PATENTS / DOCTRINE OF EQUIVALENTS / PROSECUTION HISTORY ESTOPPEL
“Tangential Relation” Exception Saves Patentee’s Reliance on DOE
Mandy H. Kim
Addressing an infringement determination under the doctrine of equivalents (DOE), the US Court of Appeals for the Federal Circuit found that the “tangential relation” exception to the doctrine of prosecution history estoppel (PHE) applied and thus infringement under DoE was not precluded. Ajinomoto Co., Inc. v. Int’l Trade Comm’n, Case Nos. 18-1590, -1629 (Fed. Cir. Aug. 6, 2019) (Taranto, J) (Dyk, J, concurring in part, dissenting in part).
Ajinomoto filed a complaint against CJ CheilJedang with the US International Trade Commission (ITC), alleging that CJ violated § 337 by importing certain animal-feed-grade L-tryptophan products produced by a process that infringed Ajinomoto’s patent. The patent covered a method of using genetically engineered Escherichia coli bacteria to increase their production of aromatic L-amino acids, such as L-tryptophan. The ITC determined that CJ’s earlier E. coli strains did not infringe, but that CJ’s two later strains did. The ITC also found that the patent was not invalid for lack of written description. Ajinomoto appealed the ITC’s claim construction underlying the determination of no infringement by the earlier strains. CJ cross-appealed the determination of infringement by the later strains and rejection of the validity challenge.
The Federal Circuit affirmed. Turning first to the ITC’s finding of no infringement by the earlier E. coli strains, the Court agreed with the ITC’s claim construction of the term “replacing the native promoter . . . with a more potent promoter.” After reviewing the intrinsic evidence, the Court found that this term meant removing the entire native promoter as a unit rather than replacement by mutagenesis of a single nucleotide of the promoter. The Court noted that this was “a case where the applicants surrendered more than may have been necessary” by changing the word “alteration” (which would have covered mutations to single nucleotides) to “replacing.”
Turning to the ITC’s infringement determination by the later E. coli strains, the Federal Circuit rejected CJ’s two arguments on appeal: (1) that PHE barred Ajinomoto from relying on the DOE and (2) that the later strains could not be found to be equivalents under the function-way-result test. The Court noted that CJ’s argument involved an unusual circumstance because the infringement determination rested not on finding an equivalent of the new claim language but on finding an equivalent that was not itself altered by the amendment at issue. The Court agreed that the “tangential relationship” exception to the DOE—which asks “whether the [patentee’s objectively apparent] reason for the narrowing amendment was peripheral, or not directly relevant, to the alleged equivalent”—applied. The Court then proceeded to find that substantial evidence supported the ITC’s finding of equivalence under the function-way-result test.
Finally, the Federal Circuit affirmed the ITC’s rejection of the validity challenge for lack of written description, finding that the patent disclosed a representative number of species and common structural features. In doing so, the Court stated that the patent disclosed four examples of potent promoters and incorporated art that disclosed 14 additional potent promoters along with a general methodology for determining promoter strength in E. coli bacteria such that a skilled artisan could make relatively predictable changes to the native promoter to arrive at a more potent promoter.
Judge Dyk dissented only as to the majority’s conclusion that Ajinomoto had successfully rebutted the presumption of PHE under the “tangential relation” exception. Noting that the Federal Circuit has consistently described this exception as “very narrow,” he stated that the majority’s analysis ignored how the patentee deliberately elected to narrow the claims to avoid anticipating prior art (a prior art protein based on its encoding nucleotide sequence that does not meet the newly claimed hybridization requirement), and that rationale was directly related to the accused equivalent (a protein made by an encoding nucleotide sequence that does not meet the newly claimed hybridization requirement).
PATENTS / ESTOPPEL (§ 317(b) FINAL DECISION)
A Decision on Appeal Is Final . . . Mostly
In the latest round of the Apple/VirnetX saga, the US Court of Appeals for the Federal Circuit held to its precedents in determining when 35 USC § 317(b) estoppel is triggered against inter partes re-examinations. VirnetX Inc. v. Apple, Inc., Case Nos. 17-1591, -1592, -1593 (Fed. Cir. Aug. 1, 2019) (Prost, J) (Reyna, J, dissenting in part).
After VirnetX alleged that Apple infringed four of its patents in district court in 2010, Apple (in October 2011) filed requests for inter partes re-examination of two of the patents before the US Patent and Trademark Office (PTO), challenging all claims of the asserted patents as anticipated or obvious over prior art (Apple re-exams). Before the PTO examiner reached a decision on the Apple re-exams, a jury in the district court proceedings found that the asserted claims were infringed and not invalid, and awarded VirnetX $386 million in damages. Apple appealed the district court’s denial of motion for judgment as a matter of law to the Federal Circuit, but in December 2014, in VirnetX I, the Court affirmed the jury’s finding of no invalidity for all four patents, as well as infringement for many of the claims not related to the instant appeal. In VirnetX I, the Court vacated the construction of one term and the damages relevant to the patents at issue in this appeal, and remanded for further proceedings. Apple did not file a request for rehearing on the Court’s invalidity or noninfringement affirmances of VirnetX I, and did not seek Supreme Court review.
On remand, the jury again found infringement by Apple as to certain claims and awarded damages to VirnetX. Apple appealed, and earlier in 2019, the Federal Circuit affirmed the jury verdict and award (IP Update, Vol. 22, No. 1).
In the parallel Apple re-exams, in May 2014, the PTO examiner found all claims of the two patents unpatentable and issued right to appeal notices (RANs). VirnetX appealed the examiner’s decisions to the Patent Trial and Appeal Board (PTAB) and also petitioned the PTO to terminate the Apple re-exams based on the estoppel provision of § 317(b). VirnetX’s petition was denied in June 2015. In September 2016, the PTAB affirmed the examiner’s finding of unpatentability as to all claims of the two patents and denied VirnetX’s requests for rehearing. VirnetX appealed to the Federal Circuit and moved for remand. A motions panel denied VirnetX’s motion for remand in June 2017.
In 2010, VirnetX also sued Cisco, alleging that it infringed VirnetX’s patents. Cisco responded by filing for inter partes re-examination in December 2011 (Cisco re-exam). The examiner in the Cisco re-exam issued a RAN in January 2015, rejecting certain claims as anticipated or obvious. Once again VirnetX appealed to the PTAB, and in September 2017 the PTAB affirmed the examiner. VirnetX’s motion for rehearing was denied, and VirnetX appealed.
On appeal, VirnetX argued that Apple was estopped from maintaining its re-exams under the pre-America Invents Act (AIA) version of § 317(b), and challenged the merits of the PTAB’s conclusions in the Apple and Cisco re-exams that the patents were invalid.
Concerning the estoppel issue, VirnetX argued that the PTO erred in refusing to terminate the Apple and Cisco re-exams and in concluding that § 317(b) did not apply. VirnetX argued that the Federal Circuit’s December 2014 decision constituted a “final decision” under § 317(b), estopping further attempts by Apple to prove invalidity.
Reviewing the statutory interpretation issue de novo, the Federal Circuit first considered the pre-AIA § 317(b) which recites as follows:
Once a final decision has been entered against a party in a civil action arising in whole or in part under section 1338 of title 28, that the party has not sustained its burden of proving the invalidity of any patent claim in suit . . . then neither that party nor its privies may thereafter request an inter partes reexamination of any such patent claim on the basis of issues which that party or its privies raised or could have raised in such civil action or inter partes reexamination proceeding, and an inter partes reexamination requested by that party or its privies on the basis of such issues may not thereafter be maintained by the Office, notwithstanding any other provision of this chapter.
The parties did not dispute that the “civil action arising . . . under [28 USC §] 1338” was the 2010 complaint, to which Apple raised an affirmative defense of invalidity on multiple grounds. Therefore, Apple had the “burden of proving the invalidity of [the asserted] patent claim[s] in suit.” The Federal Circuit noted that Apple presented its invalidity defenses to a jury in a week-long trial in 2012, that the jury concluded that Apple “failed to sustain its burden of proving the invalidity” of asserted claims, and that the district court found the evidence presented substantial enough to support the jury’s finding and enter final judgment. Similarly, the Federal Circuit noted that district court judgment was affirmed by this Court in VirnetX I.
In denying termination of the re-exams, the PTO accepted Apple’s argument that there was not yet a final decision on invalidity. Apple maintained that any issues vacated and remanded by the Court in VirnetX I may be reviewed on appeal, and that Apple may choose to file a petition for certiorari, asking the Supreme Court of the United States to look at any issues, including those decided in VirnetX I. Because the Supreme Court has “authority to consider questions determined in earlier stages of the litigation where certiorari is sought from the most recent of the judgments of the Court of Appeal” (Mercer), Apple argued that the decision on invalidity is only final when there is no potential for Supreme Court review of it.
The Federal Circuit disagreed, concluding that there is a “final decision” on a party’s attempt to prove invalidity after the party fails to petition for certiorari within the 90-day time period. The Court reiterated its 2017 decision in Fairchild (IP Update, Vol. 20, No. 5) as it relates to a binding ruling on an issue that has been litigated. Specifically, the Court explained that if a finding of no invalidity has been affirmed on appeal, a remand of other issues will not “have any effect” on validity. As for that issue, the decision is “final” once the 90-day deadline for certiorari has passed. The Court also referenced its 2011 decision in Bettcher (quoted in Fairchild) that estoppel “applies when ‘all appeals have terminated.’” Therefore, § 317(b) applies here even though issues unrelated to invalidity were remanded.
The Federal Circuit further explained that even if Fairchild did not control, the statutory text and purpose of § 317(b) compelled rejecting Apple’s theory that the entire case must be resolved in a final judgement in order to trigger estoppel. Rather, the Court found that the statute only required “a final decision” on the precise issue of “whether the party has ‘sustained its burden of proving the invalidity of any patent claim in suit,’” explaining that the plain language of the statute (and its legislative intent) demands a party cease duplicative invalidity challenges via re-exams in the PTO once “a final decision” has been reached on an invalidity challenge in a civil action.
The Federal Circuit vacated the PTAB decision and remanded the case to terminate the Apple re-exams with respect to certain claims. Referencing § 317(b)’s “raised” or “could have raised” language, the Court also noted that Apple did not dispute that estoppel extended to the dependent claims, as no new prior art was added in Apple’s re-exam requests or after the start of trial.
As to the merits regarding the challenged claims not subject to estoppel, the Federal Circuit found VirnetX’s “kitchen sink approach” unpersuasive. For example:
- In the absence of clear disavowal of claim scope, the PTAB properly construed claim terms.
- The PTAB’s conclusions were well supported by the examiner’s underlying factual findings, and Apple had properly carried its burden of showing invalidity to the examiner without improper burden shifting.
- There was no new argument since VirnetX had fair opportunity to respond.
- There was substantial evidence to support the invalidity conclusions.
- As found in Oil States, inter partes review is constitutional, and thus VirnetX’s arguments treating the unconstitutionality of inter partes reviews and re-examinations as interchangeable were moot.
The Court affirmed the PTAB’s decisions as to certain patents’ claims in the Apple and Cisco re-exams as unpatentable.
Judge Reyna dissented in part, disagreeing that applying Fairchild precluded re-examination. In Judge Reyna’s view, a “single appeal” is preferable to piecemeal litigation, and the Federal Circuit should not concern itself over the finality of the particular (invalidity) issue, but rather defer to Apple’s right to petition for certiorari. Thus, in Reyna’s view, there is no “final decision” that triggers a bar under § 317(b).
PATENTS / ART. III (CASE IN CONTROVERSY)
No Concrete Controversy if There Are No Claims
Bhanu K. Sadasivan, PhD
In reversing a district court decision as to whether a validity issue remained justiciable after the challenged claims were disclaimed, the US Court of Appeals for the Federal Circuit explained that the patent owner’s statutory disclaimer of certain patent claims mooted any controversy over those claims. Sanofi-Aventis U.S., LLC v. Dr. Reddy’s Labs., Inc., et al., Case Nos. 18-1804, -1808, -1809 (Fed. Cir. Aug. 14, 2019) (Lourie, J).
Sanofi owns the patent at issue covering methods of using a compound, cabazitaxel, for treating certain drug-resistant prostate cancers. Defendants filed an abbreviated new drug application to market generic versions of cabazitaxel, and Sanofi sued for patent infringement. While the district court case was pending, the Patent Trial and Appeal Board (PTAB) instituted inter partes review of certain claims of the patent-in-suit. Soon after the district court trial began, the PTAB found the patent claims obvious. The PTAB also denied Sanofi’s motion to amend the claims. Thereafter, Sanofi filed a statutory disclaimer of those claims. The district court, however, concluded that a case or controversy existed as to those disclaimed claims and invalidated them as obvious. Sanofi appealed, arguing that after it disclaimed the claims, there was no case or controversy as to those claims, and the district court lacked authority to invalidate the claims.
The Federal Circuit agreed, stating that Sanofi’s disclaimers mooted any controversy over the disclaimed claims and left the patent-in-suit “as though the disclaimed claims had never existed.”
Defendants argued that they were entitled to preserve the district court’s invalidity judgment to provide themselves with patent certainty and a potential claim preclusion defense in the event Sanofi were to succeed in amending the claims and again assert them against defendants. The Federal Circuit rejected the argument, explaining that under certain circumstances, jurisdiction may exist even when there is no risk of infringement. However, the party seeking such judicial relief must demonstrate some other concrete and realistic threat traceable to the claims that existed at the time the district court rendered its judgment, which defendants had not done in this case. As the Court explained, loss of a potential issue preclusion defense did not provide the requisite case or controversy for at least two reasons. First, the defense was “speculative,” as it was premised on hypothetical appellate reversal or remand of the PTAB’s inter partes review decision, given that the PTAB had declined to allow Sanofi to amend its claims. Second, the disclaimed claims were not material to a possible future suit.
The Federal Circuit concluded: “[w]e cannot issue an advisory opinion on such a theoretical dispute and we decline to do so here. Defendants will have ample opportunity to raise a claim preclusion defense at the district court should Sanofi sue them again.”
When Is Batting “Lofty”? Look to the Specification
In an opinion addressing the definiteness of a term of degree, the US Court of Appeals for the Federal Circuit affirmed a final determination of the US International Trade Commission (ITC), concluding that an asserted claim was not invalid because the specification explained the meaning of the claim term and provided objective boundaries on the claim’s scope with reasonable certainty. Guangdong Alison Hi-Tech Co. v. Int’l Trade Comm., Case No. 18-2042 (Fed. Cir. Aug. 27, 2019) (Stoll, J).
Aspen Aerogels filed a complaint with the ITC, alleging that Guangdong Alison imported certain materials that infringed several of its patents, including one directed to an aerogel composite that uses a “lofty fibrous structure” or “lofty batting.” During claim construction, Alison argued that the claim phrase “lofty . . . batting” was indefinite, but the administrative law judge (ALJ) disagreed, finding that the specification explained the meaning of the term. In an initial determination, the ALJ found that the claims including “lofty . . . batting” were not invalid and were infringed. The ITC affirmed, entering a limited exclusion order barring the importation of the materials. Alison appealed.
Before the Federal Circuit, Alison argued that the claim term “lofty batting” was an indefinite term of degree without a precise boundary. While the Court agreed that “lofty batting” is a term of degree, it explained that the written description provided reasonable certainty regarding the objective boundaries of claim scope. As an initial matter, the specification provided express definitions for the phrase and its components. Moreover, the patent detailed the functional characteristics of what a “lofty batting” is. The specification provided multiple examples and metrics further explicating the meaning of the term, including “particularly suitable” materials that qualify, along with metrics regarding the materials’ parameters. Furthermore, during prosecution, the examiner emphasized that the specification defined the term, and distinguished prior art based on this definition (similarly, the Patent Trial and Appeal Board denied institution of inter partes review based on an agreed construction of the term). Extrinsic evidence further confirmed the objective boundaries of the term. As the Court explained, “[s]ome modicum of uncertainty . . . is the price of ensuring the appropriate incentives for innovation.” Nautilus (IP Update, Vol. 17, No. 6).
PATENTS / CLAIM CONSTRUCTION
When Is “Wherein” Clause Limiting? When It’s Material to Patentability
The US Court of Appeals for the Federal Circuit affirmed a district court’s finding, based largely on the prosecution history, that disputed “wherein” clauses were limiting and therefore the grant of a preliminary injunction was proper. Allergan Sales, LLC v. Sandoz, Inc., Case No. 2018-2207 (Fed. Cir. Aug. 29, 2019) (Wallach, J) (Prost, CJ, concurring).
Allergan sued Sandoz for infringement of three patents after Sandoz filed its abbreviated new drug application (ANDA) for a generic version of Allergan’s ophthalmic drug Combigan®, a treatment for glaucoma and ocular hypertension. Allergan moved for a preliminary injunction, which Sandoz argued was improper because the patents in suit were invalid and therefore there was no likelihood of success on the merits. Specifically, Sandoz asserted that the “wherein” clauses present in the independent claims of the patents in suit were not limiting because they “merely state[d] the intended results of administering Combigan[®] twice daily” and were not “material to patentability.” As such, Sandoz argued that the resulting broader claims were invalid as obvious based on prior rulings. The district court found the disputed “wherein” clauses to constitute claim limitations because they were material to patentability and expressed the inventive aspect of the claimed invention—the ability of Combigan® to reduce daily administrations from TID to BID without a loss of efficacy, and with reduced adverse events. After the district court granted the preliminary injunction, Sandoz appealed.
The “wherein” clauses of the patents in suit referenced efficacy and safety limitations for a method of treatment with an indicated formulation of brimonidine and timolol. For example, claim 1 of one of the patents in suit recites:
A method of treating a patient . . . comprising . . . administering twice daily . . . a . . . composition comprising 0.2% w/v brimonidine tartrate and 0.68% w/v timolol maleate wherein the method is as effective as the administration of 0.2% w/v brimonidine tartrate monotherapy three times per day and wherein the method reduces the incidence of one [o]r more adverse events selected from the group consisting of conjunctival hyperemia, oral dryness, eye pruritus, allergic conjunctivitis, foreign body sensation, conjunctival folliculosis, and somnolence when compared to the administration of 0.2% w/v brimonidine tartrate monotherapy three times daily.
The Federal Circuit affirmed the district court, stating that the “wherein” clauses were material and expressed inventive aspects of the invention upon which the patents were allowed during examination. The majority stated that the specification identified the invention as a formulation that allowed certain improvements in safety and efficacy over the prior art. As such, these improvements were material to patentability. Further, in the prosecution history Allergan indicated that these improvements distinguished the invention from the prior art and were “unexpected results” that demonstrated that the invention was patentable and “non-obvious.” The examiner agreed and referred to such improvements as a basis for allowance.
Sandoz’s reference to case law for the proposition that “[a] whereby [or wherein] clause in a method claim is not given weight when it simply expresses the intended result of a process step” was unavailing. In this case, the Federal Circuit concluded that the prosecution history clearly indicated that the “wherein” clauses were material to patentability and not simply an “intended result” of what was already claimed in the patent language.
In her concurrence, Chief Judge Prost remarked that not only the specification and prosecution history but also the claim language itself demonstrated that the “wherein” clauses were limiting. The claims themselves are method of treatment claims that allow other solvents, buffers or additives to be present in addition to the brimonidine and timolol. Prost noted that Sandoz offered no evidence that any formulation containing the claimed dosages would necessarily satisfy the requirements of the “wherein” clauses. Additionally, nothing in the text of the claims themselves indicated that the “wherein” clauses were only statements of purpose or intended results. Rather, the clauses indicated specific effectiveness and safety parameters that must be met. Prost further cautioned that “[i]t is a ‘bedrock principle’ of patent law that the claims of a patent define the invention,” and one should be cautious of any attempts to hastily characterize claim language as simply an “intended result.”
PATENTS / WRITTEN DESCRIPTION
Equivalent Disclosure Used to Satisfy Written Description Requirement
Invoking a newly minted equivalent disclosure doctrine, a panel of the US Court of Appeals for the Federal Circuit found that the written description requirement of § 112 was satisfied in the interest of arriving at a “flexible, sensible interpretation.” Nalpropion Pharm., Inc. v. Actavis Labs. FL, Inc., Case No. 18-1221 (Fed. Cir. Aug. 15, 2019) (Lourie, J) (Prost, CJ, dissenting).
Underlying its Contrave® pharmaceutical product, Nalpropion owns three orange-book-listed patents related to methods of treating overweight or obesity in adults using a combination of naltrexone and bupropion and sustained release formulations thereof, which it asserted against Actavis in this abbreviated new drug application action.
The disputed limitation in the ensuing litigation was a wherein clause directed towards the dissolution profile for sustained-release naltrexone using the USP Apparatus 2 Paddle Method (USP 2). Actavis principally argued that claim lacked adequate written description support because the claimed dissolution profile was achieved using USP 2, but the supporting specification data was obtained using the different USP Apparatus 1 Basket Method (USP 1). Further, (1) both inventor and expert testimony demonstrated that USP 1 and USP 2 were not substantially equivalent and would thus produce different results; and (2) a person of ordinary skill would not appreciate that the sustained-release dissolution data using USP 1 was relevant to the claimed ranges using USP 2. Nalpropion argued that a person of skill would understand the inventors to have had possession of their invention irrespective of USP 1 or USP 2 because those methods are “substantially equivalent.” After the district court upheld the patents, Actavis appealed
The Federal Circuit affirmed in part, stating that the patents were not invalid for written description, but struck down the patents as obvious over the prior art. On the written description issue, the majority concluded that the district court did not clearly err because the dissolution data reported in the patent adequately supported the dissolution data ranges in the claim, and the dissolution profile related only to resultant dissolution parameters rather than operative claim steps. According to the majority, “[w]hile as a general matter written description may not be satisfied by so-called equivalent disclosure, in this case, buttressed by the district court’s fact-finding, and where the so-called equivalence relates only to resultant dissolution, we affirm the district court’s conclusion.”
Chief Judge Prost dissented, stating that the majority ruling did not comport with the law on written description, and that the majority had inappropriately added a new rule where a disclosure may satisfy the written description requirement when the relevant claim limitation recites only “resultant dissolution parameters rather than operative claim steps.”
Prost parted ways with the majority for three reasons:
- The USP 2 clause is limiting.
- The majority’s “substantially equivalent” rule is inconsistent with this court’s precedent.
- The district court clearly erred in finding that the written description includes a disclosure “substantially equivalent” to USP 2.
In Prost’s view, the claim in issue requires the sustained-release naltrexone to be formulated such that it obtains the recited dissolution profile using USP 2—not as generally measured by any method. Because the USP 2 clause is limiting and the original patent disclosure fails to literally or inherently disclose it, the written description inquiry should end there. “By concluding that the USP 2 clause is nonlimiting, the majority has sua sponte addressed a claim construction argument never presented to the district court,” Prost stated. Further, Nalpropion failed to present data or testimony showing that USP 1 and USP 2 were in fact substantially equivalent.
Prost further noted that teachings related to USP 1 may render methods using USP 2 obvious, but expert testimony that the two USP methods would not produce the same results was nonetheless relevant for written description.
PATENTS / EXCEPTIONAL CASE (ATTORNEYS’ FEES)
Nothing Exceptional About Litigation Costs Exceeding Potential Damages
Bhanu K. Sadasivan, PhD
Addressing the issue of whether litigation costs that exceed potential damages necessarily render a case exceptional, the US Court of Appeals for the Federal Circuit affirmed a district court’s decision that they did not. ATEN Int’l Co., Ltd. v. Uniclass Technology Co. Ltd., Case No. 18-1922 (Fed. Cir. Aug. 6, 2019) (Moore, J).
The patent-in-suit involves technology for switching between computers that share a monitor, mouse and keyboard. After Uniclass ceased making payments on a license agreement it entered with ATEN, ATEN sued for patent infringement. After the district court granted summary judgment of no lost profits, the case proceeded to trial. A jury found that Uniclass did not infringe and the asserted patent claim was invalid. Uniclass then moved for attorneys’ fees, seeking to have the case declared exceptional under 35 USC § 1295(a)(1). The district court denied Uniclass’s motion.
On appeal, the Federal Circuit panel affirmed the district court’s ruling that the case was not exceptional. Uniclass first argued that the case was exceptional because the litigation costs exceeded ATEN’s potential reasonable royalty damages. The Court explained that there “is no per se rule that a case is exceptional if litigation costs exceed the potential damages,” noting that there are many reasons for bringing a lawsuit, monetary damages being just one. Further, in many cases, no damages are at issue and only an injunction is sought. In this case, ATEN sought injunctive relief, which as the Court explained, undermined Uniclass’s argument.
Uniclass also argued that the district court’s comments during trial about public resources supported an exceptional case finding. The Federal Circuit rejected the argument, stating that it was not an abuse of discretion for the district court to deny attorneys’ fees after commenting on public resources expended during trial.
The Federal Circuit also rejected Uniclass’s contention that the district court should have weighed the strength of ATEN’s lost profits theory in its opinion, simply noting that the district court had considered the argument but deemed it as non-exceptional behavior. Further, a party does not need to ultimately prevail on an issue for its behavior to not “stand out,” and the district court’s opinion did not have to include an assessment of every consideration that went into its decision.
PATENTS / AIA / CLAIM CONSTRUCTION (§112, ¶6)
PATENTS / SUBJECT MATTER ELIGIBILITY (§ 101)
Where There’s a Claim Construction Dispute, Resolve It Before Ruling on Ineligibility
Addressing patent eligibility under 35 USC § 101, the US Court of Appeals for the Federal Circuit vacated and remanded a district court’s decision for failure to address the parties’ claim construction dispute before ruling on a Fed. R. Civ. P. Rule 12(c) motion. MyMail LTD. v. ooVoo, LLC, IAC Search & Media, Inc., Case Nos. 18-1758, -1759 (Fed. Cir. Aug. 16, 2019) (Reyna, J) (Lourie, J, dissenting).
MyMail filed two lawsuits in the Eastern District of Texas against ooVoo and IAC for infringement of MyMail patents that describe methods of modifying toolbars displayed on internet-connected devices. After ooVoo and IAC moved to dismiss the cases for improper venue, pursuant to TC Heartland, the parties agreed to transfer the lawsuits to the Northern District of California. Shortly after the suits were transferred, ooVoo and IAC filed identical motions on the pleadings, asserting that the MyMail patents were directed to patent-ineligible subject matter under § 101. MyMail opposed the motions, arguing that the inventions were patent eligible based on claim construction by the Eastern District of Texas in an earlier proceeding involving the same patent.
The Northern District analyzed the § 101 eligibility issue under the Alice test without construing the claims or addressing the parties’ claim construction dispute. At Alice step one, the district court determined that the MyMail patent claims were “directed to a process for updating toolbar software over a network without user invention.” The district court found the claims to be directed to an abstract idea because:
- They fell within the category of gathering and processing information.
- They recited a process composed of transmitting, analyzing and generating a response to transmitted data.
- They related to using communications networks to update software on computers.
At Alice step two, the district court concluded that the claims failed to provide an inventive concept sufficient to save the claims. The district court determined that the claims recited generic, conventional components, such as internet-connected computers and servers, and that the addition or changing of a button on a toolbar, based on data stored in a database, was routine and conventional. Without construing any of the patent claims or addressing the parties’ claim construction dispute, the district court granted defendants’ motion for judgment on the pleadings and held that the MyMail patents were directed to patent-ineligible subject matter under § 101. MyMail appealed.
The Federal Circuit addressed two issues on appeal: first, whether the district court erred by failing to construe the patent claims before ruling on the FRCP 12(c) motion, and second, whether the district court erred by finding the patent claims ineligible under § 101. On the first issue, the Court noted that “patent eligibility may be determined on a Rule 12(c) motion, but only when there are no factual allegations that, if taken as true, prevent resolving the eligibility question as a matter of law,” citing Aatrix Software v. Green Shades Software (IP Update, Vol. 21, No. 3). The Court noted that under Aatrix, “if the parties raise a claim construction dispute at the Rule 12(c) stage, the district court must either adopt the non-moving party’s constructions or resolve the dispute to whatever extent is necessary to conduct the § 101 analysis.”
In this case, MyMail sought to have the district court adopt the Eastern District of Texas’s construction of the term “toolbar” to mean a “button bar that can be dynamically changed or updated via a Pinger process or a MOT script.” OoVoo and IAC argued that the prior construction was “erroneous” and “improper.” The district court, however, never addressed the parties’ claim construction dispute, nor did it construe the disputed term.
The Federal Circuit ruled that the district court’s failure to adopt MyMail’s construction or to construe the term itself was an error under Aatrix. The Federal Circuit declined to construe the term, noting that doing so could conflate “de novo review with an independent analysis.” Instead, the Federal Circuit remanded the case back to the district court for further proceedings.
Judge Lourie, writing in dissent, opined that the claims at issue were clearly abstract, regardless of claim construction. Specifically, Judge Lourie found that the patent claims’ breadth illustrated their abstract nature where they covered any toolbar modification, on any type of internet-connected device, using generic servers and internet functionality. He would have found the patents ineligible and affirmed the district court’s holding.
PATENTS / § 101 ELIGIBILITY
The Door Closes on Abstract Patent Claim
Ahsan A. Shaikh
The US Court of Appeals for the Federal Circuit, relying heavily on the specification of the asserted patent, found claims directed to an abstract idea of “wirelessly communicating status information about a system” as patent ineligible under 35 USC § 101. The Chamberlain Group, Inc. v. Techtronic Industries Co. Ltd., Case Nos. 18-2113, – 2228 (Fed. Cir. Aug. 21, 2019) (Chen, J).
The Chamberlain Group, Inc., (CGI) sued Techtronic Industries (TTI) for infringement of its patent relating to an apparatus and method for communicating information about the status of a movable barrier—for example, a garage door. TTI moved for a judgment as a matter of law, which was denied, while CGI’s motions for enhanced damages and attorneys’ fees were granted. At trial, the jury also found that the patent was not invalid and that TTI willfully infringed the patent. TTI appealed.
An exemplary claim from the asserted patent reads as follows:
A movable barrier operator comprising:
a controller having a plurality of potential operational status conditions …;
a movable barrier interface operably coupled to the controller;
a wireless status condition data transmitter that is operably coupled to the controller, wherein the wireless status condition data transmitter transmits a status condition signal that:
corresponds to a present operational status condition defined, at least in part, by at least two operating states from the plurality of operating states; and
comprises an identifier that is at least relatively unique to the movable barrier operator, such that the status condition signal substantially uniquely identifies the movable barrier operator.
The Federal Circuit applied the two-step framework for assessing whether subject matter is ineligible for patent protection as an abstract idea set forth in Alice v. CLS Bank.
Under step one of the Alice framework, the Federal Circuit found the claims to be directed towards an abstract idea, relying on the patent specification in so doing: “The only described difference between the prior art movable barrier operator systems and the claimed movable barrier operator system is that the status information about the system is communicated wirelessly, in order to overcome certain undesirable disadvantages of systems using physical signal paths—additional cost, exposed wiring, and increased installation time.” Thus, the Court concluded that the claims “merely recite a system that communicates status information, in the same ‘well understood’ manner that wireless transmissions have always occurred.”
Turning to step two of the Alice framework, the Federal Circuit looked at the claim elements to determine whether they identified an “inventive concept” in the application of the ineligible subject matter to which the claim is directed.
CGI had argued that “there is no evidence in the record” that the claimed garage door opener “that includes an integrated controller and a wireless transmitter to transmit a status signal” was “well-understood, routine and conventional to a skilled artisan.” The Federal Circuit rejected that argument, noting that
The appropriate question is not whether the entire claim as a whole was “well-understood, routine [and] conventional” to a skilled artisan . . . but rather . . . (1) whether each of “the [elements] in the claimed [product] (apart from the natural laws themselves) involve well-understood, routine, conventional activity previously engaged in by researchers in the field,” and (2) whether all of the steps “as an ordered combination add nothing to the laws of nature that is not already present when the steps are considered separately.” Mayo.
The Federal Circuit explained that “the specification . . . makes clear that transmitting information wirelessly was conventional at the time the patent was filed and could be performed with off-the-shelf technology . . . Yet wireless transmission is the only aspect of the claims that CGI points to as allegedly inventive over the prior art . . .Wireless communication cannot be an inventive concept here, because it is the abstract idea that the claims are directed to.”
PATENTS / § 101 ELIGIBILITY (BIOTECH)
Doggonit: Method for Detecting Genetic Mutation Found Subject Matter Ineligible
In a case relating to methods for genotyping a canine breed, the US Court of Appeals for the Federal Circuit upheld a district court’s judgment as a matter of law that the asserted claims were not subject matter eligible under 35 USC § 101. Genetic Veterinary Sciences, Inc. v. LABOKLIN GmbH & Co., KG, Case No. 18-2056, (Fed. Cir. Aug. 9, 2019) (Wallach, J).
The claims at issue relate to in vitro methods for genotyping Labrador retrievers in order to discover whether the dog might be a genetic carrier of HNPK, a disease that causes crusts and fissures to appear on a dog’s nose. The disorder is a recessive condition, meaning that a puppy only develops the symptoms of disease if it receives a mutated HNPK gene from both parents. The genetic test disclosed in the patent would allow dog breeders to test Labrador retrievers to determine if they are carrying a mutated HNPK gene.
The Federal Circuit analyzed asserted claims under the Supreme Court’s Alice/Mayo framework, which states that a patent claim falls outside § 101 where (1) it is directed to a patent-ineligible concept, i.e., a law of nature, natural phenomenon or abstract idea, and (2), if so, the particular elements of the claim, considered both individually and as an ordered combination, do not add enough to transform the nature of the claim into a patent-eligible application.
Claim 1 of the patent recited an in vitro method for genotyping a Labrador retriever comprising:
- Obtaining a biological sample from the Labrador retriever
- Genotyping a SUV39H2 gene encoding the polypeptide of SEQ ID NO: 1
- Detecting the presence of a replacement of a nucleotide T with a nucleotide G at position 972 of SEQ ID NO: 2
Claims 2 and 3 each depended from claim 1. Claim 2 specified particular genotyping methods that could be used, and claim 3 specified particular primer pairs to be used with the genotyping step.
Under step one of the Mayo/Alice framework, the Federal Circuit found that the claims were directed to a natural phenomenon. The Court acknowledged that the claim required three steps (obtaining a biological sample, genotyping a SUV39H2 gene and detecting the presence of a mutation in said gene), but concluded that taken as a whole, claim 1 is “directed to nothing more than ‘observing or identifying’ the natural phenomenon of a mutation in the SUV39H2 gene.”
Turning to step 2, the Federal Circuit concluded that the claims did not recite an inventive concept that transformed the observation of a natural phenomenon into a patentable invention. The Court relied on expert testimony that the genotyping methods recited were conventional or known laboratory techniques to observe the newly discovered mutation in the SUV39H2 at position 972.
The Federal Circuit also addressed Laboklin’s argument that the district court lacked personal and subject-matter jurisdiction over the patent owner and its exclusive licensor, the University of Bern, which is an instrumentality of the Swiss Confederation, because the University enjoyed sovereign immunity. The Court noted that under the Foreign Sovereign Immunities Act, “a foreign state is presumptively immune from the jurisdiction of United States courts” unless a specified exception applies. Absent an exception, a federal court lacks subject-matter jurisdiction over a claim against a foreign state. However, as the Court further noted, under 28 USC § 1605(a)(2), if a foreign state engages in “commercial activity . . . in the United States,” it operates under an exception to sovereign immunity. Citing Intel v. Commonwealth Sci. & Indus. Research Org. (Fed. Cir. 2006), the Court elaborated that the “acts of (1) obtaining a United States patent and then (2) enforcing its patent so it could reap the profits thereof—whether by threatening litigation or by proffering licenses to putative infringers” constituted commercial activity.
Practice Note: While this outcome is consistent with recent Federal Circuit treatment of diagnostic claims, the Court appears to be divided on the application of the Alice/Mayo framework to patent claims covering medical diagnostics. See, e.g., Athena Diagnostics, Inc. v. Mayo Collaborative Services, LLC (Fed Cir. July 3, 2019) (an 86-page order denying en banc rehearing with eight separate concurrences/dissents) (IP Update, Vol. 22, No. 2).
PATENTS / AIA / OBVIOUSNESS / CONSTITUTIONALITY (RETROACTIVE APPLICATION OF LAW)
AIA Survives Constitutional Challenge to Applicability to Pre-AIA Filings
The US Court of Appeals for the Federal Circuit affirmed a Patent Trial and Appeal Board (PTAB) decision finding that the America Invents Act (AIA) is constitutionally sound as applied to patents issuing on applications filed prior to AIA enactment. The Court also found that the PTAB’s use of a rationale for motivation to combine different than that used in the original petition was procedurally compliant with the Administrative Procedure Act (APA). Arthrex, Inc. v. Smith & Nephew, Inc., Case No. 18-1584 (Fed. Cir. Aug. 21, 2019) (Stoll, J).
Smith & Nephew filed an inter partes review (IPR) petition against Arthrex’s patent related to a surgical suture anchor used to reattach soft tissue to bone. The PTAB found Arthrex’s patent invalid. Arthrex appealed, arguing that (1) the PTAB violated Arthrex’s procedural rights by crafting a new reason for combining references; (2) the PTAB erred in its finding that a person of ordinary skill in the art (POSITA) would have found the claimed invention obvious based on substantial evidence; and (3) IPR for Arthrex’s patent was unconstitutional.
IPR proceedings are formal administrative adjudications subject to the procedural requirements of the APA, one of which is that an agency may not change theories in midstream without giving respondents reasonable notice of the change and the opportunity to present argument under the new theory. Nor may the PTAB craft new grounds of unpatentability not advanced by the petitioner, as the Federal Circuit previously held.
Arthrex first argued that by describing the reference’s casting method as “preferred,” a characterization not found in Smith & Nephew’s petition, the PTAB crafted a new reason for combining that reference with another and violated Arthrex’s procedural rights in finding the challenged claim invalid. The Federal Circuit disagreed, stating that although the PTAB did use different language than the petition in its discussion of whether a POSITA would have been motivated to the combine the references, it did not introduce new issues or theories into the proceeding. And even if the PTAB had done so, Arthrex took advantage of the opportunity to argue these issues when asserting that the casting method of one of the references would be inherently problematic. Therefore, Arthrex was not deprived of that procedural right under the APA.
The Federal Circuit acknowledged that although Arthrex was correct that the PTAB used the term “preferred,” which differs from the petition’s characterization of reference’s casting as “well-known,” “accepted” and “simple,” the PTAB ultimately relied on the same few lines of the reference as were relied on in the petition in finding motivation to combine the casting technique of one reference with the anchor of the other. Furthermore, the Court acknowledged that while Arthrex’s evidence arguably did cut against the PTAB’s conclusion, it did not preclude substantial evidence from supporting the PTAB’s fact finding. Because the PTAB’s finding of motivation to combine was supported by such evidence as “a reasonable mind might accept as adequate,” the PTAB did not err procedurally. The Court thus affirmed the PTAB’s conclusion that the challenged claim would have been obvious over the prior art combination.
The Federal Circuit quickly struck down Arthrex’s constitutional challenge of IPR as applied retroactively to patents issued prior to the enactment of the AIA. In its analysis, the Court found immaterial the fact that Arthrex filed its patent applications prior to passage of the AIA, since the patent at issue was granted almost three years after passage of the AIA, and almost two years after the first IPR proceedings began. Hence, the Court ruled that application of IPR to Arthrex’s patent could not be characterized as retroactive. The Court reiterated its ruling in the recent Celgene case (IP Update, Vol. 22, No. 8) that application of the re-examination statute does not violate the Fifth Amendment, Seventh Amendment or Article III “controls the outcome” of similar challenges to IPR.
Practice Note: The Federal Circuit afforded the PTAB additional KSR flexibility in terms of language it may use in its obviousness analysis: “courts determine whether there was an apparent reason to combine the known elements in the fashion claimed by the patent at issue; the analysis is a flexible one, accounting for the inferences and creative steps that a person of ordinary skill in the art would employ.”
PATENTS / § 101 ELIGIBILITY
Gilstrap Requires “Eligibility Contentions” with Invalidity Contentions
Chief Judge Rodney Gilstrap of the US District Court for the Eastern District of Texas issued a new standing order requiring patent-infringement defendants to disclose “eligibility contentions.” Standing Order Regarding Subject Matter Eligibility Contentions Applicable to All Patent Infringement Cases Assigned to Chief District Judge Rodney Gilstrap (E.D. Tex. July 25, 2019) (Gilstrap, J).
In all cases filed after July 25, 2019, and assigned to Judge Gilstrap, defendants are now required to serve “eligibility contentions” no later than 45 days after receiving service of the “Disclosure of Asserted Claims and Infringement Contentions.” This timing aligns exactly with the timing required for invalidity contentions under Eastern District of Texas Patent Rule 3-3. The confluence of timing requirements between P.R. 3-3 and the new standing order suggests that the eligibility contentions are envisioned as part of the invalidity contentions.
The standing order requires that the eligibility contentions include three charts. The first should identify the eligibility exception to which each challenged claim is directed and whether any challenged claim is representative of any of the others. The second chart should describe the relevant industry and explain how each element of each challenged claim, both individually and in combination, was well understood, routine and/or conventional. The third chart should identify any other factual or legal bases for the challenged claims’ ineligibility.
The standing order further requires production of all materials upon which the party asserting ineligibility will rely. The standing order permits amendment of eligibility contentions in response to claim construction, but otherwise only upon leave of court, which requires a showing of good cause.
Practice Note: Under the standing order, the Eastern District of Texas’s invalidity contentions requirement exceeds that of the Northern District of California (after which it was originally modelled). In particular, N.D. Cal. Patent L.R. 3-3(d) requires disclosure of “grounds of invalidity based on 35 USC § 101,” but Patent L.R. 3-4 (“Document Production Accompanying Invalidity Contentions”) does not require production supporting 3-3(d) contentions. Judge Gilstrap has not only set a form and sufficiency standard for eligibility contentions,” but also has required production of “all materials” to support those contentions.
Litigants are likely to be required to supplement contentions to include references to documents, fact testimony and/or expert evidence discovered after the contentions’ date. Litigants should be diligent in identifying evidence that may support ineligibility theories and supplementing contentions accordingly.
In many cases, eligibility contentions will be filed while a motion to dismiss remains pending. While the motion to dismiss should generally be based on the pleadings and asserted patents, eligibility contentions must list extrinsic evidence to which the defendant will be limited for the remainder of the case. Litigants must be careful to give a fulsome disclosure while avoiding the impression that a finding of ineligibility requires resolving factual disputes.
PATENTS / AIA / INSTITUTION DECISIONS
Rule Against Partial Institution of IPRs Can Mean No Institution at All
Alexander P. Ott
Addressing a Patent Trial and Appeal Board (PTAB) decision vacating an earlier partial institution of inter partes reviews (IPRs) in view of an intervening Supreme Court decision against such partial institutions, the US Court of Appeals for the Federal Circuit affirmed the PTAB’s decision to instead not institute any review. BioDelivery Sciences International, Inc. v. Aquestive Therapeutics, Inc., Case Nos. 19-1643, -1644, -1645 (Fed. Cir. Aug. 29, 2019) (Reyna, J) (Newman, J, dissenting).
In late 2014, BioDelivery filed three IPR petitions against a patent owned by Aquestive Therapeutics. The three petitions collectively asserted 17 different grounds, but the PTAB instituted partial reviews of only one ground from each petition. The PTAB ultimately issued final written decisions upholding the patentability of all claims, which BioDelivery appealed. During the pendency of that appeal, the Supreme Court of the United States issued its opinion in SAS Institute v. Iancu (IP Update, Vol. 21, No. 5) finding that partial institution decisions were not permitted under the IPR statute. The Federal Circuit therefore remanded BioDelivery’s appeals with instructions to the PTAB to implement the Supreme Court’s SAS decision.
On remand, the PTAB vacated its earlier partial institution decisions and instead denied institution of all three petitions. In doing so, the PTAB relied on its discretionary authority to make institution decisions and its conclusion that most of the 14 other grounds not previously instituted were deficient. BioDelivery again appealed.
The Federal Circuit affirmed the PTAB’s decisions not to institute. The Court held that there is no requirement for IPRs to reach a final written decision after being instituted and noted that the statute explicitly allows for dismissal after institution. As for the propriety of denying institution on remand, the Federal Circuit found this to be proper because it viewed its earlier mandate to implement the Supreme Court’s SAS decision as an instruction to make the binary yes-or-no decision on whether to institute review.
Judge Newman wrote a dissenting opinion that disagreed on the interpretation of the earlier mandate, which she read as an order to the PTAB to convert its partial institution decision into a full institution decision.
America Invents Act
IPR Time-Bar Clock Starts Ticking on Service of Complaint, Even if Deficient
In a precedential decision, the Patent Trial and Appeal Board (PTAB) dismissed a petition for inter partes review (IPR), finding that the one-year time limit for filing an IPR petition under 35 USC § 315(b) is triggered even if a party serving a district court complaint alleging infringement lacks standing to sue. GoPro, Inc. v. 360Heros, Inc., Case No. IPR2018-01754, Paper No. 38 (PTAB Aug. 23, 2019) (Boalick, CAPJ).
On April 13, 2016, GoPro filed a complaint against 360Heros in the Northern District of California alleging trademark infringement, unfair competition and copyright infringement, and also requested declaratory judgment of non-infringement of a patent owned by 360Heros. On August 22, 2016, 360Heros filed an answer and counterclaim alleging infringement of the same patent. On September 13, 2017, 360Heros filed a complaint against GoPro in the District of Delaware alleging infringement of the same patent at issue in the California case. On September 15, 2017, GoPro filed a motion for summary judgment in the California case alleging that 360Heros did not have standing to sue on its counterclaim of infringement because the listed inventor of the asserted patent did not formally assign the patent until after 360Heros filed its counterclaim. On November 14, 2017, the California court granted GoPro’s motion for summary judgment.
GoPro filed a petition requesting IPR on September 17, 2018, which was less than one year after GoPro was served with 360Heros’s Delaware complaint, but more than one year after GoPro was served with 360Hero’s counterclaim in the California case. In its preliminary response, 360Heros argued the IPR petition was untimely because GoPro was served in the California case more than one year before the filing of the petition. The PTAB rejected 360Heros’s argument, finding that 360Hero did not have standing to file the counterclaim for patent infringement in August 2016, and ownership of a patent at the time of filing a complaint or counterclaim is necessary to start § 315(b)’s time-bar clock. The PTAB thus instituted the IPR proceeding. 360Heros requested rehearing and precedential opinion panel (POP) review of the PTAB’s institution decision.
The specific issue before the POP was “[w]hether the service of a pleading asserting a claim alleging infringement, where the serving party lacks standing to sue or the pleading is otherwise deficient, triggers the 1 year time period for a petitioner to file a petition under 35 U.S.C. § 315(b).” The POP found that service of a pleading asserting a claim of infringement triggers the one-year time period for a petitioner to file a petition, even where the serving party lacks standing to sue or where the pleading is otherwise deficient. Relying on the US Court of Appeals for the Federal Circuit’s 2018 decision in Click-to-Call v. Ingenio (IP Update, Vol. 21, No. 9), the POP found that the words “served with a complaint alleging infringement” in § 315(b) are plain and unambiguous. The POP found that limiting § 315(b) to only complaints filed by a party with standing to sue impermissibly imposes additional conditions not in the text of the statute. The POP rejected GoPro’s reliance on dismissal of the California action, finding that dismissal does not negate the fact that service was made as required under § 315(b).
The POP also rejected GoPro’s argument that because Article III standing is a fundamental jurisdictional requirement that must be satisfied at the time a complaint is filed, a complaint filed by a party without standing is a legal nullity that cannot trigger § 315(b)’s time bar. Relying again on Click-to-Call, the POP found that a party “served with a complaint” remains served with the complaint regardless of whether the serving party lacked standing to sue under Article III or the pleading was otherwise deficient.
Finally, the POP noted that relying on the date of service promotes efficient administration of IPR proceedings. The POP noted that standing challenges often arise well into district court proceedings, and tying IPR proceedings to standing outcomes would hinder the US Patent and Trademark Office’s ability to come to a just, speedy and inexpensive resolution as to the patentability of any claim. The POP thus found that GoPro’s IPR petition was untimely under § 315(b).
Practice Note: The POP noted that it has not encountered a circumstance in which a party serves a complaint in bad faith (e.g., with knowledge that it lacks standing to sue) in an effort to frustrate a petitioner’s ability to file an IPR. The POP noted that if it were to encounter such a bad-faith filing in the future, it may revisit the question of the availability of an equitable tolling of the application of the time bar.
PATENTS / AIA / PTAB PROCEDURE
PTAB Highlights Two Opinions Regarding Its Power to Decline Institution
Addressing the scope of its discretion under 35 USC § 325(d), the Patent Trial and Appeal Board (PTAB) designated two opinions as precedential or informative.
In Adaptics Limited v. Perfect Company, Case No. 2018-01596 (PTAB Mar. 6, 2019) (Roesel, APJ) (designated informative on August 2, 2019), the PTAB determined that the petitioner’s “kitchen sink” approach to presenting invalidity grounds warranted denial of the petition under § 314(a) because it lacked particularity as required under § 312(a)(3). The petition’s grounds of invalidity contained numerous alternative arguments for swapping out alternative references and included a “catch-all” ground that would have covered seven alternative pieces of prior art. In addition, the public availability of some of the prior art was disputed. The PTAB reasoned that even if there were a reasonable likelihood that one of the myriad combinations would render a claim non-patentable, the all-or-nothing mandate of SAS would require resolving an excessive number of issues. The petition’s lack of particularity would thwart the efficient administration of the US Patent and Trademark Office, so the PTAB used its discretion to deny institution.
In Becton, Dickinson and Co. v. B. Braun Melsungen AG, Case No. IPR2017-01586 (PTAB Dec. 15, 2017) (Daniels, APJ) (designated as precedential on August 2, 2019, as to Section III.C.5), the PTAB analyzed what constitutes “substantially the same prior art” previously considered by the Office for purposes of using its discretion to decline institution under 35 USC § 325(d). The petition included invalidity grounds based on the combination of one reference previously used in a rejection during prosecution and a second reference that was not considered by the Office during prosecution. The PTAB concluded that even if a different reference is used in the petition than was previously considered during prosecution, this fact still weighs in favor of denial when the newly used reference contains materially the same disclosures as the previously considered reference. Where the structural differences do not affect the functioning of the prior art in any meaningful manner and where the arguments raised in the petition follow the same reasoning as previously advanced by the Office, the PTAB gives little weight to the fact that the prior art disclosure comes from a different reference than was previously considered by the Office.
TRADEMARKS / LIKELIHOOD OF CONFUSION
Second User Vaping Company Has No Claim to “Affliction”
The US Court of Appeals for the 10th Circuit reversed a grant of summary judgment in favor of a company selling vaping accessories under the mark AFFLICTION, holding that the district court had erred in holding as a matter of law that there was no likelihood of confusion between the company’s goods and those of an apparel company using the same mark. Affliction Holdings, LLC v. Utah Vap or Smoke, LLC, Case No. 18-4146 (10th Cir. Aug. 27, 2019) (Lucero, J).
Affliction is a California-based apparel company that owns a registered trademark for the word mark AFFLICTION, as well as a design mark incorporating that word. It sued Utah Vap claiming that the defendant’s use of the mark VAPE AFFLICTION and associated design mark for vaping accessories and promotional apparel was likely to cause confusion with its marks and goods. The parties’ marks are below:
The district court granted summary judgment to Utah Vap despite both parties’ use of the word AFFLICTION and undeniably similar design marks. The district court held that the addition of the word VAPE in Utah Vap’s mark, which related to the industry in which Utah Vap operated, sufficiently differentiated the marks to prevent confusion. To support its finding that no reasonable juror could find a likelihood of confusion between the marks, the district court heavily relied on the fact that the parties operated in different industries: Affliction sells apparel associated with the mixed martial arts community, while Utah Vap sells vaping accessories, with less than 0.05% of its revenue coming from “promotional” apparel. In addition, according to the court, there was no evidence that Utah Vap had any bad faith intent and no evidence of actual confusion, and the parties’ products were sold and promoted in distinct channels. Indeed, the sole factor that weighed in Affliction’s favor was that its mark was strong. According to the district court, this factor was not enough to outweigh the others. The district court also found that Affliction had put forth insufficient evidence for a jury to award damages, but refused to take up the issue of whether it should permit more discovery given its ruling on the merits. Affliction appealed.
The 10th Circuit reversed. Focusing on the “high” similarity of both the word marks and the design marks—both of which were circular and incorporated the word AFFLICTION and a stylized fleur-de-lis design—the Court found that “[p]articularly in initial interest or post-sale contexts, a consumer could plausibly be confused as to a product’s origin.” The Court also emphasized the undisputed conceptual and commercial strength of Affliction’s mark. The Court found that the remaining likelihood of confusion factors did not outweigh these factors, particularly as the record indicated that the parties used the marks for at least some similar products, marketed through some similar channels.
The 10th Circuit did not take up the issue of whether Affliction’s computation of damages was sufficient, instead remanding to the district court to “consider, in its discretion, whether to permit additional discovery in light of our holding above” and to determine in the first instance injunctive relief could be available.
Practice Note: Arguing that a good is merely sold in a “promotional” capacity may be ineffective to ward off an infringement claim. If a junior user sells “promotional” t-shirts to support an otherwise-unrelated business and those t-shirts infringe another’s mark for apparel, it may be found to be infringing.
Federal Circuit Withdraws Ruling on Trademark Preclusion of ITC Determinations
In response to a petition for rehearing by the intervenors, the US Court of Appeals for the Federal Circuit vacated part of an earlier precedential decision noting the lack of preclusive effect of trademark decisions by the US International Trade Commission (ITC) rendered under § 337. Swagway, LLC v. Int’l Trade Comm’n, Case No. 18-1672 (Fed. Cir., Aug. 14, 2019) (Clevenger, J).
In its original (May 9, 2019) opinion, the Federal Circuit ruled that ITC determinations rendered in trademark-based disputes (such as its determinations rendered on patent issues) did not have any preclusive effect in subsequent district court proceedings (IP Update, Vol. 22, No. 6). In creating a circuit split with the Second and Fourth Circuits, the Court saw “no reason to differentiate between” the effects of an ITC trademark-related decision and a patent-related decision. The ensuing circuit split created a potential for Supreme Court review.
The intervenors (collectively Swagway), which were the complainants at the ITC, filed a combined petition for panel rehearing and rehearing en banc that questioned the preclusion ruling. The Court invited the views of the ITC, which supported the petition for rehearing, arguing that (1) the issue of preclusive effect was not sufficiently briefed to be decided by the Federal Circuit, and (2) the district court should be asked to apply preclusion, not the Federal Circuit, which decides whether preclusive effect should be given to the prior judgment.
In its revised opinion, the Federal Circuit vacated the portion of its original opinion related to the preclusion question.
Practice Note: In its revised opinion, the Federal Circuit did not go so far as to rule that an ITC determination in a trademark case will have preclusive effect in a related litigation. That remains an issue for a district court to address in the first instance.
COPYRIGHTS / STATUTORY DAMAGES
A Tale of Two (or 33) Copyrights: Calculating Statutory Damages
Addressing § 504(c)(1) of the US Copyright Act, which permits an award of statutory damages in lieu of actual damages for copyright infringement, the US Court of Appeals for the Seventh Circuit considered a question of first impression to determine what constitutes “one work” for purposes of calculating statutory damages where a jury finds infringement on multiple works registered in a single copyright application. Amy Lee Sullivan, dba Design King v. Flora Inc., Case Nos. 17-2241, 18-2534, (7th Cir., Aug. 21, 2019) (Scudder, J).
Graphic design artist Amy Sullivan sued herbal supplement company Flora for copyright infringement when she discovered that a series of 33 illustrations that she had produced for Flora for use in two specific video advertising campaigns were being used to promote other product lines outside of the originally agreed-upon campaigns. Sullivan petitioned for statutory damages, citing 33 instances of infringement for each of the 33 illustrations. Flora argued that Sullivan’s designs comprised a single work as a compilation and asserted that she could claim only two statutory awards for use of the compilations in two additional advertising campaigns. The district court agreed with Sullivan and instructed the jury that Sullivan could receive separate statutory awards for 33 acts of infringement on 33 individual illustrations. With those instructions, the jury arrived at statutory damages award of $3.6 million. Flora appealed.
The Seventh Circuit sided with Flora, vacating the judgment and remanding the case for further proceedings. The Court opined that the district court committed error in its grant of statutory damages absent any finding that each of the 33 illustrations constituted “one work” eligible for separate statutory damages, as opposed to a single compilation being “one work” under §504(c)(1).
Because Sullivan registered her 33 illustrations as compilations via only two US copyright applications, Flora contended that Sullivan’s illustrations fell into one of two compilations. Thus, under the language of the Copyright Act, the grant of a statutory damages award for “any one work” being “all parts of a compilation or derivative work,” precluded Sullivan from receiving more than two separate awards of statutory damages for each of the registered compilations infringed.
The Seventh Circuit explained that resolving the parties’ disagreement as to the number of works at issue “very much mattered,” since the Copyright Act authorizes a statutory damages award ranging from $750 to $30,000 for each work infringed (and up to $150,000 per work in an instance of willful infringement). Therefore, under Sullivan’s position, the “one work” damages multiplier would be 33 instead of two, as under Flora’s interpretation of the statute.
To answer the “one work” question of first impression and whether Sullivan’s 33 illustrations constituted 33 individual works or instead were part of two compilations, the Seventh Circuit looked to the US Court of Appeals for the Second Circuit’s decision in Bryant v. Media Right Prods., Inc. (and complementary decisions from the First, Ninth, 11th and DC Circuits), in which the court placed dispositive weight on whether the protected copyrighted works have value only in and through their composite whole as a single-work “compilation,” or instead have individual standalone value as “one work” each with “distinct and discernible value to the copyright holder.” Since the available case record did not allow the Court to resolve the factual inquiry into the primary and discernible value of Sullivan’s 33 illustrations as separate works or two broader compilations, the Court vacated the jury’s statutory damages award and remanded to allow the district court to reframe the proceedings to enable the “one work” determination pertinent to statutory damages.
COPYRIGHTS / PROTECTABLE SUBJECT MATTER
That’s Bananas: Third Circuit Examines Copyright Protection Under Star Athletica
Applying the Supreme Court of the United States’ 2017 decision in Star Athletica v. Varsity Brands regarding the copyrightability of non-utilitarian sculptural design features (IP Update, Vol. 20, No. 4), the US Court of Appeals for the Third Circuit took on an issue of first impression when affirming the protectability and infringement of a banana costume. Silvertop Associates Inc. v. Kangaroo Manufacturing Inc., Case No. 18-2266, (3rd Cir., Aug. 1, 2019) (Hardiman, J).
Following the end of a business partnership between Rasta and it reseller, Yagoozon, Rasta discovered that Yagoozon’s sister company, Kangaroo, was selling a costume that resembled Rasta’s full-body banana costume previously resold by Yagoozon. Rasta filed suit against Kangaroo alleging copyright infringement, trade dress infringement and unfair competition. Finding that Rasta’s banana costume was infringed, the district court granted Rasta’s motion for a preliminary injunction. Kangaroo appealed.
Kangaroo argued that no injunction should have issued on the basis of copyright infringement because the costume was ineligible for copyright protection. Therefore, Kangaroo argued, Rasta did not hold a valid copyright in the banana costume.
Under the Copyright Act, “useful articles” are eligible for copyright protection to the extent they incorporate pictorial, graphic or sculptural features that can be identified separately from, and are capable of existing independently of, the utilitarian aspects of the article. The Third Circuit began its analysis by looking at whether the non-utilitarian, sculptural features of the Rasta banana costume could be properly separated from the costume’s utilitarian features. The Court also examined whether the merger and scènes à faire doctrines rendered the costume ineligible for copyright protection.
Applying Star Athletica, the Third Circuit affirmed the district court, finding that it did not err in concluding that Rasta was reasonably likely to prove ownership of a valid copyright in, and thus the infringement of, its banana costume.
From the starting point that Rasta’s banana costume was a useful article, the Third Circuit considered (1) whether the artistic features of the costume’s design could be perceived as a work of art separate from the useful article, and (2) whether that work of art would qualify as its own protectable pictorial, graphic or sculptural work when imagined separately from the useful article.
The Third Circuit examined the banana costume’s combination of sculptural features including its colors, lines, shape and length, while ignoring the costume’s functional features, such as the cutouts intended for the wearer, and found that one could still imagine the banana apart from the costume as an original sculpture. The Court also found that the sculptural elements comprising a “recognizable rendering” of a banana met the minimal level of creativity for copyright protection. Thus the costume was deemed copyrightable.
Kangaroo also objected to the protectability of the costume design by invoking the doctrines of merger and scènes à faire, and asserted that allowing for copyright protection of the costume would be allowing for a monopoly over an idea through the protection of elements necessary to the expression of that idea. The Third Circuit rejected this argument, stating that “there are many other ways to make a costume resemble a banana,” and found that no specific feature necessarily results from the costume’s subject matter as a banana.
COPYRIGHTS / WORK MADE FOR HIRE
Post-Creation Letter Exchange Doesn’t Constitute Work for Hire Agreement
Addressing an issue of whether a letter exchange qualifies as a work for hire agreement under US copyright laws, the US Court of Appeals for the Second Circuit reversed and remanded the district court grant of summary judgment in favor of the defendants. The Estate of Stanley Kauffmann v. Rochester Institute of Technology, Case No. 18-2404 (2d Cir. Aug. 1, 2019) (Newman, J).
Stanley Kauffmann, a film critic, wrote numerous film reviews and articles for The New Republic (TNR) magazine. For 55 years, Kauffmann contributed articles to TNR while never being employed by the magazine. During that time, Kauffmann and TNR took actions consistent with an understanding that Kauffmann was the author of and owned the copyrights to his articles. Kauffmann and TNR never formalized any understanding about whether Kauffmann’s articles were “works made for hire” and therefore owned by TNR, except for one letter agreement from TNR to Kauffman, written on March 22, 2004. In that letter, TNR stated that its agreement with Kauffmann had always been an oral understanding and TNR always understood that, in light of its regular monthly compensation arrangement with Kauffmann, all articles Kauffmann wrote for TNR had been “works made for hire,” as that term is defined under the US copyright laws.
After Kauffmann’s death in 2013, Rochester Institute of Technology (RIT) published an anthology of Kauffman’s file reviews, including 44 that had originally published in TNR in 1999. In 2015, Kauffmann’s estate discovered the anthology and sued RIT for copyright infringement. Based on the 2004 agreement, RIT sought summary judgment, arguing that the estate did not own the copyrights because Kauffmann had created the articles as a work for hire, and therefore TNR, not Kauffmann, was the “author” of the articles. The district court agreed with RIT, ruling that the 2004 agreement unambiguously memorialized in writing a pre-existing oral contract, dating back to when Kauffmann started writing for TNR in 1958. The Kauffmann estate appealed.
On appeal, the Second Circuit noted that the issue turned on the legal effect of the 2004 agreement. The Court noted that other circuit courts have ruled that an agreement sufficient to establish a work as a “work for hire” must be executed before creation of the work. The Second Circuit, however, has ruled that in some circumstances a series of writings executed after creation of the works at issue can satisfy the writing requirement under 17 USC § 101(2).
The Second Circuit cited its precedent Playboy Enterprises, Inc. v. Dumas for the proposition that a writing could be after the fact if the parties had agreed before the creation of the work that it would be a work for made for hire. In Playboy, the writings in question were checks with a legend stamped on them that said “by endorsement, payee: acknowledges payment in full for services rendered on a work-made-for-hire basis in connection with the Work named on the face of this check.” The Court explained that here, the letter exchange did not occur until five years after the year in which the articles were written, there were no special circumstances even approaching the Playboy scenario, and the later agreement did not satisfy the writing requirement of § 101(2).
Practice Note: Before creating copyrightable works, independent contractors should enter into a contract that expressly defines who owns and holds the rights to the copyright.