. Meanwhile, Bumper Boy filed a continuation application and obtained a second patent in 2007 (U.S. Patent No. 7,267,082) with a somewhat more focused claim scope. In 2009, Bumper Boy sent a demand letter to Radio Systems alleging infringement of both the old '014 patent and the new '082 patent.

Radio Systems then filed a declaratory judgment action and the district court awarded summary judgment for Radio Systems. The summary judgment ruling held the patentee equitably estopped from pursuing an infringement action against the UltraSmart products based on either the old or the new patent.

On appeal, the Federal Circuit has affirmed-in-part – affirming that the patentee is estopped from suing the successor-in-interest (Radio Systems) on the old patent (subject of the 2005 letter exchange) but denying to extend the estoppel to the new family-member patent that was not mentioned in the letter and that had not issued at the time.

Judge Moore's language suggests that equitable estoppel could never apply to pending patent applications. She writes "quite simply, the '082 patent claims could not have been asserted against Innotek or Radio Systems until those claims issued." However, that interpretation of the decision is likely unduly expansive – especially since a patentee can collect back-damages for pre-issuance infringement under 35 U.S.C. § 154(d). Thus, for instance, a patentee who sends a pre-issuance 154(d) notice of infringement and then waits to sue for four years following the issuance may well (in my estimation) fall within the realm of equitable estoppel. Of course, these are hypothetical facts that do not apply in the Radio Systems case. A second potential factor in the decision here is that the patentee added new matter to the second patent, but the majority appears to have disregarded that fact as immaterial since the asserted claims do not rely on new matter.

Judge Newman has previously provided an expansive view of equitable estoppel in her majority opinion in the case of Aspex Eyewear v. Clariti Eyewear (Fed. Cir. 2009) (Judge Rader dissenting). In the present caes, Judge Newman penned a quite short opinion that argued that the estoppel should be extended to the continuation application, although her analysis does not directly confront the majority's reasoning. 

A second pressure point in the decision involves the corporate restructuring from Innotek to Radio Systems. The Federal Circuit has previously held that equitable estoppel can be claimed by successors-in-interest where privity has been established. Jamesbury Corp. v. Litton Indus. Prods., Inc., 839 F.2d 1544 (Fed. Cir. 1988). At some point, there may be a need to explore the privity element, but here that was not a real problem since Radio Systems (1) wholly owns Innotek, (2) is headed by the same individual as Innotek, (3) incorporated Innotek designs and products in its own product lines; and (4) exerts substantial control over Innotek. In my view, privity alone should be insufficient to transfer equitable estoppel rights to the new entity if the estoppel has not yet vested and if the patentee has no reasonable knowledge of the shift.

This decision provides some food-for-thought to patentees. On the one hand it places more pressure of having enforcement-through-litigation as a genuine and timely option during any license negotiations. On the other hand, the case also offers a roadmap for avoiding equitable estoppel problems with the use of continuation applications.

Patent versus Portfolio: The conceptual problem with this decision is one that we'll be struggling to deal with for years – and that is the distinctions between a single patent claim, a single patent, a family of patents, and a portfolio of loosely related patents. The law still largely focuses on single patent claims while business leaders are increasingly focused on a portfolio analysis. Equitable estoppel is largely related to reasonable reliance by business leaders and in that context it makes sense to apply the estoppel principles to a portfolio rather than single claims or single patents.

= = = = =

In addition to the estoppel decision, the lower court also found that the claims were not infringed by other Radio Systems products. In the appeal, the Radio Systems offered as an alternative ground for affirmance that the asserted patents were invalid. However, the Federal Circuit refused to hear that contention on technical grounds since the contention was raised in an opposition brief rather than as a cross-appeal. An invalidity holding is generally broader than a holding of equitable estoppel or non-infringement since those holdings are limited to the products or parties involved in the case. Invalidity on the other hand will apply to all future Radio Systems products as well as other would-be infringers and even current licensees. That change-in-scope creates a problem for Radio systems because of the ordinary rule that an appellee cannot request expansion of the lower court holding. Rather, a party unsatisfied with the scope of a lower court ruling must become an appellant by filing an appeal or cross-appeal.

The Supreme Court has long recognized that "[a]bsent a cross appeal, an appellee . . . may not attack the decree with a view either to enlarging his own rights thereunder or of lessening the rights of his adversary." El Paso Nat. Gas Co. v. Neztsosie, 526 U.S. 473 (1999). We have held that a judgment of invalidity is broader than a judgment of noninfringement. "[A] determination of infringement applies only to a specific accused product or process, whereas invalidity operates as a complete defense to infringement for any product, forever." Typeright Keyboard Corp. v. Microsoft Corp., 374 F.3d 1151 (Fed. Cir. 2004). Thus, invalidity cannot be an alternative ground for affirming a judgment of noninfringment absent a cross-appeal.

While we acknowledge the inefficiency that may result from requiring cross-appeals in situations where the scope of a judgment would be enlarged, we are cabined by our jurisdiction and may not reach issues that are not properly before us. On remand, Radio Systems may pursue its invalidity defense in further proceedings, and, should there be additional rulings on invalidity by the district court, Radio Systems may pursue a proper appeal at that time. Because Radio Systems did not properly file a cross-appeal on the invalidity issue in this appeal, Bumper Boy's motion to strike Radio System' alternative grounds for affirmance is granted.

Just to be clear, it doesn't appear that Radio Systems failure to file a cross-appeal was a technical error. Rather, the company could not file an appeal arguing invalidity because the district court had not reached that issue yet.

Limited Equitable Estoppel for 4 ½ Year Delay in License Pursuits

Patent, ,

By Dennis Crouch

Radio Systems Corp. v. Lalor (Fed. Cir. 2013) (Moore (majority author), Reyna, & Newman (in partial dissent)).

In a split decision, the Federal Circuit has affirmed that the judicial doctrine of equitable estoppel applies to block a patentee from alleging patent infringement following a five-year delay in pursuing charges. Writing in partial dissent, Judge Newman argued that estoppel should additionally apply to family members of the patent in question.

In the 1992 en banc decision of Aukerman v. Chaides Constr., the Federal Circuit identified three elements of the equitable estoppel doctrine applicable here:

  1. Misleading Silence: The patentee, through misleading conduct (or silence), leads the alleged infringer to reasonably infer that the patentee does not intend to enforce its patent against the alleged infringer;
  2. Reliance: The alleged infringer relies on that conduct; and
  3. Prejudice: The alleged infringer will be materially prejudiced if the patentee is allowed to proceed with its claim.

As background, the patentee (Bumper Boy) sent a demand letter to Innotek back in 2005. The letter indicated that Innotek's "UltraSmart" dog collar infringed Bumper Boy's U.S. Patent No. 6,830,014. Innotek quickly responded with a letter claiming that the patent was invalid. Following that, there was no communication between the parties for 4 ½ years. In fact, Bumper Boy never again communicated with Innotek because that company was acquired by Radio Systems. Radio Systems continued to develop the UltraSmart and other dog collar product lines. Meanwhile, Bumper Boy filed a continuation application and obtained a second patent in 2007 (U.S. Patent No. 7,267,082) with a somewhat more focused claim scope. In 2009, Bumper Boy sent a demand letter to Radio Systems alleging infringement of both the old '014 patent and the new '082 patent.

Radio Systems then filed a declaratory judgment action and the district court awarded summary judgment for Radio Systems. The summary judgment ruling held the patentee equitably estopped from pursuing an infringement action against the UltraSmart products based on either the old or the new patent.

On appeal, the Federal Circuit has affirmed-in-part – affirming that the patentee is estopped from suing the successor-in-interest (Radio Systems) on the old patent (subject of the 2005 letter exchange) but denying to extend the estoppel to the new family-member patent that was not mentioned in the letter and that had not issued at the time.

Judge Moore's language suggests that equitable estoppel could never apply to pending patent applications. She writes "quite simply, the '082 patent claims could not have been asserted against Innotek or Radio Systems until those claims issued." However, that interpretation of the decision is likely unduly expansive – especially since a patentee can collect back-damages for pre-issuance infringement under 35 U.S.C. § 154(d). Thus, for instance, a patentee who sends a pre-issuance 154(d) notice of infringement and then waits to sue for four years following the issuance may well (in my estimation) fall within the realm of equitable estoppel. Of course, these are hypothetical facts that do not apply in the Radio Systems case. A second potential factor in the decision here is that the patentee added new matter to the second patent, but the majority appears to have disregarded that fact as immaterial since the asserted claims do not rely on new matter.

Judge Newman has previously provided an expansive view of equitable estoppel in her majority opinion in the case of Aspex Eyewear v. Clariti Eyewear (Fed. Cir. 2009) (Judge Rader dissenting). In the present caes, Judge Newman penned a quite short opinion that argued that the estoppel should be extended to the continuation application, although her analysis does not directly confront the majority's reasoning. 

A second pressure point in the decision involves the corporate restructuring from Innotek to Radio Systems. The Federal Circuit has previously held that equitable estoppel can be claimed by successors-in-interest where privity has been established. Jamesbury Corp. v. Litton Indus. Prods., Inc., 839 F.2d 1544 (Fed. Cir. 1988). At some point, there may be a need to explore the privity element, but here that was not a real problem since Radio Systems (1) wholly owns Innotek, (2) is headed by the same individual as Innotek, (3) incorporated Innotek designs and products in its own product lines; and (4) exerts substantial control over Innotek. In my view, privity alone should be insufficient to transfer equitable estoppel rights to the new entity if the estoppel has not yet vested and if the patentee has no reasonable knowledge of the shift.

This decision provides some food-for-thought to patentees. On the one hand it places more pressure of having enforcement-through-litigation as a genuine and timely option during any license negotiations. On the other hand, the case also offers a roadmap for avoiding equitable estoppel problems with the use of continuation applications.

Patent versus Portfolio: The conceptual problem with this decision is one that we'll be struggling to deal with for years – and that is the distinctions between a single patent claim, a single patent, a family of patents, and a portfolio of loosely related patents. The law still largely focuses on single patent claims while business leaders are increasingly focused on a portfolio analysis. Equitable estoppel is largely related to reasonable reliance by business leaders and in that context it makes sense to apply the estoppel principles to a portfolio rather than single claims or single patents.

= = = = =

In addition to the estoppel decision, the lower court also found that the claims were not infringed by other Radio Systems products. In the appeal, the Radio Systems offered as an alternative ground for affirmance that the asserted patents were invalid. However, the Federal Circuit refused to hear that contention on technical grounds since the contention was raised in an opposition brief rather than as a cross-appeal. An invalidity holding is generally broader than a holding of equitable estoppel or non-infringement since those holdings are limited to the products or parties involved in the case. Invalidity on the other hand will apply to all future Radio Systems products as well as other would-be infringers and even current licensees. That change-in-scope creates a problem for Radio systems because of the ordinary rule that an appellee cannot request expansion of the lower court holding. Rather, a party unsatisfied with the scope of a lower court ruling must become an appellant by filing an appeal or cross-appeal.

The Supreme Court has long recognized that "[a]bsent a cross appeal, an appellee . . . may not attack the decree with a view either to enlarging his own rights thereunder or of lessening the rights of his adversary." El Paso Nat. Gas Co. v. Neztsosie, 526 U.S. 473 (1999). We have held that a judgment of invalidity is broader than a judgment of noninfringement. "[A] determination of infringement applies only to a specific accused product or process, whereas invalidity operates as a complete defense to infringement for any product, forever." Typeright Keyboard Corp. v. Microsoft Corp., 374 F.3d 1151 (Fed. Cir. 2004). Thus, invalidity cannot be an alternative ground for affirming a judgment of noninfringment absent a cross-appeal.

While we acknowledge the inefficiency that may result from requiring cross-appeals in situations where the scope of a judgment would be enlarged, we are cabined by our jurisdiction and may not reach issues that are not properly before us. On remand, Radio Systems may pursue its invalidity defense in further proceedings, and, should there be additional rulings on invalidity by the district court, Radio Systems may pursue a proper appeal at that time. Because Radio Systems did not properly file a cross-appeal on the invalidity issue in this appeal, Bumper Boy's motion to strike Radio System' alternative grounds for affirmance is granted.

Just to be clear, it doesn't appear that Radio Systems failure to file a cross-appeal was a technical error. Rather, the company could not file an appeal arguing invalidity because the district court had not reached that issue yet.

Limited Equitable Estoppel for 4 ½ Year Delay in License Pursuits

Patent, ,

By Dennis Crouch

Radio Systems Corp. v. Lalor (Fed. Cir. 2013) (Moore (majority author), Reyna, & Newman (in partial dissent)).

In a split decision, the Federal Circuit has affirmed that the judicial doctrine of equitable estoppel applies to block a patentee from alleging patent infringement following a five-year delay in pursuing charges. Writing in partial dissent, Judge Newman argued that estoppel should additionally apply to family members of the patent in question.

In the 1992 en banc decision of Aukerman v. Chaides Constr., the Federal Circuit identified three elements of the equitable estoppel doctrine applicable here:

  1. Misleading Silence: The patentee, through misleading conduct (or silence), leads the alleged infringer to reasonably infer that the patentee does not intend to enforce its patent against the alleged infringer;
  2. Reliance: The alleged infringer relies on that conduct; and
  3. Prejudice: The alleged infringer will be materially prejudiced if the patentee is allowed to proceed with its claim.

As background, the patentee (Bumper Boy) sent a demand letter to Innotek back in 2005. The letter indicated that Innotek's "UltraSmart" dog collar infringed Bumper Boy's U.S. Patent No. 6,830,014. Innotek quickly responded with a letter claiming that the patent was invalid. Following that, there was no communication between the parties for 4 ½ years. In fact, Bumper Boy never again communicated with Innotek because that company was acquired by Radio Systems. Radio Systems continued to develop the UltraSmart and other dog collar product lines. Meanwhile, Bumper Boy filed a continuation application and obtained a second patent in 2007 (U.S. Patent No. 7,267,082) with a somewhat more focused claim scope. In 2009, Bumper Boy sent a demand letter to Radio Systems alleging infringement of both the old '014 patent and the new '082 patent.

Radio Systems then filed a declaratory judgment action and the district court awarded summary judgment for Radio Systems. The summary judgment ruling held the patentee equitably estopped from pursuing an infringement action against the UltraSmart products based on either the old or the new patent.

On appeal, the Federal Circuit has affirmed-in-part – affirming that the patentee is estopped from suing the successor-in-interest (Radio Systems) on the old patent (subject of the 2005 letter exchange) but denying to extend the estoppel to the new family-member patent that was not mentioned in the letter and that had not issued at the time.

Judge Moore's language suggests that equitable estoppel could never apply to pending patent applications. She writes "quite simply, the '082 patent claims could not have been asserted against Innotek or Radio Systems until those claims issued." However, that interpretation of the decision is likely unduly expansive – especially since a patentee can collect back-damages for pre-issuance infringement under 35 U.S.C. § 154(d). Thus, for instance, a patentee who sends a pre-issuance 154(d) notice of infringement and then waits to sue for four years following the issuance may well (in my estimation) fall within the realm of equitable estoppel. Of course, these are hypothetical facts that do not apply in the Radio Systems case. A second potential factor in the decision here is that the patentee added new matter to the second patent, but the majority appears to have disregarded that fact as immaterial since the asserted claims do not rely on new matter.

Judge Newman has previously provided an expansive view of equitable estoppel in her majority opinion in the case of Aspex Eyewear v. Clariti Eyewear (Fed. Cir. 2009) (Judge Rader dissenting). In the present caes, Judge Newman penned a quite short opinion that argued that the estoppel should be extended to the continuation application, although her analysis does not directly confront the majority's reasoning. 

A second pressure point in the decision involves the corporate restructuring from Innotek to Radio Systems. The Federal Circuit has previously held that equitable estoppel can be claimed by successors-in-interest where privity has been established. Jamesbury Corp. v. Litton Indus. Prods., Inc., 839 F.2d 1544 (Fed. Cir. 1988). At some point, there may be a need to explore the privity element, but here that was not a real problem since Radio Systems (1) wholly owns Innotek, (2) is headed by the same individual as Innotek, (3) incorporated Innotek designs and products in its own product lines; and (4) exerts substantial control over Innotek. In my view, privity alone should be insufficient to transfer equitable estoppel rights to the new entity if the estoppel has not yet vested and if the patentee has no reasonable knowledge of the shift.

This decision provides some food-for-thought to patentees. On the one hand it places more pressure of having enforcement-through-litigation as a genuine and timely option during any license negotiations. On the other hand, the case also offers a roadmap for avoiding equitable estoppel problems with the use of continuation applications.

Patent versus Portfolio: The conceptual problem with this decision is one that we'll be struggling to deal with for years – and that is the distinctions between a single patent claim, a single patent, a family of patents, and a portfolio of loosely related patents. The law still largely focuses on single patent claims while business leaders are increasingly focused on a portfolio analysis. Equitable estoppel is largely related to reasonable reliance by business leaders and in that context it makes sense to apply the estoppel principles to a portfolio rather than single claims or single patents.

= = = = =

In addition to the estoppel decision, the lower court also found that the claims were not infringed by other Radio Systems products. In the appeal, the Radio Systems offered as an alternative ground for affirmance that the asserted patents were invalid. However, the Federal Circuit refused to hear that contention on technical grounds since the contention was raised in an opposition brief rather than as a cross-appeal. An invalidity holding is generally broader than a holding of equitable estoppel or non-infringement since those holdings are limited to the products or parties involved in the case. Invalidity on the other hand will apply to all future Radio Systems products as well as other would-be infringers and even current licensees. That change-in-scope creates a problem for Radio systems because of the ordinary rule that an appellee cannot request expansion of the lower court holding. Rather, a party unsatisfied with the scope of a lower court ruling must become an appellant by filing an appeal or cross-appeal.

The Supreme Court has long recognized that "[a]bsent a cross appeal, an appellee . . . may not attack the decree with a view either to enlarging his own rights thereunder or of lessening the rights of his adversary." El Paso Nat. Gas Co. v. Neztsosie, 526 U.S. 473 (1999). We have held that a judgment of invalidity is broader than a judgment of noninfringement. "[A] determination of infringement applies only to a specific accused product or process, whereas invalidity operates as a complete defense to infringement for any product, forever." Typeright Keyboard Corp. v. Microsoft Corp., 374 F.3d 1151 (Fed. Cir. 2004). Thus, invalidity cannot be an alternative ground for affirming a judgment of noninfringment absent a cross-appeal.

While we acknowledge the inefficiency that may result from requiring cross-appeals in situations where the scope of a judgment would be enlarged, we are cabined by our jurisdiction and may not reach issues that are not properly before us. On remand, Radio Systems may pursue its invalidity defense in further proceedings, and, should there be additional rulings on invalidity by the district court, Radio Systems may pursue a proper appeal at that time. Because Radio Systems did not properly file a cross-appeal on the invalidity issue in this appeal, Bumper Boy's motion to strike Radio System' alternative grounds for affirmance is granted.

Just to be clear, it doesn't appear that Radio Systems failure to file a cross-appeal was a technical error. Rather, the company could not file an appeal arguing invalidity because the district court had not reached that issue yet.

Debate on Joint/Divided Infringement Doctrine Continues

Patent,

by Dennis Crouch

Move, Inc. v. Real Estate Alliance (REAL) (Fed. Cir. 2013)

REAL owns U.S. Patent No. 5,032,989 that covers a computerized map-based system for locating available real estate.  Although the patent is now expired, MOVE filed a declaratory judgment action to stop REAL from pursuing back-damages.

Claim 1 appears to read on most online real-estate systems.  The method includes the following steps:

(a) creating a database of the available real estate properties;
(b) displaying a map of a desired geographic area;
(c) selecting a first area having boundaries within the geographic area;
(d) zooming in on the first area of the displayed map to about the boundaries of the first area to display a higher level of detail than the displayed map;
(e) displaying the first zoomed area;
(f) selecting a second area having boundaries within the first zoomed area;
(g) displaying the second area and a plurality of points within the second area, each point representing the appropriate geographic location of an available real estate property; and
(h) identifying available real estate properties within the database which are located within the second area.

REAL’s problem, of course, is on the question of divided infringement. The accused infringers “create the database” while independent users select the various areas.  In that situation, neither party could be considered a “direct infringer” under the traditional Federal Circuit rule that direct infringement occurs only when a single actor performs each and every element of an asserted claim. 

Of course the law has changed somewhat since the district court’s January 2012 dismissal of the case.  In August 2012, the Federal Circuit issued its en banc rulings in the parallel cases of Akamai Tech. v. Limelight Networks, 692 F.3d 1301 (Fed. Cir. 2012) and Mckesson Tech. v. Epic Systems (Fed. Cir. 2012). In those cases, the court expanded the potential for liability for so-called divided-infringement under the rubric of inducement. In particular, to prove inducement liability, “it is no longer necessary to prove that all the steps were committed by a single entity."

On appeal, the Federal Circuit agreed that there is no direct infringement. “If the performance of those steps is not attributable to Move, then Move cannot be directly liable for infringing REAL’s asserted method claim.”  However, the court remanded on the question of inducement:

We conclude that the district court legally erred by not analyzing inducement under 35 U.S.C. § 271(b). Recently, sitting en banc in Akamai, we clarified the law on inducement. We explained that all the steps of a claimed method must be performed in order to find induced infringement, but that it is not necessary to prove that all the steps were committed by a single entity. In so holding, we overruled the holding in BMC that in order for a party to be liable for induced infringement, some other entity must be liable for direct infringement.

On remand, REAL may be able to prove that it induced users to act in a way that completed all of the claimed step.  However, inducement raises some difficulty because it also requires that the accused inducer have knowledge of the patent (or be willfully blind) and have intended for their actions to induce the infringement.
 
In the background, both Akamai and Epic Systems have filed pending petitions for Supreme Court review. Epic’s question is most pointed: “Whether a defendant may be held liable for inducing infringement of a patent that no one is liable for infringing.” Akamai has asked the Supreme Court to push the envelope on direct infringement by holding that concerted action by two parties can result in direct infringement liability.  Those cases are at the petitions stage and briefing is ongoing.
In the past, I have suggested that liability should persist based upon infringement by conspiracy. 

Waiting for Federal Circuit Decisions

Patent,

by Dennis Crouch

I am regularly asked how long it will take for the Court of Appeals for the Federal Circuit to issue its decision in a given patent case. The chart below helps to answer that question. The chart shows a set of boxplots for the timing of Federal Circuit patent decisions appealed from US District Courts.  At its most basic, the chart attempts to provide some guidance as to typical timelines from Federal Circuit oral argument until the resulting decision. The boxplot shows the range between the 25th and 75th percentile of that pendency and also the median pendency.

As is apparent, non-precedential opinions (including Rule 36 decisions) are much quicker than precedential decisions.  With a comparative median of 7 days to about 4 months respectively.  The group as a whole (precedential and non-precedential) has a median pendency of 70 days.

022413_1623_WaitingforF1

Although not shown here, one driver of even-longer precedential opinions is the appearance of a dissenting opinion — adding about two months to the typical timeline.  And, en banc decisions take approximately twice as long as ordinary precedential decisions.  The slowest authors are Judge Newman, Rader, and O'Malley; the quickest are Judges Lourie, Moore, and Dyk. 

Does the Presumption of Validity Apply to Section 101 Subject-Matter-Eligibility Questions?

Patent, ,

By Dennis Crouch

One issue put before the en banc Federal Circuit in CLS Bank v. Alice is whether the presumption of validity applies to subject matter eligibility questions. The statute, 35 U.S.C. § 282 indicates that "A patent shall be presumed valid" and in Microsoft Corp. v. i4i Ltd. Partnership, 564 U.S. (2011), the Supreme Court confirmed that presumption can only be overcome with clear and convincing evidence of invalidity. However, in cases like Mayo and Bilski the Supreme Court has not provided even one suggestion supporting the notion that subject matter eligibility challenges are treated with such a presumption.

There are a few reasons to think that the strong presumption of validity does not apply to subject matter eligibility questions.

Subject matter eligibility is a question of law and is normally based on very few factual determinations. It is that setup that allowed the district court to rule on CLS Bank's Section 101 so early in the present case. As Justice Breyer wrote in his i4i concurring opinion, "evidentiary standards of proof apply to questions of fact and not to questions of law." Under Justice Breyer's construct, any facts that serve as a basis for an eligibility challenge would need to be justified with clear and convincing evidence, but with questions of law we demand that the judge apply the correct legal standard and do away with any other evidentiary burden. The particular facts in this case further weigh against the a strong presumption of validity in this case because the patent prosecution history file show that the PTO applied a less rigorous patent eligibility test than that required by Bilski and Mayo.

In its reply brief, CLS Bank picks up on Professor Hricik's 2012 essay where he questioned whether courts are correct in their assumption that a patent issued on non-patentable subject matter is invalid and my follow-on essay questioning whether a third party can challenge subject matter eligibility in the new Post-Grant Review procedure. Both essays looked at the defenses identified by 35 U.S.C. § 282 and argued that Section 101 may well fall outside the scope of those statutory defenses. At first blush, our arguments appear to favor the patentee by saying that an issued patent cannot be challenged on Section 101 grounds. However, CLS Bank provides an interesting twist that begins with the understanding that we know from Mayo that issued patents can definitely be challenged under Section 101. In its brief, CLS Bank reconciles these competing factors with the suggestion that the 101 challenge is an eligibility challenge rather than a validity challenge.

CLS Bank writes:

More generally, the presumption of validity does not apply to patent eligibility challenges. The Supreme Court did not even mention the presumption in Mayo, Bilski, Diehr, Flook, or Benson. That makes sense because what Congress named the "[p]resumption of validity" applies only to the statutory bases for invalidating a patent. As the Supreme Court has explained, Section 101 is a "threshold test." Bilski. It defines subject-matter eligibility for patenting and is judicially enforceable before any bases for invalidity are ever reached. Mayo.

The Supreme Court's consistent practice finds support in the text of the Patent Act. The Act applies the presumption explicitly to Section 102, 103, 112, and 251, and "[a]ny other fact or act made a defense by [the Act]." 35 U.S.C. § 282. Section 101 is conspicuously missing. Nor is Section 101 a "fact or act made a defense by [the Act]," because its drafting reflects that it is an eligibility "threshold." See Bilski.

This second argument is perhaps too clever by half – especially when you read the penultimate sentence of Mayo where the court writes that "[t]he claims are consequently invalid." In this most recent pronouncement, the Supreme Court appears to believe that the eligibility question is indeed a validity question. Assuming Mayo forecloses the eligibility-not-validity argument, CLS Bank is left in the uncomfortable position of simply arguing that eligibility questions do not qualify as a proper defense.