Third Time’s The Charm: Federal Circuit Remands for Third Damages Trial Because Patent Owner Did Not Prove Use of Entire Market Value was Appropriate

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In Power Integrations, Inc. v. Fairchild Semiconductor International, Inc., [2016-2691, 2017-1875] (July 3, 2018), the Federal Circuit affirm the district court’s judgments of infringement of U.S. Patent Nos. 6,212,079 and 6,538,908, but concluded that the entire market value rule cannot be used here to calculate damages and vacated the
damages award and remanded for further proceedings.

The patents in suit related to power supply controller chips used in power
supplies, such as chargers for electronic devices.  While the case was pending in the district court, the Federal Circuit in VirnetX, Inc. v. Cisco Systems, Inc.,explained that simply identifying the smallest salable unit is not necessarily sufficient to satisfy a patentee’s obligation to apportion for multi-component products with significant unpatented features.  Because Power Integrations’ royalty calculation in the first trial did not apportion beyond the “smallest salable unit” and Power Integrations had disclaimed reliance on the entire market value rule, the district court granted a new trial on the
issue of damages.  The district court excluded Power Integrations’ expert testimony based on apportionment, but allowed its expert to present testimony based on the entire market value rule. The jury awarded $139.8 million in damages, based on damages
testimony that relied solely on the entire market value rule  The district court denied Fairchild’s motion for judgment as a matter of law, or in the alternative for a new trial.

The Federal Circuit affirmed infringement of U.S. Patent No. 6,212,079 finding the verdict supported by substantial evidence, noting that the jury could have properly concluded that the claim terms “fixed frequency” and “non-varying” left open the
possibility for minor frequency variations due to operating conditions.

The Federal Circuit also affirmed infringement of U.S. Patent No. 6,538,908 under the doctrine of equivalents, agreeing that adjusting a voltage limit of a power switch was an infringing equivalent of adjusting a current limit of a power switch.   The Federal noted that Circuit Power Integrations’ expert testified that a value of voltage qualifies as a “value of current” because under Ohm’s Law, current is equal to voltage divided by
resistance.  The Federal Circuit also affirmed that equivalence was not precluded by prosecution history, and in particular to arguments distinguishing current and voltage in another application sharing the same specification.  The Federal Circuit said that the claim language on its face is different than the language of the claims to which the prosecution argument was directed, and concluded that Fairchild failed to establish that the prosecution history is sufficiently clear as to create an estoppel.

On the issue of damages, the Federal Circuit agreed with Fairchild that the district court should have granted the new trial motion.  The Federal Circuit said that a  patentee is only entitled to a reasonable royalty attributable to the infringing features, and must
in every case give evidence tending to separate or apportion the defendant’s profits and the patentee’s damages between the patented feature and the unpatented features.  In the context of a utility patent, it is only the patented technology that is taken from the owner, so the value to be determined is only the value that the infringing features contribute to the value of an accused product.

Where multicomponent products are accused of infringement, the royalty base should not be larger than the smallest salable unit embodying the patented invention.  Use of the entire market value of a multi-component product that includes a patented
component cannot help but skew the damages horizon for the jury, regardless of the contribution of the patented component to this revenue. The Federal Circuit said that Admission of evidence of the entire market value only serves to make a patentee’s proffered damages amount appear modest by comparison, and to artificially inflate the jury’s damages calculation beyond that which is adequate to compensate for the infringement.

The Federal Circuit noted that the entire market value rule allows for the recovery of damages based on the value of an entire apparatus containing several features, when the feature patented constitutes the basis for consumer demand.  However if the product has other valuable features that also contribute to driving consumer demand—patented or unpatented—then the damages for patent infringement must be apportioned to reflect only the value of the patented feature.

In the present case, both parties agreed that the accused products contained other valuable features as well, yet Power Integrations presented no evidence about the
effect of those features on consumer demand or the extent to which those features were responsible for the products’ value.

The Federal Circuit said that the entire market value rule is appropriate only when the
patented feature is the sole driver of customer demand or substantially creates the value of the component parts.  It is not enough to merely show that the patented feature is viewed as essential, that a product would not be commercially viable without the patented feature, or that consumers would not purchase the product without the
patented feature. The Federal Circuit said that when the product contains
other valuable features, the patentee must prove that those other features did not influence purchasing decisions.

Because the evidence presented by Power Integrations was insufficient as a matter of law to invoke the entire market value rule, the Federal Circuit vacated the award of damages and remand for a new trial.

 

 

Adidas and Nike Race Back to PTAB to Address Non-Instituted Grounds

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In Adidas AG v. Nike, Inc., [2018-1180, 2018-1181] (July 2, 2018), the Federal Circuit granted Adidas’ motion to remand the appeal back to the PTAB to consider the non-instituted grounds in Adidas’ Petitions for inter partes review against Nike’s U.S. Patent Nos. 7,814,598 and  8,266,749.

The PTAB’s final written decision found that Nike’s patent were not unpatentable on the instituted grounds, but did not reach a second, non-instituted grounds.  After the Supreme Court’s decision in SAS, Adidas promptly moved to remand for the Board to consider the non-instituted ground.  The Federal Circuit agreed, as it had in several other cases, that remand was appropriate without first deciding the appeal of the claims and grounds already before it.

No-Harm, No-Foul: Board Denies Sanctions Where Patent Owner Suffered No Harm from Alleged Cross Examination Overreach

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In Apple Inc. v. California Institute of Technology, IPR2017-00297, Paper 66, (June 29, 2018), the PTAB, en route to finding claims 19-21 of U.S. Patent No. 7,916,781 invalid, also denied the Patent Owner’s Motion for Sanctions.  Patent Owner’s Motion (Paper 40) complained that “[d][uring cross-examination of Caltech’s witnesses, Dr.
Mitzenmacher and Dr. Divsalar, Petitioner repeatedly failed to stay within the
proper scope” which “violated numerous Board rules and orders, and was an abuse of the discovery process.” The Patent Owner noted that the cross examination of Dr. Divsalar’s 16-page declaration generated over 280 pages, and a wide range of topics.  In sign of excellent witness preparation, “Dr. Divsalar reminded counsel over 100 times that questions were being directed to subject matter not discussed in his declaration.”  Patent Owner had similar, but not as extensive complaints about the cross examination of Dr. Mitzenmacher, who was Patent Owner’s primary witness and submitted four declarations.

The Board during a conference call, indicated that “a typical remedy is to give no weight to such improperly elicited testimony,” but Patent Owner correctly pointed out in its motion that without further sanctions, “future parties will not be deterred from flouting the Board’s rules when the only risk is not gaining an advantage.”

In its Final Written Decision, the Board found that sanctions were not warranted because petitioner’s attempts to elicit testimony “while inartful” did not rise to the level of sanctionable conduct because they were reasonably related to the direct testimony. Ultimately, the Board adopted a no-harm, no-foul policy, finding sanctions unwarranted because patent owner suffered no harm.

 

Federal Circuit Affirms Non-obvious Holding in “Close” Case, Declining to Disturb Factual Findings on Motiviation

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In Impax Laboratories Inc. v. Lannett Holdings Inc., [2017-2020] (June 28, 2018), the Federal Circuit affirmed the district court decision that claims 4, 11, 12, and 14 of U.S. Patent 6,760,237 and claims 6 and 14–
16 of U.S. Patent 7,220,767 were not shown to be invalid and entering an injunction.

The claims at issue are directed to pharmaceutical formulations, intranasal administration devices, or aqueous solutions, of zolmitriptan.  The Federal Circuit noted that all of the claims at issue rise and fall together with the issue of whether it would have been obvious to make zolmitriptan into a nasal spray.

In considering the asserted obviousness of the claimed invention, the Federal Circuit noted that while the reference mentioned the possible nasal administration of zolmitriptan (just once, and not in a claim or an example), the reference was not about administering zolmitriptan, but about the nasal administration of active ingredients generally.  The Federal Circuit also noted evidence in the record that a skilled artisan would have expected delayed or lower therapeutic effectiveness from
zolmitriptan if administered nasally because it would have been “absolutely counterintuitive to make a nasal spray when you have an active metabolite which is more potent . . . than the drug itself.”

The Federal Circuit said that:

In view of the totality of the record evidence of the state of the prior art, we cannot find that the district court clearly erred in its findings. Far from disregarding the prior art’s discussion of zolmitriptan, the court specifically considered and acknowledged that zolmitriptan was mentioned in connection with nasal formulations and
sprays. However, the court also properly considered additional record evidence to make findings on the state of the prior art as a whole.

The Federal Circuit noted that the presence or absence of a motivation to combine references in an obviousness determination is a pure  question of fact, as is what a reference teaches and whether it teaches toward or away from the claimed invention.  Based on the record before it, the Federal Circuit could not find that the court clearly erred in concluding that at the time, zolmitriptan’s known significant reliance on its active metabolite would have, on balance, dissuaded a person of
skill in the art from making nasal formulations of zolmitriptan.  The Federal Circuit said that it does not and should not reweigh evidence or make factual findings anew on appeal.

Board’s Decision Did not Change Theories Simply Because it Used Different Language than the Petition

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In Sirona Dental Systems GmbH v. Institut Straumann AG, [2017-1341, 2017-1403](June 19, 2018), the Federal Circuit affirmed-in-part, vacated-in-part, and remanded-in-part, the PTAB’s determination that claims 1-8 of U.S. Patent No. 6,319,006 were unpatentable, while claims 9-10 were patentable.

The patent related to a drill template, to precisely place a pilot hole for a tooth implant. The parties each provided their own translation of the primary references, and based upon these different translations disputed whether the reference digitally inputs structures of the mouth or movements of the mouth into the simulation.  Sirona focused on the references disclosure of a “recording bow,” which only measures movement of the jaw joint, not surface structures.  However, the Federal Circuit agreed with the district court that this was not dispositive in light of the reference’s other disclosures.

In addition to agreeing with the Board about the content of the prior art, the Federal Circuit also found substantial evidence also supported the Board’s finding that a person of ordinary skill in the art would have been motivated to combine the references, and affirmed the determination that claims 1-8 would have been obvious.

Sirona also complained that the Board violated the APA when it determined that Sirona’s recording bow argument was not relevant and put together its own obviousness theory based on Bannuscher’s input of “geometry data,” which
does not appear in the petition.  While the Federal Circuit agreed that it would not be proper for the Board to deviate from the grounds in the petition and raise its own obviousness theory, it held that the Board’s unpatentability determination did not
deviate from the grounds alleged in the petition.  The Federal Circuit noted that the Board cited the same portions of the reference as the Petition, and said the Board “did not change theories simply because the petition did not use the exact words.”  The Federal Circuit also noted that Sirona spent much of its response addressing the very argument that it complained was new.

Sirona also challenged the denial of its contingent motion to amend.  On this point, the Federal Circuit agreed. The final written decision, which issued prior to Aqua Products,
improperly placed the burden on Sirona to demonstrate that the proposed substitute claims were patentable. The Federal Circuit vacated the Board’s denial of Sirona’s contingent motion to amend and remand for the Board to reconsider in light of Aqua Products.

On the cross appeal, the Federal Circuit affirmed the finding that claims 9 and 10 were patentable, noting that there was no error in the Board’s decision not to decide grounds of unpatentability not raised in the petition.

10**7

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U.S. Patent No. 10,000,000 issued June 19, 2018 on Coherent LADAR Using Intra-Pixel Quadrature Detection.

At the current rate, we can expect utility patent number 11,000,000 in 2021.

Of course nerdy purists will point out that the 10,000,000 number does not take into account the X-patents — the 9957 (or so) patents that issued before it occurred to the Patent Office to begin numbering the patents in 1836.  The nerdiest of these purists will further point out that the 10,000,000 includes numbers for which patents were withdrawn from issue, and does not include a handful of “fractional” patents issued over the years.

Federal Circuit Denies Rehearing En Banc of Decision Federal Circuit Lacked Jurisdiction over Walker-Process Claim

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In Xitronix Corp. v. KLA Tencor Corporation, [2016-2746] (June 15, 2018), the Federal Circuit denied rehearing en banc of a patent decision holding that the Federal Circuit did not have jurisdiction over the complaint alleging fraud or inequitable conduct in prosecution of the patent application were a violation of antitrust laws.  Judge Newman wrote in dissent that the jurisdictional ruling is contrary to the statute governing
the Federal Circuit, and contrary to decades of precedent and experience.

June 14, 2018, is Flag Day

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Americans are proud of our flag, and the records of the U.S. Patent and Trademark Office, document a wide array of creative ways we Americans have found to display the flag, including on decorative displays (U.S. Patent No. 89,270): on parking meters (U.S. Patent No. 2,686,029):on our SUV’s (U.S. Patent No. 6,860,047):

on our mailboxes (U.S. Patent No. 6,929,173):

on our beverages (U.S. Patent No. D695626):

and even on our bandages (U.S. Patent No. D516730):

Salute the flag, where ever you find it!

 

Board Failed to Properly Consider Circumstances of Disclosure When It Determined They Were Not Printed Publications

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In Medtronic, Inc. v. Barry, [2017-1169, 2017-1170] (June 11, 2018) the Federal Circuit affirmed-in-part and vacated-in-part two PTAB Decisions finding that the Board erroneously concluded that asserted videos and slides were were not prior art because
the Board did not fully consider all the factors for determining whether the video and slides were publicly accessible.

The patents in suit, U.S. Patent Nos. 7,670,358 and 7,776,072 are directed to methods and systems for ameliorating aberrant spinal column deviation conditions.  After being sued for infringement, Medtronic instituted two IPRs relying in part on a video demonstration and a related slide presentation to spinal surgeons at various industry meetings and conferences in 2003.  The Board found that the video and slides, although presented at three different meetings in 2003, were not publicly accessible and therefore were not “printed publications,” in accordance with 35 U.S.C. § 102.

The determination of whether a document is a “printed publication” under 35 U.S.C. § 102(b) “involves a case-by-case inquiry into the facts and circumstances surrounding
the reference’s disclosure to members of the public. There are many ways in which a reference may be disseminated to the interested public, so public accessibility is the touchstone in determining whether a reference constitutes a ‘printed publication’
bar under 35 U.S.C. § 102(b).  A reference will be considered publicly accessible if it was ‘disseminated or otherwise made available to the extent that persons interested and ordinarily skilled in the subject matter or art exercising reasonable diligence could locate it.

The Federal Circuit noted that the distribution of certain materials to groups of people at one or more meetings presents a slightly different question than references stored in libraries, and that in the former, the publication need not be easily searchable after publication if it was sufficiently disseminated at the time of its publication.  The Federal Circuit identified several relevant factors from the case law, including (1) whether the copies were freely distributed to interested members of the public; (2) any expectations of confidentiality; (3) the length of time the display was exhibited, (4) the expertise of the target audience (to determine how easily those who viewed the material could
retain the information), (5) the existence (or lack thereof) of reasonable expectations that the material displayed would not be copied,” and (6) “the simplicity or ease with
which the material displayed could have been copied.”

The Federal Circuit said the record does not show that the Board fully considered
all of the relevant factors, including effect of the differences in the various disclosures.  The Federal Circuit said that the nature of those meetings, as well as any restrictions on
public disclosures, expectations of confidentiality, or, alternatively, expectations of sharing the information gained, can bear important weight in the overall inquiry.  For these reasons, the Federal Circuit vacated the Board’s finding that the video and slides are not printed publications and remand for further proceedings.

Invalidity Contentions Citing 32 Prior Art References with Only General Explanations, and “Inconsistent and Unilluminating” Claim Charts Not Enough to Put Patent Owner on Notice of the Weakness of its Position

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In Stone Basket Innovations, LLC v. Cook Medical LLC, [2017-2330] (June 11, 2018), the Federal Circuit affirmed the denial of attorneys fees to defendant under 35 U.S.C. § 285 after plaintiff dismissed its complaint for infringement of U.S. Patent No. 6,551,327 on a basket-type stone extraction medical device used to remove stones from biological systems, when defendant instituted in inter partes review.

This appeal involved two main issues: whether the District Court erred in its assessment of: (1) the substantive strength of Stone’s litigating position, and (2) the alleged pattern of vexatious litigation by Stone.  On the first issue, the Federal Circuit held that the District Court did not abuse its discretion in finding that the substantive strength of Stone’s ultimately non-prevailing litigating position did not warrant an award of fees. The Federal Circuit held that the patent owner was not put on clear notice of the invalidity of its patent by defendants invalidity contentions listing 32 prior art references with general statements of invalidity, and “inconsistent and unilluminating” claim charts.  The Federal Circuit further noted that the invalidating prior art used in the inter partes review was listed on the face of the patent, creating a presumption of good faith in asserting its patent rights against Cook.  The Federal Circuit likewise found the statements of the inventor to be taken out of context, and in any even irrelevant because a post-issuance statement regarding a single element of a claimed invention does not establish invalidity.  Lastly, the Federal Circuit noted the district court’s explanation that following the service of the invalidity contentions, Cook took no action to ensure a rapid termination of the instant litigation.  Cook complained that the prevailing party’s conduct is not a proper consideration, but the Federal Circuit said it was a proper part of the totality of the circumstances.

The Federal Circuit added that Cook’s failure to provide early, focused, and supported notice of its belief that it was being subjected to exceptional litigation behavior further supports the District Court’s determination that Stone’s litigating position did not “stand out” from others.

The Federal Circuit concluded that absent any evidence that Stone’s litigating position was frivolous when filed or at any point before it filed for dismissal, it was not persuaded the District Court abused its discretion in determining Stone’s case did not meet the standard for an award of attorney fees.  The Federal Circuit said a party cannot simply hide under a rock, quietly documenting all the ways it’s been wronged, so that it can march out its “parade of horribles” after all is said and done.”