“Raging Bull” and the Patent Act: Laches Still Available in Patent Cases
The U.S. Court of Appeals for the Federal Circuit convened an en banc panel to examine the Supreme Court’s “Raging Bull” decision in Petrella v. Metro-Goldwyn-Mayer, Inc. (IP Update, Vol. 17, No. 5) in the context of deciding whether laches remains a defense in a patent infringement suit. After an in-depth analysis, the Court concluded that Congress intended for laches to apply in patent matters when it codified laches under 35 USC §282(b)(1) of the Patent Act. However, the Court made a point to note that the laches defense must be harmonized with Petrella and other Supreme Court precedent. The Court clarified that equitable principles apply whenever an accused infringer seeks to use laches as a bar to injunctions or ongoing relief, while laches will only foreclose an ongoing royalty in extraordinary circumstances. SCA Hygiene Products AB et al. v. First Quality Baby Products LLC et al., Case No. 13-1564 (Fed. Cir., September 18, 2015) (en banc) (Hughes, J., concurring-in-part and dissenting-in-part). In 2003, SCA Hygiene Products (SCA) sent a letter to First Quality Baby Products (First Quality), a competitor in the adult incontinence market, alleging that First Quality’s Prevail® All Nites™ product infringed a patent held by SCA pertaining to certain aspects of adult diapers. First Quality responded to the letter stating that it had located a prior art patent describing the same diaper construction, which invalidated the SCA patent and thereby precluded infringement by First Quality. SCA did not respond to First Quality’s reply. Instead, in 2004, SCA requested re-examination of its patent in view of the prior art patent cited to it by First Quality. SCA did not notify First Quality of the re-examination proceedings, but the company presumed that First Quality was following the proceedings due to their public nature. In the meantime, First Quality believed that SCA had dropped its infringement claims, and it continued to invest in and expand its adult incontinence products line, including multimillion dollar acquisitions of competitors’ businesses. In 2007, the USPTO confirmed the patentability of SCA’s patent. In August 2010, more than three years after the conclusion of the re-examination and over seven years since SCA last communicated with First Quality regarding the its patent, SCA filed a complaint for patent infringement. The district court granted First Quality’s motion for summary judgment on the issues of laches and equitable estoppel. SCA appealed, arguing that the Petrella decision abolished laches in patent law. In September 2014, a panel of the Federal Circuit rejected SCA’s Petrella arguments and affirmed the district court’s opinion on laches, but reversed as to equitable estoppel (See IP Update, Vol. 17, No. 5). SCA filed a petition for rehearing en banc, and the Federal Circuit granted the petition with respect to two questions:
- In light of Petrella, which addressed laches under the Copyright Act, should the Federal Circuit’s 1992 decision in Aukerman be overruled so that the defense of laches is not applicable to a claim of damages on patent infringement occurring within the six-year damages limitations period established by the Patent Act?
- Because there is no statute of limitations for claims of patent infringement, should the defense of laches be available under some circumstances to bar an entire infringement suit for either damages or injunctive relief?
Viability of Laches After Petrella As for the first question, after examining history of the laches defenses by the courts, congressional intent, and precedential decisions in this area, the Federal Circuit reconciled Aukerman with Petrella, noting that Petrella was fundamentally concerned with the separation of powers and therefore eliminated judicially created laches because Congress had already spoke on the timeliness of infringement claims in the Copyright Act. However, the Court found a different statutory scheme in the patent law because 35 U.S.C. §286 provides for time limitations on recovery of legal remedies within six years of the filing date of the infringement action, while 35 U.S.C. §282 provides for laches as a defense to legal relief. Therefore, the Court reasoned that the same separation of powers concern that the Supreme Court discussed in Petrella is not present in matters arising under the patent laws. The Federal Circuit also distinguished copyright and patent law on the grounds that copyright infringement requires evidence of copying, while intent (or ignorance of a patent) is not a defense to patent infringement. Accordingly, the Court determined that it makes sense to limit damages by applying laches in a patent case where an infringer may not know he is infringing. On the other hand, a potential defendant in a copyright infringement action is typically aware of the risk that he or she is infringing and can usually estimate his or her exposure and liability. Therefore, the Court determined that laches remains a viable defense to legal relief in actions for patent infringement. The Application of Laches to Ongoing Relief As for the extent to which laches can limit recovery of ongoing relief, the Federal Circuit reexamined Aukerman in light of Petrella, as well as the Supreme Court’s eBay decision. The Court, noting the four-factor eBay test for injunctions in patent cases, stated that the district court should consider all material facts, including those pertaining to laches, when deciding whether to issue an injunction, with the understanding that laches could foreclose injunctive relief since patentees are not automatically entitled to an injunction. Conversely, the Federal Circuit explained that equity normally dictates that courts award ongoing royalties, despite laches. Citing Aukerman, Petrella and the Supreme Court’s 1888 holding in Menendez, the Court warned that it must recognize the distinction between estoppel and laches, as estoppel bars an entire suit, while laches does not. In this regard, the Court concluded that absent extraordinary circumstances, laches does not preclude an ongoing royalty and reinstated the earlier panel’s reversal of the district court’s grant of summary judgment on equitable estoppel and remanded to the district court.
Patents / Injunctions / eBay Factors
Apple Secures Its Permanent Injunction
Addressing the factors for granting injunctive relief in multifaceted, multifunction technology, the U.S. Court of Appeals for the Federal Circuit vacated and remanded the district court’s denial of Apple’s request for a permanent injunction finding Apple had proven irreparable harm, the balance of harm tipped in its favor and that the public interest supported an injunction. Apple Inc. v. Samsung Electronics Co., Ltd., Case No. 14-1802 (Fed. Cir., Sept. 17, 2015) (Moore, J.) (Reyna, J., concurring) (Prost, J., dissenting). Following its jury verdict win, Apple sought a narrowly tailored injunction to enjoin Samsung from including software or code capable of implementing certain infringing features on its devices. Apple also proposed a 30-day “sunset period” to allow Samsung to create a design around. The district court found that despite the public interest favoring an injunction and the narrowness of Apple’s request tilting the balance of the hardships in Apple’s favor, Apple had not shown it would suffer irreparable harm without an injunction and denied the motion. Apple appealed. The Federal Circuit confirmed that Apple must show a causal nexus between the infringement and the lost sales even where the requested injunction does not target specific products. It went on to find that the causal nexus “is a flexible analysis” requiring the patentee to show “some connection” between the patented features and the demand for the infringing products. The patentee need not prove that the infringing features “drove consumer demand.” Evidence of Samsung’s copying of the infringing features and consumer demand for the features supported their value to the Samsung product and while alone would not provide a causal nexus, were to be considered in the analysis. The Court held Apple had met the causal nexus test. The Federal Circuit also concluded that Apple’s sales-based losses were difficult to quantify due to the effect on the sales of downstream accessories, computers, software and future Apple products. The Court went on to find that this inability to quantify the damages “strongly” weighed in favor of a finding of irreparable harm and an injunction. The Federal Circuit agreed with the district court’s finding that the balance of the hardships weighed in Apple’s favor and “strongly” favored an injunction. Samsung’s infringement forced Apple to “compete against its own patented invention.” The Court concluded that Apple’s proposed injunction was narrowly tailored and would cause little harm to Samsung. Finally, the Court agreed that the public interest favored an injunction and noted that “the public interest nearly always weighs in favor of protecting property rights in the absence of countervailing factors, especially when the patentee practices his inventions.” Because it found Apple suffered irreparable harm from its sales-based losses, the Federal Circuit did not address whether Apple also suffered irreparable reputational harm. Judge Reyna’s concurrence noted that he would have also found the injury to Apple’s reputation as a direct competitor to Samsung and an innovator satisfied the irreparable harm factor. Judge Reyna noted that recently courts had extended eBay too far and ignored “the fundamental nature of patents as property rights granting the owner the right to exclude.” Chief Judge Prost issued a vigorous dissent, writing, “[t]his is not a close case.” Chief Judge Prost argued that the majority failed to defer to the district court’s analysis of evidence presented by Apple and improperly considered evidence of Samsung’s copying as part of the causal nexus analysis. Practice Note: As Judge Reyna noted in his concurrence, this decision “leaves open the door for obtaining an injunction in a case involving infringement of a multi-patented device” which had been “near shut under current law.”
Design Patentees Are Entitled to Infringers’ Unapportioned Total Profits
In an opinion addressing the proper measure of damages for design patent infringement, the U.S. Court of Appeals for the Federal Circuit vacated and remanded a district court’s order denying a motion for a new trial on damages, finding that a design patentee is entitled to at least the infringer’s total profits. Nordock, Inc. v. Systems Inc., Case Nos. 14-1762, -1795 (Sept. 29, 2015) (O’Malley, J.). Nordock and Systems are competitors in the loading dock device industry. Nordock sued Systems for patent infringement, alleging that Systems infringed a Nordock design patent for a dock leveler. At trial, Nordock’s damages expert testified that Systems’ profits for the accused products totaled over $900,000. Systems’ damages expert testified that the proper form of damages was a reasonable royalty of $15 per accused unit, for a total damages amount of roughly $90,000. Systems’ expert also testified that Systems’ apportioned profit—i.e., Systems’ profit on the portion of the accused device covered by the patent—was less than $15 per unit. The jury returned a mixed verdict, finding infringement for some but not all of the accused products and awarding Nordock roughly $47,000. The jury also indicated on the verdict form that Systems’ profits were $0. Nordock moved for a new trial on damages, arguing that, pursuant to 35 U.S.C. § 289, Nordock was entitled to recover all of Systems’ profits. The court denied Nordock’s motion, explaining that the jury was allowed to award either lost profits or a reasonable royalty and that the jury had reasonably based its verdict on the evidence presented. Nordock appealed. The Federal Circuit reversed, finding that Nordock was entitled to a new trial on damages. When a design patent is infringed, a patentee can recover damages under either § 284 or § 289. Under § 289 a patentee is entitled “to the extent of [the infringer’s] total profit, but not less than $250.” The Federal Circuit explained that a design patentee may recover either the infringer’s total profits under § 289; the patentee’s lost profits or a reasonable royalty under § 284; or $250 in statutory damages under § 289, whichever is greater. The Federal Circuit also explained that apportionment is inappropriate in a design patent case. In denying Nordock’s post-trial motion for a new trial on damages, the district court had relied on Systems’ expert’s methodology, which calculated the portion of the profit attributable to the infringement of the design patent. In rejecting this approach, the Federal Circuit explained § 289 provides for the recovery of the infringer’s total profit, which is based on gross revenue. Because no reasonable jury could believe that Systems’ total profit was less than $15 per unit, and because the district court erred in relying on an improper methodology, Nordock was entitled to a new trial on damages.
Patents / Induced Infringement / Safe Harbor
Supplier to ANDA Filer Is Not Liable for Induced Infringement Until After ANDA Approval
K. Nicole Clouse, PhD
Addressing the scope of the safe harbor provision of § 271(e)(1), the U.S. Court of Appeals for the Federal Circuit reversed the district court, holding that supplying an active pharmaceutical ingredient (API) to the filer of an abbreviated new drug application (ANDA) is not an act of induced infringement when it takes place prior to the approval of an ANDA application. Shire LLC v. Amneal Pharms., LLC, Case Nos. 14-1736, -1737, -1738, -1739, -1740, -1741 (Fed. Cir., Sept. 24, 2015) (Linn, J.). Shire markets a branded version of L-lysine-d-amphetamine dimesylate (LDX), an amphetamine useful for treatment of attention deficit hyperactivity disorder (ADHD). When several generic companies (ANDA defendants) filed ANDAs to LDX, Shire sued for patent infringement, including a claim of induced infringement against Johnson Matthey—the supplier of LDX to the ANDA defendants. Johnson Matthey filed a drug master file (DMF) with the FDA in support of the generic companies’ ANDAs, but did not itself file an ANDA. This type of supply arrangement between ANDA filers and companies that provide API and independently file the DMF is quite common in the generics pharmaceutical industry. The district court granted several summary judgment motions, including that Johnson Matthey induced infringement and that the claims were not invalid as obvious. Defendants appealed to the Federal Circuit. The Federal Circuit reversed the district court’s finding of induced infringement on two grounds. First, the Court explained that Johnson Matthey cannot be liable under § 271(e)(2)—which provides that filing an ANDA constitutes a constructive act of infringement—because it did not actually file an ANDA. Second, because the generic companies’ ANDAs have not yet been approved, the Court observed that Johnson Matthey “has thus far done nothing more than provide material for use by the ANDA defendants in obtaining FDA approval.” Johnson Matthey’s sales to the ANDA defendants fall within the scope of the § 271(e)(1) safe harbor because they were “reasonably related to” preparation of the generic companies’ ANDA submissions. Distinguishing the present facts from those in Forest v. Ivax, the Court effectively drew a line between API sales before and after ANDA approval. In particular, supplying the ANDA defendants with API after ANDA approval is no longer related to submission of their ANDAs and thus would constitute induced infringement. After ANDA approval, Johnson Matthey could properly be enjoined under § 271(e)(4) from supplying API to the ANDA defendants. The Court also affirmed the district court’s grant of summary judgment that the claims were not invalid as obvious. The Court agreed that the cited prior art reference described enormous chemical genera without providing any specific teachings to direct a skilled person to arrive at LDX out of the expansive number of possible options described in the reference. Without describing a “finite and limited class” of compounds including LDX, or any “preference” for such compounds, hindsight would be required to arrive at LDX from the broad prior art disclosure.
“Mechanism” Claim Term Found to Be an Indefinite Means-Plus-Function Element
Alexander P. Ott
Addressing whether a claim term was a means-plus-function term under the pre-America Invents Act (AIA) 35 U.S.C. § 112 ¶ 6, the U.S. Court of Appeals for the Federal Circuit construed the disputed term as a means-plus-function term despite the absence of the word “means” and found the claims invalid because the specification failed to adequately disclose the structure to perform all of the claimed functions. Media Rights Techs. v. Capital One Financial Corp., Case Nos. 14-1218 (Fed. Cir., Sept. 4, 2015) (O’Malley, J.). Media Rights Technologies brought an infringement suit against Capital One based on a patent directed to preventing unauthorized recording of electronic media. At the claim construction stage, Capital One filed a motion for judgment on the pleadings, arguing that all of the claims were invalid for indefiniteness because, inter alia, they contained a means-plus-function term that was not supported by the specification. Media Rights argued that the disputed term was not a means-plus-function term and that the specification adequately disclosed a sufficiently definite structure. The district court granted Capital One’s motion, and because the disputed term appeared in every claim of the patent-in-suit, the district court found all of the claims to be invalid. Media Rights appealed. On appeal, the Federal Circuit agreed that the term “compliance mechanism” was indefinite. As to whether the term should be evaluated as a means-plus-function element, the Court agreed with Media Rights that the district court incorrectly limited its analysis to just the claims. The Court also agreed with Media Rights that a term need not have a plain and ordinary meaning in order to avoid means-plus-function treatment. Nevertheless, upon its own review of both the claims and specification, the Court ruled that the district court properly concluded that the term “compliance mechanism” was a means-plus-function term. The Court distinguished a prior holding where a term that lacked a common meaning was found to define a particular electrical circuit and thus did not invoke means-plus-function claim drafting. The Court also noted that the prior holding predated its recent en banc decision abolishing the heavy presumption against construing terms lacking the word “means” as means-plus-function elements. See Williamson v. Citrix Online (IP Update, Vol. 18, No. 6). Turning to whether the specification recited sufficient corresponding structure, the Federal Circuit concluded that the “compliance mechanism” performed computer functions that required the disclosure of an algorithm; they could not be supported by the mere disclosure of a general-purpose computer. Here, the Court found that the specification failed to disclose any operative algorithm for all of the recited functions. As to two of the functions, the Court accepted apparently unrebutted expert testimony that certain source code included in the specification merely resulted in error messages and thus did not disclose a corresponding algorithm. As to a third function, Media Rights relied on a specification passage mentioning a set of rules to be used, but the Court disagreed noting that the specification did not provide any detail about what those rules actually were. The Federal Circuit thus found the term indefinite for being a means-plus-function element that lacked sufficiently corresponding structure.
Patents / Malicious Prosecution / Antitrust
Accused Infringer Rides Antitrust Roller Coaster
Addressing antitrust issues in connection with a dismissed patent infringement lawsuit, the U. S. Court of Appeals for the Ninth Circuit affirmed a grant of summary judgment dismissing antitrust and malicious prosecution claims despite labeling the defendant-appellee’s purportedly anticompetitive behavior “problematic.” Magnetar Technologies Corp. v. Intamin Ltd., Case Nos. 13-56119, -56333 (9th Cir., Sept. 14, 2015) (Smith, J.). Intamin builds and designs roller coaster rides. In 1994 Intamin agreed to build a new ride, called the “Hellevator,” for the Kentucky Kingdom amusement park. The Hellevator ride contract called for use of a mechanical brake system. However, Intamin had also started work on a new magnetic braking system at around the same time. Shortly after signing the contract with Kentucky Kingdom, Intamin informed Kentucky Kingdom that it was planning to use its new magnetic brake technology in the Hellevator ride. Intamin completed construction on the Hellevator in 1995, and the ride included the new magnetic braking system. In 1996, Intamin filed a patent application for its new magnetic brakes, and the application issued as a patent in 2001. Intamin then filed a patent infringement lawsuit against Magnetar, a company that also manufactures and distributes magnetic braking systems for use on roller coasters. The district court granted summary judgment of invalidity in Magnetar’s favor based on a statutory (on-sale) bar and dismissed the lawsuit. After Intamin’s infringement suit was dismissed, Magnetar filed its own lawsuit against Intamin. According to Magnetar, Intamin violated the Sherman Act by using a fraudulently obtained patent to establish a monopoly in the market for magnetic braking systems. Magnetar also claimed that Intamin maliciously prosecuted the patent infringement action, because Intamin brought the action despite knowing that the patent was invalid pursuant to the on-sale bar. Intamin moved for summary judgment, and the district court granted Intamin’s motion for both claims. With respect to the antitrust claim, the district court concluded that Magnetar’s theory of antitrust injury was unreliable and speculative, and that Magnetar had offered insufficient evidence to prove an antitrust injury. The district court also concluded that a legitimate dispute existed with respect to the applicability of the on-sale bar, and therefore Intamin had probable cause to bring its patent infringement action. Magnetar appealed to the 9th Circuit. With respect to the malicious prosecution claim, the 9th Circuit concluded that a reasonable attorney could have thought that Intamin’s claim in the first proceeding was tenable. Specifically, the court noted that the original 1994 contract between Intamin and Kentucky Kingdom called for mechanical breaks, and that the subsequent communications between Intamin and Kentucky Kingdom did not rise to the level of an “offer for sale,” as required to render the patent invalid under 35 U.S.C. § 102(b). As for the antitrust claims, the 9th Circuit found Intamin’s conduct to be “problematic,” but found that Magnetar had not alleged sufficient facts to show a causal antitrust injury stemming from Intamin’s actions. The court criticized the expert opinions offered by Magnetar as conclusory and found that the expert did not take into account factors that might have come to bear on the damages estimates that were not caused by Intamin’s conduct. The 9th Circuit also explained that, even if Magnetar’s expert could correctly establish Magnetar’s damages, the expert failed to establish how those losses could be reasonably linked to Intamin’s allegedly anticompetitive conduct.
Patents / IPR / Prior Art / Burden of Proof
Federal Circuit: Prior Disclosure is Not Necessarily Prior Art
The U.S. Court of Appeals for the Federal Circuit affirmed the Patent Trial and Appeal Board (PTAB or Board), finding that an IPR petitioner failed to meet its burden of proving that a cited prior art U.S. patent reference was entitled to its (earlier) provisional application’s priority date as its effective prior art date. Dynamic Drinkware v. National Graphics, Case No. 15-1214 (Fed. Cir. Sept. 4, 2015) (Lourie, J.). The challenged patent had an effective filing date of November 22, 2000. The patent claimed priority to a provisional application filed in June of 2000. The owner of the challenged patent established that the inventor had completed the invention and reduced it to practice as of March 2000. The asserted prior art, a U.S. patent, matured from an application filed in May 2000 and claimed priority back to a February 2000 provisional application filing. If the asserted prior art were entitled to a priority date of the provisional application, it would “beat” the challenged patent by about a month. The PTAB, however, held that Dynamic Drinkware failed to prove the cited patent was entitled to its February 2000 provisional filing date. Dynamic Drinkware appealed. For a provisional application to qualify as art under § 102(a)(2) or pre-AIA § 102(e), it must support the claims of the application or patent asserting priority thereto. Here, because the provisional application did not support the claims of the issued patent (under § 112), an otherwise anticipatory disclosure found in a referenced provisional application was found to be ineffective as prior art, even though it was a provisional application of a duly issued patent. On appeal, Dynamic Drinkware argued that issued patents are presumed to be valid and enabled, and, therefore, the cited prior art patent should presumptively be accorded its provisional filing date of February 2000. It further argued that the Board erred in requiring petitioner to prove entitlement to the earlier filing date. The Federal Circuit disagreed, stating that “because the PTO does not examine priority claims unless necessary, the Board has no basis to presume that a reference patent is necessarily entitled to the filing date of its provisional application.” The Federal Circuit also agreed that Dynamic Drinkware, as the IPR petitioner, had the ultimate burden of persuasion to prove entitlement to the provisional filing date, explaining the distinction between the ultimate burden of persuasion assigned to a party who must prove something to a specified degree of certainty and the shifting burden of production of going forward with evidence. The Court explained that in an inter partes review, the petitioner carries the burden of persuasion to prove invalidity, the burden never shifts to the patent owner to prove validity. Here, Dynamic Drinkware as petitioner had the initial burden of production, which it satisfied by its assertion of invalidity in its petition. The burden of production then shifted to the patent owner, National Graphics, which contested the entitlement to the provisional filing date of the asserted prior art and presented evidence of an earlier reduction to practice date vis-à-vis the regular application filing date of the asserted prior art. The burden of production then shifted back to Dynamic Drinkware, which ultimately failed to establish entitlement to the provisional filing date. The Panel explained that for a patent to claim benefit to the filing date of its provisional application “the specification of the provisional must contain a written description of the invention and the manner and process of making and using it, in such full, clear, concise, and exact terms, 35 U.S.C. § 112 ¶ 1, to enable an ordinarily skilled artisan to practice the invention claimed in the non-provisional application.” (Emphasis in original.) The petitioner, however, never met its burden of proving that the disclosure of the provisional application supported the claims of the issued patent. Showing that the disclosures of both the provisional application and the cited prior art patent similarly anticipated the challenged patent did not establish support for the claims in the issued patent. As the Court explained, a provisional application’s effectiveness as prior art depends upon its written description support for the claims in the issued patent of which it was provisional. Practice Note: If a petitioner plans to rely on an effective filing date of an earlier-filed provisional application, the petitioner must prove that the claims of the prior art patent are supported by the written description of that provisional application.
Preemption Challenge to State Demand-Letter Regulations Confers Jurisdiction Under Post-AIA 35 U.S.C. § 1295(a)(1)
Addressing jurisdictional issues, the U.S. Court of Appeals for the Federal Circuit relied on post-AIA 35 U.S.C. § 1295(a)(1) to exercise, for the first time, jurisdiction over an appeal in which only a counterclaim arose under the patent laws. Vermont v. MPHJ Tech. Invs., LLC, Case No. 15-1310 (Fed. Cir., Sep. 28, 2015) (O’Malley, J.). Defendant MPHJ is a non-practicing entity that owns several patents. In 2013, MPHJ began a licensing campaign in which it sent demand letters threatening litigation to Vermont businesses. Alleging that MPHJ’s demand-letter campaign violated the Vermont Consumer Protection Act (VCPA), the State of Vermont filed suit in state court. The State sought, among other forms of relief, a permanent injunction prohibiting the defendant from engaging in any business activity in, into, or from, Vermont that violates Vermont law. MPHJ’s first attempt to remove the case to federal court was unsuccessful, with the district court remanding the case back to state court. MPHJ filed an answer and counterclaims in the state court action, premised in part on the assertion that Vermont was seeking an injunction that extended beyond the VCPA to a second statute, the Vermont Bad Faith Assertions of Patent Infringement Act (BFAPIA). MPHJ’s counterclaims sought declaratory judgment that the BFAPIA was invalid or preempted, that its patents were valid and infringed, that the VCPA was invalid or preempted and that it did not violate the VCPA. Along with its counterclaims, MPHJ filed a second notice of removal premised, in relevant part, on the notion that the BFAPIA triggered federal jurisdiction under 28 U.S.C. § 1442(a)(2). The district court remanded, finding that the complaint did not require compliance with the BFAPIA. MPHJ appealed to the Federal Circuit. Agreeing with the district court’s assessment, the Federal Circuit held that there was no basis for removal to federal court under 28 U.S.C. § 1442(a)(2) and affirmed the remand. Notably, the Federal Circuit relied on the America Invents Act (AIA) amendment to 35 U.S.C. § 1295(a)(1) to exercise jurisdiction over the case. The AIA amendment expanded the Federal Circuit’s jurisdiction to cases in which a compulsory counterclaim arises under the patent laws. As mentioned above, one of MPHJ’s counterclaims challenged the VCPA as preempted by federal patent law. Applying U.S. Court of Appeals for the Second Circuit law, the Federal Circuit determined that the counterclaim was compulsory. Then, the Federal Circuit determined that the counterclaim fell into the “special and small category of cases” in which a state law claim gives rise to federal jurisdiction because a federal issue is necessarily raised, actually disputed, substantial and capable of resolution in federal court without disrupting the federal-state balance approved by Congress. (See Gunn v. Minton, IP Update, Vol. 16, No. 2). Practice Note: Barring diversity jurisdiction, typical licensing cases involving state-law breach of contract claims still need to be brought in state court under Gunn. Under post-AIA law, however, defendants who counterclaim for infringement will now be able to remove such cases to federal court. It is still unclear how this statutory change will affect legal malpractice claims against patent attorneys. See NeuroRepair, Inc. v. Nath Law Group (IP Update, Vol. 18, No. 2).
Patents / Damages Experts
Fact-Intensive Reasonable Royalty Analysis Need Not Be Peer Reviewed or Published to Be Admissible
Addressing the admissibility of expert testimony on damages issues, the U.S. Court of Appeals for the Federal Circuit upheld the district court’s admission of expert testimony based on a fact-intensive analysis that was not peer reviewed or published. The Federal Circuit also agreed that the expert could assume that the frequency of a feature’s use is proportional to its value, and also that an expert can rely on evidence from consumer surveys as long as experts in the field reasonably rely on those surveys. Summit 6, LLC v. Samsung Elecs. Co., Nos. 13-1648, -1651 (Fed. Cir., Sept. 21, 2015) (Reyna, J.). After a jury trial resulting in a $15 million damages award, Samsung challenged the district court’s admission of Summit 6’s expert’s (Mr. Paul Benoit’s) reasonable-royalty analysis. The asserted patents related to the processing of digital photos, such as in a mobile phone with a camera. Mr. Benoit analyzed Samsung’s cost and revenue spreadsheets to determine the revenue derived from a phone’s camera. Next, Mr. Benoit relied on surveys of camera users to determine the percentage of users who used the infringing methods. Based on those surveys, the revenue associated with a camera, an analysis of Samsung’s profit margins, and the Nash Bargaining Solution—which Samsung did not challenge—Mr. Benoit estimated a reasonable royalty should be $29 million. Under Daubert, the trial judge plays a gatekeeping role for the admission of expert testimony. The trial judge determines whether the expert’s methodology is scientifically valid and tied to the facts of the case. The trial judge may consider a number of factors, including whether the methodology is scientific knowledge that will assist the trier of fact, whether it has been published in peer-reviewed journals and whether the methodology is generally accepted. In contrast, the jury determines whether the expert is credible and whether the expert’s conclusions are correct. On appeal, the Federal Circuit concluded that Mr. Benoit’s damages methodology was based on reliable principles and was sufficiently tied to the facts of the case. Samsung argued that Mr. Benoit’s methodology was inadmissible because it was not peer reviewed or published. The Court disagreed, explaining that Mr. Benoit’s fact-based analysis would have been impractical, if not impossible, to subject to peer review and publication. The Court also found that the district court did not abuse its discretion by allowing Mr. Benoit to correlate the feature’s use with value. As the Federal Circuit explained, “an invention used more frequently is more valuable than a comparable one that is used less frequently.” Finally, the district court did not err by allowing Mr. Benoit to rely on consumer surveys from third parties. Mr. Benoit was not required to be a survey expert as long as experts in the field reasonably rely on consumer surveys. Any flaws in Mr. Benoit’s credibility, data, or factual assumptions went to the weight of the evidence, not its admissibility.
Declarations from Inventors of Prior Art Could Create Genuine Dispute over Motivation to Combine
Mandy H. Kim
Addressing the issue of obviousness, the U.S. Court of Appeals for the Federal Circuit held that the district court erred in granting summary judgment of invalidity because plaintiff patentee established a genuine issue of material fact over whether one of ordinary skill in the art would have been motivated to combine the cited prior art. Ivera Medical Corp. v. Hospira, Inc., Case Nos. 14-1613, 14-1614 (Fed. Cir., Sept. 8, 2015) (Reyna, J.). Ivera sued Hospira alleging infringement of three patents relating to a cleaning device for a medical implement, such as catheters and luer ports. The claimed invention of the asserted patents related to caps that include a means for venting, which inhibits pressure buildup and allows for evaporation of a cleaning agent. The district court granted summary judgment, finding the asserted patent claims obvious under § 103. According to the district court, although the prior art did not disclose the vent limitations, a person of ordinary skill would not need the benefit of hindsight to recognize the benefit of adding a vent to relieve possible pressure on the inside of the cap. Ivera appealed. On appeal, the Federal Circuit held that the record evidence established a genuine dispute over whether one of ordinary skill in the art would have been motivated to add a vent to the disinfecting cap as described in the prior art. In so holding, the Court looked at declarations from inventors of cited prior art references that were not considered during parallel inter partes reexamination proceedings, noting that Hospira did not challenge Ivera’s reference to these declarations at the summary judgment stage before the district court. The Court further remarked that while “statements of an inventor are not controlling as to the content of a patent application, Hospira [did] not challenge [the inventor’s] assertion that he is a person of ordinary skill.” The Court found that these declarations indicated that a person of ordinary skill would have desired fluid-tight disinfecting caps to retain the cleaning agent included within the cap. The parties also disputed the appropriate interpretation of a portion of a prior art reference. The Federal Circuit explained that the prior art reference was not clear on which interpretation was correct and because “neither side point[ed] to any other evidence favoring one interpretation,” this was another factual dispute that the Court must resolve in Ivera’s favor at the summary judgment stage.
Patents / Criminal Law / Statements Made to the Government
If Considered Material, False Statements Made to Federal Regulatory Bodies Create Exposure to Criminal Liability
Joshua David Rogaczewski
The U.S. Court of Appeals for the Tenth Circuit reversed a conviction for making a false statement to the U.S. Patent and Trademark Office (USPTO), holding that a false statement is not material if it could not influence the relevant USPTO decision. The Court also reversed several other convictions against the defendant but affirmed his obstruction-of-justice conviction. Judge Kelly dissented in part because he would have reversed all of the convictions against the defendant. United States v. Camick, Case No. 14-3089 (10th Cir., July 31, 2015) (McHugh, J. (Kelly, J., dissenting). Leslie Camick sought to leave his life in Canada—including his obligations to pay back taxes and child support—behind. Accordingly, in July 2000, Mr. Camick assumed the identity of Wayne Camick, his deceased brother, and entered the United States. Mr. Camick lived in the United States as “Wayne Camick” for 11 years before federal immigration authorities uncovered the truth. During that period, Mr. Camick used his false identity in a number of ways, one of which was to file a provisional patent application. Importantly, Mr. Camick abandoned his provisional application. The United States prosecuted Mr. Camick for several acts of fraud under a variety of criminal statutes. With respect to the provisional patent application, the government claimed Mr. Camick made a “materially false, fictitious, or fraudulent statement” to the USPTO. 18 U.S.C. § 1001(a)(3) (2012). The jury convicted Mr. Camick of the offense, and Mr. Camick appealed to the 10th Circuit that the evidence did not support the conviction. The 10th Circuit agreed and reversed the conviction. Mr. Camick’s statement to the USPTO that he was “Wayne Camick” was obviously false and intended to mislead the USPTO into thinking he was “Wayne Camick,” but the statement was not material. As the court explained, the purpose of a provisional patent application is to set the priority date if the applicant converts the provisional application into a non-provisional application. Moreover, the USPTO does not examine provisional applications for patentability. Because he took no further action on his provisional application, effectively abandoning it, Mr. Camick insured that the USPTO would never review the statements in the provisional application, much less take action based on them. Accordingly, the use of a false identity in the provisional application was not material and could not support a false-statement conviction. Practice Note: Mr. Camick escaped criminal liability because he made his false statement in a provisional application that he abandoned. Nevertheless, the case serves as an effective reminder of the importance of avoiding false statements when dealing with the USPTO (or any government agency), because the consequences can include criminal liability.
Patents / AIA / Real Party in Interest
No Review of PTAB Determination to Not Institute an IPR, Again
Addressing a decision by the U.S. Patent and Trademark Office’s Patent Trial and Appeal Board (PTAB or Board) to not institute inter partes review IPR proceedings, the U.S. Court of Appeals for the Federal Circuit concluded that Board’s decision was not appealable, even though the Board’s assessment of issues leading to the decision were examined during the proceedings and in the Board’s final written decision. Achates Reference Publishing, Inc. v. Apple, Inc., Case No. 14-1788 (Fed. Cir., Sept. 30, 2013) (Linn, J.). A decision by the Board whether to institute an IPR is final and non-appealable. An IPR may not be instituted if the petition requesting the proceeding is filed more than one year after the date on which the petitioner, a real party in interest or a privy of the petitioner is served with a complaint alleging infringement of the patent. A number of factors are relevant to determining whether a party is a real party in interest or in privy with another party, including whether the non-party exercised or could have exercised control over a party’s participation in a proceeding or is responsible for funding and directing the proceeding. Achates sued multiple defendants for infringing the patent-at-issue and then one year later joined Apple as another defendant. Apple initiated the patent challenge based on multiple petitions for IPR, and Achates argued that Apple’s petitions were time-barred because of Apple’s relationship with its co-defendants via a software development kit (SDK) agreement, which requires software developers to indemnify Apple from infringement claims. The Board found that Apple’s petitions were not time-barred and initiated IPR proceedings, finding that Achates provided no proof the co-defendants ever signed the SDK agreement and, in any event, the indemnification provision in the agreement did not give developers the right to intervene or control Apple’s defense in patent litigation, and Apple’s co-defendants had distinct interests in the litigation. Achates continued to argue the petitions were time-barred during the merits phase of the proceedings. The Board denied Achates’ discovery request for information relevant to the issue, finding the evidence and arguments proffered by Achates amounted to a mere allegation and speculation. The findings were again discussed in the Board’s final written decision (FWD). Achates appealed. The Federal Circuit affirmed the Board, concluding that simply because the Board considered the time-bar in its FWD does not suddenly resurrect the issue for review. Rather, the Board is always entitled to reconsider its own opinions. A final decision on the merits and a decision to institute IPR are distinct actions and do not become the same merely because both are discussed at the same stage of the process, i.e., in the FWD. As the Court explained, the time bar is a part of the procedure for seeking IPR, but does not go to the Board’s authority to invalidate. This stands in contrast to determinations by the Board that form a part of the Board’s basis for institution as well as a “defining characteristic” of the Board’s ultimate authority to invalidate a patent—e.g., whether a challenged patent qualifies as part of the covered business method patent. Citing Cuozzo Speed Technologies (IP Update, Vol. 18, No. 8), the Court concluded it was prohibited from reviewing the Board’s assessment of whether Apple’s petitions were time-barred, and the Board’s denial of related discovery requests, even if the issues were reconsidered during the merits phase and restated in the FWD. Practice Note: The Board’s assessment of issues solely pertinent to initiation of an IPR is not reviewable.
Patents / ITC / Inducement
On Remand, Panel Affirms ITC Finding of Section 337 Violation *Web Only*
In a non-precedential remand decision, the original panel in the case of Suprema v. International Trade Commission affirmed the International Trade Commission’s finding that appellant Suprema violated § 337 by inducing infringement of intervenor Cross Match Technologies’ patents. Suprema, Inc. v. International Trade Commission, Case No. 12-1170 (Fed. Cir., Sept. 14, 2015) (O’Malley, J.) (Suprema III) (non-precedential). By way of background, in an 2013 opinion, a panel of the Federal Circuit reversed a finding by the ITC that Suprema had violated § 337 by inducing infringement of intervenor Cross Match’s patents, finding that the language of § 337 did not provide the ITC with jurisdiction in a case where the underlying act of infringement did not take place until after importation. See& IP Update, Vol. 16, No. 12 (Suprema I). The full Federal Circuit reheard the case en banc, and by a 6-4 vote reversed the panel opinion, finding that § 337 was ambiguous, that the ITC had interpreted § 337 as granting jurisdiction, and that its interpretation of its enabling statute was entitled to Chevron deference. See IP Update, Vol. 18, No. 8 (Suprema II). On remand, the Suprema III panel found that the Commission’s findings were supported by substantial evidence. First, the panel found that there was no infringement of one Cross Match patent and direct infringement by Suprema of a second patent. For a third patent, the panel upheld the Commission’s finding of induced infringement, agreeing that the requisite knowledge of the patent, or willful blindness thereof, could be implied from the fact that Suprema was aware of the Cross Match first patent, which was both related to and mentioned the application that matured into the third patent. Despite Suprema’s claim that it had never checked to see if the third patent’s parent application had ever issued, the panel noted that the patent had already issued at the time Suprema became aware of the Cross Match patent. As such, “a word search likely would have identified both patents.” The panel also noted that “the record is replete with evidence of Suprema’s efforts in aiding and abetting Mentalix to adapt . . . Suprema’s imported scanners” to practice the third patent and that Suprema’s failure to obtain an opinion of counsel was further evidence of its state of mind. Practice Note: In dicta, the panel noted a concern by amici that the Commission’s opinion placed on respondents a duty to ensure that their customers would not infringe a patent, noting that even though it found for the complainant, it was “not unmindful of these concerns” and limiting its holding to the facts in this case.
Patents / Ex Parte Reexamination / Substantially Identical
Claim Amendments Are Not Always What They Seem *Web Only*
Addressing whether language added to a claim during ex parte re-examination resulted in substantive changes, the U.S. Court of Appeals for the Federal Circuit affirmed the lower court’s dismissal of the infringement claims, holding the amended claim was not substantially identical to the original claim. R+L Carriers, Inc. v. Qualcomm, Inc., Case No. 14-1718 (Fed. Cir., Sept. 17, 2015) (O’Malley, J.). R+L filed suit against Qualcomm in 2009 for induced infringement of a patent related to a method to consolidate freight of trailers traveling to a central location. The patent discloses a system to transmit the contents of trailers to the central terminal while the trailers are still en route, so the load planning and consolidation can occur before the trailers arrival. The patent allegedly describes both computerized and manual systems for extracting the load planning information from the transmissions and preparing the loading manifests. In 2013, R+L filed for ex parte re-examination of its own patent-in-suit based on prior art identified by a third party. To overcome the prior art, R+L amended the language of the sole claim: “said remote processing center to prepare [a] an advance loading manifest document for another transporting vehicle.” (Deletion in brackets, additions in italics.) The U.S. Patent and Trademark Office (PTO) allowed the amended claim, stating the prior art reference only discussed a loading manifest for the current shipping vehicle and not an advance loading manifest for another vehicle. The district court held the amendment substantively narrowed the claim, thereby precluding recovery of damages for infringement prior to the date the PTO issued the re-examination certificate. According to the district court, the amended claim was substantially narrowed because it only covered computer-prepared loading manifests rather than both computer and manually prepared loading manifests that fell within the scope of the original claim. Because Qualcomm sold its allegedly infringing business unit before the issuance of the reexamination certificate, R+L conceded it could not recover damages against Qualcomm and stipulated to the entry of a final judgment, dismissing the infringement claim. R+L then appealed to the Federal Circuit. The issue for the Federal Circuit was whether the lower court correctly determined that the amended claim was substantively narrower than the original claim. Qualcomm argued that the claim was substantively narrowed in reexamination because the insertion of the term “advance” into the claims limited it to only computer-generated loading manifests (and that the claim now excluded manual loading manifests). R+L argued that the claim was always limited to computer-generated or computer-assisted documents and that the amendment only clarified that the loading manifest must be a document for another transporting vehicle (rather than the current transport vehicle). The Federal Circuit disagreed with the premise of both sides’ arguments. According to the Federal Circuit “it is irrelevant why an amended claim is narrowed during reexamination, or even whether the patentee intended to narrow the claim in a particular way.” What matters is whether the scope of the amended claim is not “substantially identical” to the scope of the original claim. Here, the Federal Circuit explained that the amended claim was not substantially identical to the original claim because the original claim encompassed scope that the amended claim does not. The Federal Circuit also found that R+L clearly understood that it was limiting the scope of its claims to get around the prior art. For these reasons, R+L is not entitled to infringement damages prior to issuance of the reexamination certificate.
Patents / Infringement Jurisdiction / Federal Claims
Wrong Defendant, Wrong Court: Plaintiff Wrongly Targets Government Contractors Instead of U.S. Government *Web Only*
In a case addressing whether a patent holder can sue government contractors in district court, the U.S. Court of Appeals for the Federal Circuit upheld the dismissal of Astornet’s claims against three government contractors that supplied equipment to the Transportation Security Administration (TSA) finding that the plaintiff’s exclusive remedy was against the U.S. Government in the U.S. Court of Federal Claims. Astornet Technologies Inc., v. BAE Systems, Inc. et al., Case Nos. 14-1854, 15-1006, -1007 (Fed. Cir., Sept. 17, 2015) (Taranto, J.). In June 2009, TSA sough bids for airport scanning equipment called Credential Authentication Technology/Boarding Pass Scanning System (CAT/BPSS). BAE Systems Information Solutions, a subsidiary of BAE Systems, and NCR, a company for which MorphoTrust eventually took over, won the bids over Astornet Technologies. Soon after, Michael Haddad, an Astornet inventor, brought a suit in a federal district court in his own name and “doing business as wholly owned Astornet Technologies.” He named NCR, MorphoTrust’s predecessor, two subsidiaries of BAE Systems, TSA and the United States Army as defendants. The cases were later voluntarily dismissed without prejudice, and Astornet, but not Mr. Haddad, brought another suit in federal district court against NCR, MorphoTrust and BAE Systems. The claim alleged direct infringement by the three defendants for making, using, selling and offering to sell “products that embody that patented invention.” One month later, Astornet separated the three defendants into three separate complaints: an action alleging that BAE Systems directly infringed its patent; an action against NCR, and an action against MorphoTrust, the later two alleging indirect infringement under § 271(b) and (c). Specifically, the NCR and MorphoTrust actions alleged that the defendants infringed the patent by “at least inducing the TSA to use the [defendants’] CAT/BPSS system by providing the TSA the CAT/BPSS prototypes and 10 full CAT/BPSS systems, and instructing the TSA regarding the use of these systems in a manner which infringed” the patent. NCR and BAE Systems filed motions to dismiss, arguing that 28 U.S.C. § 1498 barred the suits by limiting Astornet’s remedy to an action against the United States in the U.S. Court of Federal Claims. The district court agreed. The district court also sua sponte dismissed the case against MorphoTrust because the MorphoTrust case was one “in which the same defense has been asserted based on the same contract documents.” Astornet appealed. On appeal, the U.S. Court of Appeals for the Federal Circuit analyzed § 1498(a), the statute requiring a patent owner to file suit against the United States in the U.S. Court of Federal Claims to recover damages for the unauthorized use or manufacture of a patented invention by or for the United States. The Court explained that the purpose of the statute was to stimulate contractors to furnish what the government needs while protecting them against infringement liability. Because the plaintiff’s claims specifically alleged that NCR, MorphoTrust and BAE Systems induced and contributed to TSA’s unauthorized use of the equipment and thus the direct infringement by TSA, the Court found that Astornet’s allegation met the “use of the patented invention by . . . the United States” provision in the section 1498(a) that § 1498(a) barred Astornet’s suit against the government contractors and barred suit outside of the U.S. Court of Federal Claims.
Patents / Reexamination / Presumption of Validity
Preponderance Standard Applies to Ex Parte Re-examinations *Web Only*
Addressing the presumption of validity in ex parte re-examinations, the U.S. Court of Appeals for the Federal Circuit reiterated that the presumption of validity does not apply to patents under reexamination in the U.S. Patent and Trademark Office (Patent Office). Rather, the correct evidentiary standard is preponderance of the evidence. In 1997, Dome asserted a patent directed to a method of making contact lens materials that are both rigid and gas permeable against six contact lens manufacturers. One of the defendants requested ex parte reexamination, which the Patent Office granted in June 1999. The district court proceedings were stayed pending a final determination in the reexamination proceeding. In the reexamination, the Patent Office canceled claim 1 of the patent, holding that the claim was obvious over three prior art references. Dome then filed suit, against the Patent Office in the district court, under 35 U.S.C. § 145, seeking to overturn the cancellation of the claim. The district court, however, affirmed the cancellation of the claim. Dome appealed the district court’s decision, arguing that under Microsoft Corp. v. i4i Ltd. Partnership the district court and the Patent Office should have applied the clear and convincing evidence standard due to the presumption of validity. Dome Patent L.P. v. Lee, Case No. 14-1673 (Fed. Cir., Sep. 3, 2015) (Hughes, J.) On appeal, the Federal Circuit found that the district court had applied the correct standard and had not erred in its patentability analysis. The Court explained that Dome’s reliance on § 282 and the holding in Microsoft Corp. v. i4i Ltd. Partnership was misplaced. The Court explained that the clear and convincing evidence standard “stems from our suggestion that the party challenging a patent in court ‘bears the added burden of overcoming the deference that is due to a qualified government agency presumed to have done its job.’” But, in re-examination proceedings, “an examiner is not attacking the validity of a patent, but is conducting a subjective examination of claims in light of the prior art.” For ex parte re-examination, the Patent Office “reopens prosecution to determine whether the claimed subject matter should have been allowed in the first place.” The Court reasoned that in those re-examination proceedings, there is no need to presume that the Patent Office had done its “job” in the previous examination. The Court further observed that the legislative history evidenced that Congress actually intended that patents under reexamination not be accorded special deference. According to the Federal Circuit, “[w]e would hinder this intent if we required the district court here to presume that the reexamined patent claim is valid because of the Patent Office’s previous determination and, consequently, to impose a burden to defend its own subsequent reexamination decision by clear and convincing evidence.” Noting that Dome had not disputed the Patent Office’s finding that the cited prior art taught the elements of the claim, the Court found that the district court had not erred in affirming the Patent Office’s conclusion of obviousness. Practice Note: While arising in the relatively rare context of an ex parte re-examination commenced prior to November 29, 1999, this decision similarly applies to current ex parte re-examinations and also those lingering inter partes re-examinations filed before enactment of the America Invents Act.
Supreme Court to Review Federal Circuit Standard for Treble Damage Awards Under § 284
Taking its first IP cases of the current session, the Supreme Court has granted certiorari in two § 284 enhanced fee award patent cases:Halo Electronics, Inc. v. Pulse Electronics, Inc., S.Ct. No. 14-1513 (Oct. 19, 2015) and Stryker Corp. v. Zimmer, Inc., No. 14-1520 (Oct. 19, 2015). The two cases, focusing on whether the Federal Circuit’s “rigid” test, limiting enhanced patent damages is appropriate, will be heard together. The Supreme Court’s grant of cert in this case comes in the wake of the Court’s 2014 decision in Octane Fitness where the Court rejected a “rigid test” in the context of § 285 fee-shifting (IP Update, Vol. 17, No. 5). The relevant statute, 35 U.S.C. 284, states that “the court may increase the damages up to three times the amount found or assessed.” Questions presented: Halo: Whether the Federal Circuit erred by applying a rigid, two-part test for enhancing patent infringement damages under 35 U.S.C. § 284, that is the same as the rigid, two-part test this Court rejected last term in Octane Fitness, LLC v. ICON Health & Fitness, Inc. for imposing attorneys’ fees under the similarly-worded 35 U.S.C. § 285. Stryker: Whether the Federal Circuit improperly abrogated the plain meaning of 35 U.S.C. § 284 by forbidding any award of enhanced damages unless there is a finding of willfulness under a rigid, two-part test, when this Court recently rejected an analogous framework imposed on 35 U.S.C. § 285, the statute providing for attorneys’ fee awards in exceptional cases.
America Invents Act
AIA / CBM / Motion to Terminate
Standing for CBM Proceeding Only Necessary at Time of the Petition
Addressing the issue of whether standing must be maintained throughout a covered business method (CBM) proceeding under the America Invents Act (AIA), the U.S. Patent and Trademark Office’s (PTO’s) Patent Trial Appeal Board (PTAB or Board) answered in the negative, holding that there is no continuous standing requirement during a CBM proceeding. Westlake Servs., LLC v. Credit Acceptance Corp., Case No. CBM2014-00176 (PTAB, Sept. 3, 2015) (McKone, APJ). Westlake filed a petition seeking a CBM review of a patent related to a method of providing financing to customers. In a related litigation, patent owner Credit Acceptance provided Westlake a covenant not to sue, and the district court granted Credit Acceptance’s motion to voluntarily dismiss with prejudice. Credit Acceptance then requested a conference call with the Board seeking authorization to file a motion to terminate, which Westlake opposed. The Board declined to grant authorization. Credit Acceptance contended that § 18(a)(1)(B) of the AIA and 37 CFR § 42.302(a) provide the basis for its motion to terminate. Both statute and rule require that a petitioner for a CBM proceeding must either have been sued for or charged with infringement of the patent. Credit Acceptance argued the Board can no longer maintain the CBM proceeding now the underlying infringement controversy had been resolved. As the Board explained, the starting point for a standing determination before an administrative agency, including the PTO, is not Article III but the statute that confers standing before that agency. In this case, the appropriate statute is § 18(a)(1)(B) of the AIA. Any Article III standing analysis is inappropriate. The Board found no ambiguity in the plain language of § 18(a)(1)(B), holding that it restricts only who may “file” a petition. Whether the underlying litigation resolves itself during the CBM proceeding is irrelevant to standing. Credit Acceptance provided no contrary authority. As a final argument, Credit Acceptance argued 35 U.S.C. § 327 provided a basis for termination. However, § 327 requires a joint request of termination by petitioner and patent owner, and no remaining petitioners. Further, it does not require termination but only grants the Board the discretion to terminate. The Board found this section inapplicable since Westlake opposed termination.
AIA / CBM / Patent-Eligible Subject Matter
Internet-Centric Solution is More Than Moving Online
Addressing the issue of patent-eligible subject matter in a covered business method (CBM) review, the Patent Trial and Appeal Board (PTAB or Board) found the challenged online action patent to be directed to ineligible subject matter. eBay, Inc. v. PAID, Inc., Case CBM2014-00125 (PTAB, Sept. 30, 2015) (Giannetti, APJ). The Board instituted CBM review for the challenged patent after finding the claimed invention was directed to a financial product or service and not subject to the technological invention exception. The claimed invention was a shipping calculator for online auctions. The petitioner asserted the claimed subject matter was not patent-eligible. The patent owner argued that the patent did not claim an abstract idea because it was directed to online auctions and because the petitioner relied on obviousness rather than anticipation challenges. The Board explained that an abstract idea does not become non-abstract by limiting the claimed invention to a technological environment such as the internet. The Board also found that the question of novelty is to be evaluated wholly separate from whether the invention falls into a category of statutory subject matter. The Board concluded that because conventional auctions and shipping rate calculations existed before the internet, the claims were directed to the abstract idea of determining shipping rates for an online auction item. In terms of the technological exception, the patent owner argued that the patent claimed real-time shipping calculation, solving a new technical problem created when auctions moved to the internet. The patent owner asserted that the claims were an “internet-centric” solution. The Board, however, concluded that the claims did not reflect any form of new real-time calculation, but rather recited steps that were routinely and conventionally done manually. The Board also found that merely reciting use of the internet is not sufficient to save otherwise abstract claims from ineligibility, explaining that reference to online auctions did not make the claims “internet-centric.” Rather, the Board concluded the claims were not rooted in computer technology to solve a problem specifically arising in some aspect of computer technology, as the problem of real-time shipping calculations in conventional auctions could have been done manually, albeit at a slower speed. Thus, the Board concluded that the claimed invention was not entitled to the technological exception and that the claims were directed to ineligible subject matter. Practice Note: Claiming conventional business methods as online does not create patentable subject matter. An internet-centric solution requires more than reference to online actions.
Support from Specification Not Enough for Covered Business Method Review
The Patent Trial and Appeal Board (PTAB or Board) determined that a patent directed to a web services management was not eligible for covered business method (CBM) review under § 18 of the America Invents Act (AIA) and that “it is insufficient to simply show how the claims of the patent may be mapped to a financial embodiment in the specification.” ServiceNow, Inc. v. Hewlett-Packard Company,Case No. CBM2015-00077 (PTAB, Sept.17, 2015) (Crumbley, APJ). To be eligible for CBM review under § 18(d)(1) a patent must claim “a method or corresponding apparatus for performing data processing or other operations used in the practice, administration, or management of a financial product or service.” ServiceNow (the petitioner) contended that the challenged patent is eligible for CBM review, arguing that illustrative embodiment in the specification pertains to an online ordering system and that “each of the limitations from claim 1 is reflected in the online order system.” The petitioner further argued that the challenged patent expressly contemplates using the claimed method to manage “a financial product or service,” and therefore, that the challenged patent is eligible for CBM review. The patent owner, Hewlett-Packard, disagreed that the challenged patent claims a CBM and argued that CBM review “is not available for patents that claim generally useful technologies that happen to be also useful to financial application.” The patent owner further argued that the claims of the challenged patent do not contain a “limitation that is financial in nature” and “are directed to generally useful technologies that may be applied to various industries and processes.” The Board agreed with the patent owner, concluding that the claims of the challenged patent are of general utility. In particular, the Board noted that the challenged claims had no “finance-related terminology or limitation” and that the challenged claims are directed to an invention of general utility. The According to the Board, the specification of the challenged patent supports such a conclusion by providing examples of non-financial embodiments, such as Web services used for language translation or travel planning functions. As the Board explained, in § 18(d)(1) Congress defined a CBM patent as one that claims “a method or corresponding apparatus for performing data processing or other operations used in the practice, administration, or management of financial product or service,” not a method or apparatus that “can be used,” “may be used” or “is capable of being used” in such a manner. The Board acknowledged that “[f]inancially-related illustrative embodiments in the specification may be sufficient in cases where the specification indicates particular advantages or applicability to financial embodiments, where the specification makes clear that claim limitations are expressly interpreted to cover financial embodiments, or where there is not extensive evidence that the claimed invention has general utility.” However, in the present case, the Board found that the petitioner failed to establish that the challenged patent was directed to a CBM.
Starbucks Brews Successful CBMs *Web Only*
Addressing patent eligibility for a covered business method (CBM) review under Section 18 of the America Invents Act (AIA), the Patent Trial and Appeal Board (PTAB, the Board) found the patents-at-issue to be eligible and instituted the CBM review. Starbucks Corp. v. Ameranth, Inc., Case Nos. CBM2015-00091, CBM2015-00099 (PTAB, Sept. 14, 2015) (White, APJ.). Petitioner Starbucks requested CBM review of two Ameranth patents. The AIA defines a covered business method patent as “a method or corresponding apparatus for performing data processing or other operations used in the practice, administration, or management of a financial product or service.” This definition was drafted to encompass patents “claiming activities that are financial in nature, incidental to a financial activity or complementary to a financial activity,” excluding patents that claim “technological inventions.” The patents at issue here describe the use of a system in the context of online or mobile ordering and paying in restaurant and other “hospitality” contexts, including “reservations, frequent customer ticketing, wait list, etc.” The system includes a central database, multiple handheld devices, a web server and a single point of entry for all hospitality applications, as well as an application programming interface (API) that enables third parties (e.g., point-of sale companies and internet content providers) to integrate fully with the computerized hospitality applications. Starbucks argued that the claimed “orders” are part of the purchasing process and thus, a financial activity. The Board agreed with Starbucks and concluded that the representative claims of the patents-at-issue meet the financial-in-nature requirement of § 18(d)(1) of the AIA. To determine whether a patent meets the technological invention exception (to CBM eligibility), the Board considers “whether the claimed subject matter as a whole recites a technological feature that is novel and unobvious over the prior art; and solves a technical problem using a technical solution.” 37 C.F.R. § 42.301(b). As to this issue, Starbucks argued that the patents are not novel or nonobvious over the prior art and so they are not a technological invention. According to the specification, the software discussed by the patent owner may be written in any software language and is composed of steps that are commonly known, making it unnecessary to discuss the invention in any detail. The Board agreed with Starbucks that the patents merely contain a “recitation of known technologies” and do not qualify for technological invention exception. Having found that the patents were eligible for CBM review, the Board proceeded to institute review § 324, finding it is more likely than not that at least one of the challenged claims is unpatentable as obvious.
Can’t Run Away from Your Expert’s Testimony: Board Says Testimony from Another Proceeding Admissible
Addressing the admissibility of testimony from prior proceedings, the U. S. Patent and Trademark Office Patent Trial and Appeal Board (PTAB or Board) denied the petitioner’s motion to exclude the prior testimony of its own expert. Edmund Optics, Inc. v. Semrock, Inc. IPR2014-00583 (PTAB, Sep. 9, 2015) (Capp, APJ). Edmund Optics (Edmund) filed petitions requesting inter partes review (IPR) of two related patents belonging to Semrock. Both requests were instituted (hereinafter the “First Case” and the “Second Case”). Because the two cases involved related patents, Edmund used the same technical expert for both proceedings. To support its claim construction in the First Case, Semrock introduced the Edmund’s expert testimony from the Second Case. In particular, Semrock submitted deposition and declaration testimony from Edmund’s expert in the Second Case with its papers in the First Case. Edmund objected to Semrock’s maneuver and filed a motion to exclude. In its motion, Edmund argued that testimony from its expert in the related proceeding was inadmissible because the testimony was outside the scope of its expert’s testimony in the First Case, because it was hearsay and because the testimony was not relevant to the claims sought to be construed. With respect to deposition testimony, Edmund further averred that the parties agreed to treat the depositions in the two cases as separate—assigning separate days for each proceeding. Going a step further, Edmund argued that “admissions” by its expert in the instant proceeding (i.e., First Case) were also inadmissible. Edmund alleged that its expert did not understand the legal significance of the term “disclose” when cross-examined about whether the prior art failed to disclose elements of the claimed invention. The Board disagreed that testimony from another proceeding was inadmissible and declined to exclude it. The Board reasoned that the expert’s testimony from the related proceeding was at least relevant to claim construction and was therefore admissible. At the same time, because the testimony was offered as extrinsic evidence on the issue of claim construction, the Board assigned it little weight. The Board also rebuffed Edmund’s attempt to exclude cross-examination testimony of its expert in the case at issue. The Board pointed-out that Edmund’s expert had even used the term “disclose,” or variations of it, more than 50 times in his own declaration when discussing the prior art. Accordingly, there was no evidence tending to show that Edmund’s expert had a materially different understanding of the word “disclose” in cross-examination than in his declaration. Practice Note: This case should serve as a cautionary tale to patent practitioners who are considering using the same expert in multiple proceedings. In a footnote of the Final Decision, the Board explained that it was disinclined to adopt a “blanket rule” that cross-examination testimony obtained in one case can never be used in another. The Board posited that testimony in another proceeding may be appropriate, for example, to impeach a witness with a prior inconsistent statement.
Estoppel in the Context of Inter Partes Review Proceedings
The Patent Trial and Appeal Board (PTAB or Board) interpreted the estoppel provision of 35 U.S.C. § 315(e)(1) to deny institution of inter partes review in a second petition by the same petitioner against the challenged patent of ground that would have been raised in its earlier petition. Apotex Inc. v. Wyeth LLC, Case No. IPR 2015-00873 (PTAB, Sept. 16, 2015) (Kokoski, APJ). The present IPR petition was the third that Apotex had filed with respect to the challenged patent. In its first petition and its current petitions, Apotex asserted that the challenged patent claims, which are “directed to compositions comprising tigecycline, a suitable carbohydrate, and an acid or buffer,” would have been obvious in view of the teachings of various prior art references. The Board had instituted an IPR on certain grounds urged in the first petition and ultimately issued a final written decision in that proceeding. Apotex’s present petition sought institution of an IPR based on two grounds. Ground 1 was among those raised in the first IPR petition, but the Board declined to institute review on this ground, finding it cumulative. Ground 2 had not been raised in the initial petition, although the underlying references were all cited in that petition. The patent owner (Wyeth) argued that Apotex was estopped from asserting Grounds 1 and 2 based on § 315(e)(1), which precludes a petitioner in an IPR that resulted in a final decision from seeking or pursuing another IPR-based on “any ground that the petitioner raised or reasonably could have raised during [the first IPR].” Based on the legislative history of the AIA, the Board interpreted the “could have raised” provision of § 315(e)(1) as including “prior art which a skilled searcher conducting a diligent search reasonably could have been expected to discover.” However, the Board found it unnecessary to apply this standard to the present case because Apotex “was aware of, and cited, all of the Ground 2 prior art in the [initial] Petition, and therefore reasonably could have raised it during that proceeding.” In contrast, although Ground 1 was included in Apotex’s first IPR petition, the Board ultimately found that § 315(e)(1) did not bar Apotex from pursuing Ground 1 in the present proceeding. Section 315(e)(1) only applies to “grounds that the petitioner ‘raised or reasonably could have raised during the inter parties review.’” The Board explained that “[a]n inter partes review does not begin until the Office decides to institute review; prior to that point, our Rules refer to a preliminary proceeding that begins with the filing of a petition and ends with a decision whether to institute trial.” Accordingly, the Board explained that “grounds raised during the preliminary proceeding, but not made part of the instituted trial, are not raised ‘during’ an inter partes review and cannot be the basis for estoppel under 35 U.S.C. § 315(e)(1).” The Board went on to consider Ground 1 on the merits and ultimately denied Apotex’s petition on the grounds that Apotex had not established a reasonable likelihood that the challenged claims would have been obvious. Practice Note: In view of the PTAB’s interpretation of the estoppel provisions of § 315(e)(1), petitioners run the risk of future estoppel by failing to include all references cited in an IPR petition as part of specific grounds for obviousness. Further, any grounds on which an IPR is not instituted are fair game for a subsequent IPR petition.
AIA / IPR / Assignor Estoppel
PTAB to Purchasers: "Caveat Emptor"
In a decision to institute inter partes review (IPR) in four separate but related matters, the Patent Trial and Appeal Board (PTAB or Board) found that the patent owner failed to provide sufficient support for its contention that the Board is authorized to consider assignor estoppel under 35 U.S.C. §§ 314, 316 when deciding institution decisions. Esselte AB v. DYMO B.V.B.A., Case Nos. IPR2015-00766, IPR2015-00771, IPR2015-00779, IPR2015-00781 (PTAB, Aug. 28, 2015) (Parvis, APJ). The challenged technology relates generally to printing devices and methods used to print an image on a tape. In its initial analysis, the PTAB found that the petitioner had demonstrated a reasonable likelihood of prevailing in showing the unpatentability of the challenged claims. However, the real “meat” of the decision to institute came in the Board’s examination of assignor estoppel. In 2005, the petitioner entered into a stock purchase agreement (SPA) that sold off three of its companies, including the patent owner. As part of the SPA, the various intellectual properties owned by the companies were assigned and transferred, including patents covering the challenged technologies. The patent owner argued that as a result of the SPA, the petitioner was barred from seeking an IPR. Further, the patent owner claimed that the doctrine of assignor estoppel barred the IPR, based on the petitioner’s transfer of patents rights for value. The petitioner contended that the doctrine of assignor estoppel does not apply to an IPR proceeding, citing prior Board decisions finding that 35 U.S.C. § 311(a) presents “a clear expression of Congress’s broad grant of the ability to challenge the patentability of patents through inter partes review.” The patent owner countered by explaining that § 314 indicates that petitioners that are barred by assignor estoppel from challenging a patent’s validity logically do not have a reasonable likelihood to prevail. The Board found that assignor estoppel does not apply in IPRs. Specifically, the PTAB noted that the patent owner’s position “assumes [the PTAB is] authorized to consider assignor estoppel, without sufficiently explaining the basis of that assumption.” The Board pointed approvingly to prior PTAB decisions finding that Congress will expressly provide for the application of equitable defenses when it so desires. To date, Congress has provided no such direction. The Board then turned to the patent owner’s argument that § 316 obliges the PTO’s director to consider the effect of any proscribed regulations “on the economy, the integrity of the patent system, the efficient administration of the Office, and the ability of the Office to timely complete proceedings instituted under this chapter.” The Board rejected the patent owner’s reasoning, noting that the patent owner failed to specify which regulations of the director it contended would pertain “to recognizing and applying contractual bars and assignor estoppel to inter partes review proceedings.” After disposing of the patent owner’s assignor estoppel arguments, the Board determined that the petitioner had demonstrated a reasonable likelihood that several challenged claims were unpatentable and thus instituted inter partes review. Practice Note: The Board’s decision allows for the possibility that a company or individual can sell a patent and then turn around and challenge its patentability in an IPR.
AIA / IPR / "Reasonable Likelihood" Institution Standard
Threshold for Institution is Preponderance of Evidence *Web Only*
In a decision denying the patent owner’s request for rehearing, the Patent Trial and Appeal Board (PTAB or Board) explained that when instituting an inter partes review (IPR) on obviousness grounds, a petitioner must only demonstrate a likelihood that it will prevail based on a preponderance of the evidence, and need not establish prima facie obviousness. Nestlé Purina Petcare Co. v. Oil-Dri Corp. of America, Case IPR2015-00737 (PTAB, Sept. 23, 2015) (DeFranco, APJ). The challenged patent is directed to a clump-forming, clay-based composition that can be used as animal litter. In its request for rehearing, the patent owner asked the Board to reconsider its decision to institute IPR, contending that the Board “misapprehended the ‘reasonable likelihood’ standard for institution.” According to the patent owner, the standard “requires the petitioner to present a prima facie case of unpatentability,” and, as the petitioner failed to demonstrate a prima facie case, the PTAB should not have instituted an IPR. The Board rejected the patent owner’s argument, noting that while a demonstration of a prima facie case of unpatentability is helpful, it “is not necessarily a prerequisite to the institution” of an IPR. The Board pointed to 35 U.S.C. § 316(e) in noting that, under the statute, the preponderance of the evidence standard does not play a role in Board proceedings until after an IPR has been instituted. As the Board explained, in its decision to institute, the Board considered the petition and the preliminary response and, using the evidence of record at that time, found that there was a reasonable likelihood that the petitioner would prevail on the instituted grounds. As such, the Board determined that it had applied the correct standard for institution, and denied the patent owner’s request for rehearing.
Copyrights / Copyrightability
Holy Copyright Batman; the Batmobile Still Protected by Copyright Despite “Costume Changes"
The U.S. Court of Appeals for the Ninth Circuit, recognizing that Batman’s personal crime-fighting vehicle, the Batmobile, is not just a cool car, but a character with “physical as well as conceptual qualities,” concluded that it is “sufficiently delineated” to deserve copyright protection. DC Comics v. Mark Towle dba Garage Gotham, Case No. 13-55484 (9th Cir., Sept. 23, 2015) (Ikuta, J.) Since its inception, the Batmobile has consistently been depicted as a vehicle with “bat-like” external features equipped with futuristic weaponry and technology that is years ahead of anything else on wheels. Even though the precise nature of the Batmobile has changed throughout the sequence of relevant comic books, television series and motion pictures, its status, the court writes, as “a highly-interactive vehicle, equipped with high-tech gadgets and weaponry used to aid Batman in fighting crime” has not. At issue are two incarnations of the Batmobile. Defendant Mark Towle built and sold replicas of the Batmobile as it appeared in the 1966 TV show Batman, starring Adam West and from the 1989 film BATMAN, starring Michael Keaton. Towle admitted that he is not authorized by DC Comics to make or sell any products bearing DC’s copyright or trademarks, but denies infringement arguing that the Batmobile as it appeared in the 1966 show and the 1989 movie were not subject to copyright protection. The 9th Circuit disagreed. Citing to its 2008 Halicki decision, the 9th Circuit explained that copyright protection extends not only to an original work as a whole, but also to “sufficiently distinctive” elements, like comic book characters, contained within the work. For characters to meet this standard, it must be “sufficiently delineated” and display “consistent, widely identifiable traits.” Indeed, the persistence of these traits and attributes are key to determining whether the character qualifies for copyright protection. To determine whether the Batmobile has obtained such status, the 9th Circuit applied a three-part test: the character must have “physical as well as conceptual qualities”; the character must be “sufficiently delineated” to be recognizable as the same character whenever it appears, although it need not have a consistent appearance; and the character must be “especially distinctive” and “contain some unique elements of expression,” that is, it cannot be a stock character. Towle argues that the Batmobile did not consistently appear with its signature sleek “bat-like” features, having been sometimes depicted as a heavily armored tank or a batmissile. The 9th Circuit disagreed, reasoning that these “costume changes” did not alter the Batmobile’s innate characteristics. The court also disagreed that the jury should decide whether the Batmobile displayed unique elements of expression and consistent, widely identifiable traits because neither party disputed the relevant facts regarding the Batmobile. As a matter of law, the undisputed facts establish that the Batmobile is an “especially distinctive” character entitled to copyright protection. Towle also challenged DC Comic’s standing to bring its copyright suit, arguing that DC Comics does not own any copyright interest in the 1966 and 1989 derivative depictions of the Batmobile. Again, the 9th Circuit disagreed: “if a third party copies a derivative work without authorization, it infringes the original copyright owner’s copyright in the underlying work to the extent the unauthorized copy of the derivative work also copies the underlying work.” This rule applies regardless of whether the defendant copied directly from the underlying work, or indirectly via the derivative work, as Towle did here. There seems to be no question, in the starry eyes of the 9th Circuit panel, that the Batmobile and incarnations of the Batman’s ride enjoys copyright protection—whether depicted as a tank, a missile or, perhaps, as Christopher Nolan’s reimagined Batmobile, the “Tumbler”—as long as these depictions “promote its character as Batman’s crime-fighting super car that can adapt to new situations as may be necessary to help Batman vanquish Gotham City’s most notorious evildoers.”
Copyrights / DMCA / Fair Use
Copyright Holders Must Consider Fair Use Before Issuing DMCA Takedown Notification
The U.S. Court of Appeals for the Ninth Circuit ruled that copyright holders must consider the fair-use doctrine prior to issuing a takedown notification under the Digital Millennium Copyright Act (DMCA). Lenz v. Universal Music Corp. et al., Case Nos. 13-16106, -16107 (9th Cir., Sept. 14, 2015) (Tallman, J.) (Smith, Jr., J., concurring-in-part and dissenting-in-part). Plaintiff Stephanie Lenz uploaded to YouTube a 29-second home video featuring her children dancing to the Prince song Let’s Go Crazy. As Prince’s publishing administrator at the time, Universal Music (Universal) routinely policed user-generated content sites such as YouTube for copyright misuses. While Universal employed a process for determining whether particular content rose to the level of enforcement action, its guidelines did not explicitly include consideration of the fair-use doctrine. Universal included Lenz’s video among hundreds of others as part of a takedown notice to YouTube, on the grounds that the Prince composition was the focus of Lenz’s video and used without authorization. As required by the DMCA, the takedown notice included a statement that Universal had a good-faith belief that use of the composition was not authorized “by the copyright owner, its agent, or the law.” Lenz contested the removal of her video by sending to YouTube a counter-notification under § 512(g)(3) of the Copyright Act, and YouTube reinstated the video. Lenz filed suit against Universal alleging, in part, that Universal “knowingly materially misrepresent[ed]” that her video was infringing, in violation of § 512(f)(1) of the Copyright Act. Lenz and Universal each filed motions for summary judgment, which the district court denied. On appeal, the 9th Circuit affirmed the district court’s denials of summary judgment and ruled that a copyright holder must consider fair use before issuing a DMCA takedown notification. Reasoning that the Copyright Act “unambiguously contemplates fair use as a use authorized by the law” (emphasis added), as opposed to an affirmative defense that excuses unlawful conduct, the court concluded that fair use must be evaluated before a copyright holder can make a good faith representation in a DMCA takedown notification that use of the copyrighted material is not authorized “by … the law.” Acknowledging the “pressing crush of voluminous infringing content that copyright holders face in a digital age” the 9th Circuit offered that a copyright holder’s consideration of fair use “need not be searching or intensive” and “does not require investigation of the allegedly infringing conduct.” The court, “without passing judgment,” offered that, “the implementation of computer algorithms appears to be a valid and good faith middle ground for processing a plethora of content while still meeting the DMCA’s requirements to somehow consider fair use.” The panel continued that a copyright holder need only form a subjective good-faith belief that use of a copyrighted work is unlawful. Further, whether a copyright holder “knowingly materially misrepresented” that a use is unauthorized in violation of § 512(f) is a question for the jury and may be evaluated based on actual knowledge or willful blindness. On the issue of damages, the court ruled that a plaintiff such as Lenz could recover nominal damages if a § 512(f) misrepresentation claim is successful. However, the panel left to the jury whether Lenz was entitled to damages. Practice Note: The 9th Circuit ruling imposes a burden on copyright holders to understand the arguably complex fair-use doctrine well enough to consider whether it does or does not protect an unauthorized use of a copyrighted work. At the same time, the court’s “subjective good faith belief” threshold seems to recognize that application of the fair-use doctrine can lead to a wide variety of conclusions, stating that the court is “in no position to dispute the copyright holder’s [good-faith subjective] belief even if we would have reached the opposite conclusion.” Copyright holders should train personnel on the basics of the fair use doctrine and create policing guidelines that include a consideration of the fair use factors, so there is a legitimate basis to support the issuance of a DMCA takedown notification if challenged.
Unflattering Photo - A Blogger's Paradise? *Web Only*
The U.S. Court of Appeals for the Eleventh Circuit affirmed the district court’s grant of summary judgment in favor of defendant based on an assertion of fair use of an unflattering, candid headshot photograph of plaintiff. Raanan Katz v. Irina Chevaldina, Case No. 14-14525 (11th Cir., Sept. 17, 2015) (per curiam). Irina Chevaldina (Chevaldina) was a commercial tenant of Raanan Katz (Katz), a commercial landlord and also part owner of the Miami Heat of the NBA. After the business relationship between the two ended badly, Chevaldina started a blog criticizing Katz and his business practices. In her blog, Chevaldina repeatedly posted a headshot photograph of Katz which she found on an Israeli website using Google search engine. Katz thought the photograph was very unflattering and, after acquiring the photograph from the photographer, claimed Chevaldina infringed his newly acquired copyright in the photograph. According to § 107 of the Copyright Act “the fair use of a copyrighted work . . . for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research, is not an infringement of copyright.” In deciding whether a defendant’s use of a work constitutes fair use, courts weigh the following factors: the purpose and character of the allegedly infringing use, the nature of the copyrighted work, the amount of the copyrighted work used, and the effect of the use on the potential market or value of the copyrighted work. These statutory factors are not to be treated in isolation from one another. The district court granted Chevaldina’s motion for summary judgment of dismissal based on her fair-use defense, concluding that her use of the photograph was non-commercial, that her use was “transformative” because she used it for a different function and meaning than the original use of the photograph on the Israeli website, that it captured Katz in a public setting and was used simply to identify him, and that there could be no harm to the market value of the photograph since Katz did not have any interest in publishing the photograph. Katz appealed. The 11th Circuit affirmed the grant of summary judgment based on fair use, concluding that Chevaldina’s use of the photograph was non-commercial because her blog sought to educate and inform others of Katz business practices and, as such, it was educational. In addition, the court concluded that her use of the photograph was transformative because “she used Katz’s purportedly ‘ugly’ and ‘compromising’ appearance to ridicule and satirize his character.” Moreover, Chevaldina’s use of the photograph was primarily factual, not creative, and the photograph had been previously published, all of which weighs in favor of fair use. The 11th Circuit concluded that the third factor (amount of the work used) was neutral because, although Chevaldina used the whole photograph, that “to copy any less of the image would have made the picture useless to [Chevaldina’s] story.” Lastly, the court concluded that Chevaldina’s use of the photograph would not materially impair Katz’s incentive to publish the work as there is no potential market for his work and the suit was Katz’s attempt to utilize copyright as an instrument of censorship against unwanted criticism.