Federal Circuit to PTAB: Show Your Work

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In Alacritech, Inc., v. Intel, [2019-1467, 2019-1468] (July 31, 2020) the Federal Circuit vacated the Board’s obviousness determination as to claims 41–43 of U.S. Patent No. 8,131,880  because the Board did not adequately support its finding that the asserted prior art combination teaches or suggests a limitation recited in claims, and remanded for further proceedings regarding those claims.

The ’880 patent relates to computer networking, and is specifically directed to offloading certain network-related processing tasks from a host computer’s central processing unit (CPU) to an “intelligent network interface card” (INIC). According to the ’880 patent, one of the tasks that can be offloaded from the CPU to the INIC is the reassembly of data from packets received by the host computer from the network.

The Federal Circuit said that to support Federal Circuit review, the Board is obligated to provide an administrative record showing the evidence on which the findings are based, accompanied by the agency’s reasoning in reaching its conclusions.  The Federal Circuit said that it does not require perfect explanations, and it will uphold a decision of less than ideal clarity if the agency’s path may reasonably be discerned.  However, the Federal Circuit found that the Board’s analysis of the disclosure of the reassembly limitations in claims 41–43 falls short of that which the APA and our precedent require.

The Federal Circuit found that the Board’s analysis did not acknowledge the parties’ dispute over where the reassembly occurs, much less explain how the prior art teaches or suggests reassembly in the network interface. As such, the Federal Circuit said that it could not reasonably discern whether the Board followed a proper path in determining that the asserted prior art teaches or suggests the reassembly limitations, and by extension, that the subject matter of claims 41–43 would have been obvious.  The Federal Circuit further noted that because the Board’s reasoning appears to be untethered to either party’s position, it could not infer that the Board’s obviousness determinations flowed directly from its rejection of the patent owner’s arguments, or adoption of the Petitioner’s arguments.

The Federal Circuit vacated the Board’s obviousness determination as to claims 41–43 and remanded for further proceedings consistent with this opinion.   

Posted in IPR

Improved Method of Operating a Flow Cytometry Apparatus Is Not Abstract

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In XY, LLC v. Trans Ova Genetics, LC, [2019-1789] (July 31, 2020), the Federal Circuit reversed the district court’s judgment that the asserted claims of RE46559 are ineligible under §101, and vacate the district court’s determination that claim-preclusion judgment, and remand for further proceedings certain claims of U.S. Patent Nos. 6,732,422, 7,723,116, and 8,652,769 were claim-precluded based on a prior lawsuit filed by XY against Trans Ova.

The ‘559 patent is directed to a method of operating a flow cytometry apparatus with at least n detectors to analyze at least two populations of particles in the same sample.  At Alice step two the district court found that the claims were directed to the mathematical equation that permits rotating multi-dimensional data.  At Alice step two, the district court held that the asserted claims lacked an inventive concept because XY admitted that each claim element was known in the art.

Beginning its analysis with Alice step one, the Federal Circuit concluded that the district court erred when it held that the claims are directed to the mathematical equation that permits rotating multi-dimensional data.  The Federal Circuit found that the claims are directed to a purportedly improved method of operating a flow cytometry apparatus.  The Federal Circuit found the asserted ’559 patent claims were analogous to the claims at issue in Diehr and Thales.  Like the claims in Diehr, the asserted claims “describe in detail a step-by-step method” for accomplishing a physical process.  Like the claims in Thales, the claims are directed to a method in which at least two sensors or detectors gather data about an object before mathematical operations are applied to the gathered data to generate more accurate information about the object than was previously possible in the art.  Having concluded that the asserted claims of the ’559 patent are not directed to an abstract idea at Alice step one, the Federal Circuit did not reach Alice step two.

Turning to the issue of claim preclusion, the Federal Circuit said that the parties’ only dispute concerned whether the district court properly concluded that XY’s 2012 and 2016 lawsuits present the same cause of action. XY argues that the district court erred by failing to compare the currently asserted patent claims to the previously asserted patent claims to determine whether the causes of action in the two lawsuits are essentially the same, and the Federal Circuit agreed.  The district court’s holding was based solely on the fact that the earlier-asserted patents and the later-asserted patents shared a common specification and were continuations of, and terminally-disclaimed to, the same parent patent.  The Federal Circuit concluded that the district court erred in its claim-preclusion analysis by failing to compare the scope of the patent claims asserted in the 2012 lawsuit with the scope of the patent claims asserted in the 2016 lawsuit, and vacated and remanded the case.

Posted in 101

“Half-Liquid” is Wholly Indefinite

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In IBSA Institut Biochemique, S.A. v. Teva Pharmaceuticals USA, Inc., [2019-2400] (July 31, 2020), the Federal Circuit affirmed claims the district court determination that claims 1, 2, 4, and 7–9 of U.S. Patent No. 7,723,390 were invalid as indefinite under 35 U.S.C. § 112.

Central to the appeal was the parties’ dispute over the construction of “half-liquid,” which appears in independent claim 1.  IBSA proposed that the term “half-liquid” should be construed to mean “semi-liquid, i.e., having a thick consistency between solid and liquid.” Teva argued that the term “half-liquid” is indefinite or should be construed as “a non-solid, non-paste, non-gel, non-slurry, non-gas substance.”

The district court determined that IBSA’s proposed construction was not supported by the record, and that a skilled artisan could not otherwise ascertain a reasonably certain meaning for “half-liquid.”

The Federal Circuit began by noting that a claim is invalid for indefiniteness if its language, read in light of the specification and prosecution history, fails to inform, with reasonable certainty, those skilled in the art about the scope of the invention.  The Federal Circuit then turned to the language of the claim to determine whether the meaning of “half-liquid” is reasonably clear. Neither party meaningfully disputed that the claim language did not make the meaning of “half-liquid” reasonably clear. The Federal Circuit found that the claim language clarifies only that a “half-liquid” differs from a liquid.  The Federal Circuit then turned to the specification and prosecution history, which did not help. In fact, the fact that at one time a claim to a semi-liquid depended from the claim to the half-liquid established that half-liquid and semi-liquid were not synonyms.

Because the intrinsic evidence failed to establish the boundaries of a “half-liquid,” the  Federal Circuit turned to the extrinsic evidence, and found no error in the district court’s determination that the extrinsic evidence does not supply “half-liquid” with a definite meaning under § 112.

The Federal Circuit concluded that taken together, the intrinsic and extrinsic evidence fail to inform, with reasonable certainty, those skilled in the art about the scope of the invention, and affirmed the judgment of the district court.

It is important to make sure the meaning of every claim term is clear from the specification, particularly where the claims have been translated from another language.

Lack of Likelihood of Success and Irreparable Harm Doomed Preliminary Injunction

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In Takeda Pharmaceuticals USA, Inc. v. Mylan Pharmaceuticals Inc., [  2020-1407, 2020-1417] (July 31, 2020), the Federal Circuit affirmed the denial of a preliminary injunction on the grounds that Takeda failed to show that it was likely to succeed on the merits or that it would be irreparably harmed absent a preliminary injunction.

A plaintiff seeking a preliminary injunction must establish [1] that he is likely to succeed on the merits, [2] that he is likely to suffer irreparable harm in the absence of preliminary relief, [3] that the balance of equities tips in his favor, and [4] that an injunction is in the public interest.”

On the likelihood of success, the Federal Circuit agreed that the final judgment in the prior litigation likely triggered Section 1.2(d) of a License Agreement, permitting Mylan to market its generic colchicine product, and therefore Takeda was unlikely to succeed on the merits.

The Federal Circuit then considered the issue of irreparable harm. Takeda primarily relied on Section 1.10 of the License Agreement, which created a presumption of harm if the license agreement were breached, to prove irreparable harm. The Federal Circuit by its terms, Section 1.10 only offers Takeda a basis for establishing irreparable harm in the event Mylan breached Section 1.2.  However, because it concluded that it is unlikely Takeda can show that Mylan breached the License Agreement, the Federal Circuit further conclude that Section 1.10 is not useful for establishing irreparable harm.

Judge Newman in dissent argued that there was no accelerating event and thus Mylan breached the Agreement, entitling Takeda to a preliminary injunction.

Axles are Still Abstract Ideas

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In American Axle & Manufacturing, Inc., v. Neapco Holdings LLC, [2018-1763] (July 31, 2020), the Federal Circuit modified and reissued its October 3, 2019 opinion. In American Axle & Manufacturing, Inc., v. Neapco Holdings LLC, [2018-1763] (July 31, 2020). On petition for rehearing en banc, the Federal Circuit denied rehearing en banc.  DYK, wrote a concurrence, joined by WALLACH and TARANTO.  CHEN, also wrote a concurrence, joined by WALLACH.  NEWMAN wrote a dissent, joined by MOORE, O’MALLEY, REYNA, and STOLL.  STOLL wrote a dissent, joined by NEWMAN, MOORE, O’MALLEY, and REYNA. O’MALLEY wrote a dissent joined by NEWMAN, MOORE, and STOLL. LOURIE, dissented without opinion.

Posted in 101

Institution Decision Not Carved in Stone; Final Written Decision Can Differ

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In Fanduel, Inc. v. Interactive Games LLC, [2019-1393] (July 29. 2020), the Federal Circuit affirmed the PTAB’s determination that Fanduel, had failed to prove that claim 6 of U.S. Patent No. 8,771,058 was obvious in view of the asserted prior art.  Fanduel argued that the Board violated the APA by adopting in its final written decision a “new theory”—that the combination of Walker, Carter, and the Slot Payouts Webpage failed to disclose the claimed combination, after instituting on that ground.

The Federal Circuit said that the critical question for compliance with the APA and due process is whether patent owner received adequate notice of the issues that would be considered, and ultimately resolved, at that hearing.  The Federal Circuit added that FanDuel’s argument that it lacked notice that the Board might address and reject the obviousness arguments made in FanDuel’s own petition strains credulity.

Moreover, the Federal Circuit failed to see how the Board changed theories at all in this case. The Federal Circuit said that by finding at institution that Fan-Duel had a reasonable likelihood of succeeding in its obviousness challenge to claim 6, despite one reference’s contested prior art status, the Board was not adopting a position on the ultimate import of the three references. The Federal Circuit said that the Board said nothing in its institution decision endorsing FanDuel’s arguments such that later rejecting these arguments would have been a change in theory.

The Federal Circuit said that there is nothing inherently inconsistent about the Board instituting IPR on obviousness grounds and then ultimately finding that the petitioner did not provide preponderant evidence that the challenged claim was obvious. The Federal Circuit observed that this happens with some frequency, and that is has encouraged the Board to “change its view of the merits after further development of the record, if convinced its initial inclinations were wrong.

The Federal Circuit also rejected FanDuel’s suggestion that the patent owner’s failure to put forth rebuttal evidence regarding the substance of the references’ disclosures in any way limited the Board’s ability to decide for itself what the references would teach or suggest to a person of skill in the art.  The Federal Circuit noted that the Petitioner always has the burden of showing invalidity, and that the patent owner does not even have to file a response, and thus, a patent owner’s response, alone, does not define the universe of issues the Board may address in its final written decision.

The Federal Circuit concluded that from the moment FanDuel filed its petition, it was on notice that the Board would decide whether those references taught what FanDuel claimed they taught. That is exactly what the Board ultimately did. No APA violation results from such a course.  The Board’s purported new theory in this case was merely an assessment of the arguments and evidence Fan-Duel put forth in its petition.

On the substantive issues, the Federal Circuit agreed with Board that FanDuel failed to show that claim 6 was obvious.

Patent Owner is Not Always Indispensable

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In Gensetix,Inc. v. Baylor College of Medicine, [2019-1424] (July 24, 2020), the Federal Circuit affirmed-in-part, reversed-in-part, and remanded  the dismissal of the suit for failure to join an indispensable party.

Gensetix, Inc. , exclusively licensed U.S. Patent Nos. 8,728,806 and 9,333,248 from the University of Texas, an arm of the state of Texas. Gensetix brought suit, naming the University of Texas as an involuntary plaintiff. The district court determined that the Eleventh Amendment barred joinder of UT as an involuntary plaintiff, and concluded that the suit could not proceed in UT’s absence.

The Federal Circuit agreed that sovereign immunity prevented UT from being joined as an involuntary plaintiff, noting that sovereign immunity is reflected in (rather than created by) the Eleventh Amendment, and transcends the narrow text of the Amendment itself. Sovereign immunity serves to avoid the indignity of subjecting a State to the coercive process of judicial tribunals at the instance of private parties. The Federal Circuit distinguished cases where the state is the plaintiff, noting that the Eleventh Amendment applies to suits against a state, not suits by a state. Thus, the fact that UT did not voluntarily invoke federal court jurisdiction was dispositive. Accordingly, Rule 19(a)(2) cannot be used to drag an unwilling UT into federal court.

However, the Federal Circuit found that the district court abused its discretion when it dismissed the suit because of the absence of UT. Rule 19(b) provides that, where joinder of a required party is not feasible, “the court must determine whether, in equity and good conscience, the action should proceed among the existing parties or should be dismissed.” Fed. R. Civ. P. 19(b). This inquiry involves consideration of four factors: (1) the extent to which a judgment rendered might prejudice the missing required party or the existing par-ties; (2) the extent to which any prejudice could be lessened or avoided (3) whether a judgment rendered in the required party’s absence would be adequate; and (4) whether the plaintiff would have an adequate remedy if the action were dismissed for nonjoinder.

The district court found that three out of the four Rule 19(b) factors weighed in favor of dismissing the case. However, the Federal Circuit concluded that the district court abused its discretion by collapsing the multi-factorial Rule 19(b) inquiry into one dispositive fact: UT’s status as a sovereign.

The Federal Circuit said that the proper analysis of the Rule 19(b) factors is far more nuanced than the district court’s. As to the prejudice to UT, the interests of UT and Gensetix are aligned. Despite UT’s sovereign status, given Gensetix’s identical interest in the validity of the patents-in-suit, any prejudice to UT is greatly reduced. There is also no risk of multiple suits be-cause, under the express terms of the parties’ agreement, UT may not sue Baylor once Gensetix has commenced liti-gation. And, as an exclusive licensee with less than all sub-stantial rights in the patents-in-suit, Gensetix cannot enforce its patent rights without the court allowing the suit to proceed in UT’s absence. Given this clear factual record, we conclude that it was an abuse of discretion to find that the suit may not proceed in UT’s absence. Accordingly, we reverse the district court on this point.

Gensetix provides some guidance when licensing from an arm of the state government. To be able to suit without joint the patent owner, the licensee should make sure that their license is exclusive, in all fields, and that the licensee can enforce the patent, and patent owner cannot bring suit once the licensee does. This should tip the balance of the FRCP 19(b) factors in favor of the licensee enforcing the patent.

PTAB is not Limited to § 102 and § 103 when Reviewing Amended Claims in IPR

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In Uniloc 2017 LLC v. Hulu, LLC, [2019-1686] (July 22, 2020) the Federal Circuit affirmed the PTAB’s denial of Uniloc 2017’s motion to amend on the grounds that the substitute claims were unpatentable under 35 USC 101.

During an IPR the patent owner may file one motion to amend the patent, canceling any challenged patent claim and for each challenged claim, proposing a reasonable number of substitute claims. § 316(d)(1). At the conclusion of the IPR, the Director shall issue and publish a certificate incorporating in the patent by operation of the certificate any new or amended claim determined to be patentable. § 318(b).

In its Final Written Decision, the PTAB, in addition to explaining why the challenged original claims are unpatentable, denied Uniloc’s Motion to Amend the claims, concluding that Hulu had shown by a preponderance of the evidence that the Substitute Claims are directed to non-statutory subject matter under 35 U.S.C. § 101. Ineligibility was the sole ground on which the PTAB denied the motion to amend.

Rejecting the argument that the case was moot, the Federal Circuit considered PTAB authority to consider § 101 eligibility for proposed
substitute claims, concluding that the PTAB was authorized by statute to assess Uniloc’s proposed Substitute Claims for eligibility under § 101 and,
finding the claims ineligible, to deny the motion to amend.

Uniloc argued that the PTAB was limited in its review of proposed
substitute claims to anticipation or obviousness, as provided by § 311(b). However the Federal Circuit found that the PTAB correctly concluded that it is not limited by § 311(b) in its review of proposed substitute claims in an
IPR, and that it may consider § 101 eligibility. The Federal Circuit said that this determination was supported by the text, structure, and history of
the IPR Statutes, which indicate Congress’s unambiguous intent to permit the PTAB to review proposed substitute claims more broadly than those bases provided in § 311(b).

The Federal Circuit said that the IPR Statutes plainly and repeatedly require the PTAB to determine the “patentability” of proposed substitute claims. The Federal Circuit said that Congress did not intend §311 to constrain the PTAB’s review of proposed substitute claims to anticipation and obviousness, pursuant to § 102 and § 103, because §311 is confined to the review of existing patent claims, not proposed ones. The Federal Circuit said that the structure and legislative history of the IPR Statutes support this conclusion, as section 311 applies to the petition phase of the proceedings, and not to a separate adjudication-stage provision, such as § 316. Finally, the Federal Circuit found support in the IPR statute’s legislative history.

The Federal Circuit concluded that the PTAB can consider §101 when considering amended or substitute claims in an IPR (and no doubt §112 as well).

Licensee’s Failure to Mark Ruined Patent Owner’s Claim for $3.5 Million in Pre-Suit Damages

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In Packet Intelligence, LLC v. NetScout Systems, Inc. [2019-2041] (July 14, 2020), the Federal Circuit reversed the district court’s award of $3.5 million in pre-suit damages, vacated the court’s enhancement of that award, but affirmed the district court’s judgment in all other respects.

The Federal Circuit noted that an alleged infringer bears an initial burden of production to articulate the products it believes are unmarked patented articles subject to the marking requirement. This initial burden is a “low bar” and that the alleged infringer needed only to put the patentee on notice that certain licensees sold specific unmarked products that the alleged infringer believes practice the pa-tent. The burden then falss on the patentee to prove that the identified products do not practice the patent-at-issue.

NetScout argued that Packet Intelligence is not entitled to pre-suit damages because it failed to prove that MeterFlow, an unmarked product of Packet Intelligence’s licensee, did not practice the patent. The Federal Circuit agreed that under the standard articulated in Arctic Cat, Packet Intelligence bore the burden of proving that MeterFlow product identifed by NetScout did not practice at least one claim of the patent. Because Packet Intelligence failed to present substantial evidence to the jury that matched the limitations in any claim of the patent to the features of the Meter-Flow product, NetScout is entitled to judgment as a matter of law that it is not liable for pre-suit damages based on infringement of the patent.

Packet Intelligence further argued that the two method patents, which are not subject to the marking requirement, would alternatively support the award of pre-suit damages. However the Federal Circuit disagreed, noting that method claims are not directly infringed by the mere sale of an apparatus capable of performing the claimed process. Thus Packet Intelligence could not simply count sales of the software accused of infringing the ’789 patent as sales of the method claimed in the ’725 and ’751 patents. Instead, Packet Intelligence was required to produce evidence that the claimed method was actually used and hence infringed. The Federal Circuit rejected Packet Intelligence’s efforts to show that NetScout’s internal use justified the entire damage award, noting that the damages base was not tailored to any alleged internal use of the claimed methods.

Patent owners should police the marking by their licensees, and remember to always completely prove their entitlement to damages when challenged by the accused infringer.

Collaboration and Concerted Effort are What Result in Joint Inventorship

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In Dana-Farber Cancer Institute, Inc., v. Ono Pharmaceutical Co., [2019-2050] (July 14, 2020), the Federal Circuit affirmed the district court determination that Dr. Gordon Freeman and Dr. Clive Wood be added to U.S. Patent Nos. 7,595,048, 8,168,179, 8,728,474, 9,067,999, and 9,402,899.

The appeal relates to an inventorship dispute over groundbreaking work in the field of cancer treatment. Each patent at issue claims a method of treating cancer by administering antibodies targeting specific receptor-ligand interactions on T cells. Ono challenges the district court’s decision on two bases: (1) the district court’s legal analysis of conception, and (2) the district court’s factual findings regarding inventorship. We address each argument in turn.

The Federal Circuit explained that a joint invention is simply the product of a collaboration between two or more persons working together to solve the problem addressed. To be a joint inventor, one must: (1) contribute in some significant manner to the conception or reduction to practice of the invention, (2) make a contribution to the claimed invention that is not insignificant in quality, when that contribution is measured against the dimension of the full invention, and (3) do more than merely explain to the real inventors well-known concepts and/or the current state of the art.

There is no explicit lower limit on the quantum or quality of inventive contribution required for a person to qualify as a joint inventor. People may be joint inventors even though they do not physically work on the invention together or at the same time, and even though each does not make the same type or amount of contribution.

The Federal Circuit noted that conception is the touchstone of the joint inventorship inquiry, and conception is complete when an idea is definite and permanent enough that one of skill in the art could understand the invention. An inventor need not know, however, that an invention will work for its intended purpose in order for conception to be complete, as verification that an invention actually works is part of its reduction to practice.

The Federal Circuit refused to adopt a rule that research made public before the date of conception of a total invention cannot qualify as a significant contribution to conception of the total invention. Such a rule would ignore the realities of collaboration, especially that collaboration generally spans a period of time and may involve multiple contributions. It is certainly true that simply informing another about the state of the prior art does not make one a joint inventor. Collaboration and concerted effort are what result in joint inventorship, but a collaborative enterprise is not negated by a joint inventor disclosing ideas less than the total invention to others.

The Federal Circuit went on to reject a series of challenges to the district court’s factual analysis for each patent, and concluded that Freeman and Wood were co-inventors, and affirmed the district court