Vitiation has not be Vitiated

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In Power Integrations, Inc., v. Fairchild Semiconductor International, Inc, [2015-1329, 2015-1388] (December 12, 2016), a complicated action where each party claimed the other directly and indirectly infringed its patents,  the Federal Circuit: affirmed the jury’s verdict that the asserted claims of the ’876 patent were not anticipated;  vacated the jury’s verdict that Fairchild induced infringement of the asserted claims of the ’876 and ’851 patents; reversed the jury’s verdict that the asserted claims of the ’605 patent were not anticipated; and affirmed the district court’s construction of the ’972 patent.

An interesting aspect of the case was the use of vitiation to find no infringement under the doctrine of equivalents.  The Federal Circuit addressed Power Integrations’ claim vitiation argument, noting that under claim vitiation, “if a court determines that a finding of infringement under the doctrine of equivalents would entirely vitiate a particular claimed element, then the court should rule that there is no infringement under the doctrine of equivalents.” citing Lockheed Martin Corp. v. Space Systems/ Loral, Inc., 324 F.3d 1308, 1321 (Fed. Cir. 2003).  The Federal Circuit also quoted from Warner-Jenkinson Co., Inc. v. Hilton Davis Chem. Co.:

if a theory of equivalence would entirely vitiate a particular claim element, partial or

complete judgment should be rendered by the court.

The Federal Circuit agreed with Power Integrations that a finding of infringement under the doctrine of equivalents would vitiate the requirement that the claimed feedback signals be “distinct.” The Federal Circuit explained that the inventor of the ’972 patent detailed at trial the difficulty in designing a power supply with accurate primary-side control and the breakthrough he achieved by adding a second feedback signal specifically related to output current. The inventor went on to testify that having a second feedback signal—related to current—that is distinct from the first feedback signal—related to voltage—is what distinguished the claimed invention from the prior art.

Under these circumstances, allowing the doctrine of equivalents to read out the claim requirement for a second feedback signal in order to cover a system with a single feedback signal would impermissibly vitiate the claim element.

“A Finding of Induced Infringement Requires Actual Inducement”

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In Power Integrations, Inc., v. Fairchild Semiconductor International, Inc., [2015-1329, 2015-1388] (December 12, 2016), a complicated action where each party claimed the other directly and indirectly infringed its patents,  the Federal Circuit affirmed the jury’s verdict that the asserted claims of the ’876 patent were not anticipated; vacated the jury’s verdict that Fairchild induced infringement of the asserted claims of the ’876 and ’851 patents; reversed the jury’s verdict that the asserted claims of the ’605 patent were not anticipated; and affirmed the district court’s construction of the ’972 patent.

On this issue of induced infringement, the Federal Circuit noted  that induced infringement is defined in 35 U.S.C. § 271(b): “Whoever actively induces infringement of a patent shall be liable as an infringer.”  Fairchild’s proposed jury instruction tracked the then-current Federal Circuit Bar Association model, while Power Integrations’ proposal was a variation of an instruction given in a prior trial in the District of Delaware.  The district court adopted an instruction that largely tracked the one proposed by Power Integrations:

Each party alleges that the other is liable for infringement by actively inducing others to directly infringe the patents in suit. The direct infringement may either be literal or under the doctrine of equivalents. A party induces patent infringement if it purposefully causes, urges, or encourages another to use a product in a manner that infringes an asserted claim. Inducing infringement cannot occur unintentionally.

A party is liable for active inducement only if the patent owner proves by a preponderance of the evidence that:

  1. the party took some action during the time the patents in suit were in force intending to encourage or assist actions by others;
  2. the party was aware of the patent and knew that the acts, if taken, would constitute infringement of that patent or the party believed there was a high probability that the acts, if taken, would constitute infringement of the patent but deliberately avoided confirming that belief; and
  3. use by others of the party’s product infringes one or more of the asserted claims of the patent.

In order to establish active inducement of infringement, it is not sufficient that others directly infringe the claim. Nor is it sufficient that the party accused of infringement was aware of the acts by others that directly infringe. Rather, in order to find inducement, you must find that the party accused of infringement intended others to use its products in at least some ways that would infringe the asserted claims of the patent. However, that infringement need not have been actually caused by the party’s actions. All that is required is that the party took steps to encourage or assist that infringement, regardless of whether that encouragement succeeded, or was even received.

Intent to encourage or assist the acts that constitute direct infringement must be proven by evidence of active steps taken to encourage direct infringement, such as providing products, advertising any infringing use, or instructing how to engage in any use that is infringing. Proof of intent to induce infringement may be based on circumstantial evidence, rather than direct evidence.

The Federal Circuit said that this instruction left the jury with the incorrect understanding that a party may be liable for induced infringement even where it does not successfully communicate with and induce a third-party direct infringer. The Federal Circuit said that the Supreme Court in Global-Tech Appliances explained that the term “induce” as it is used in § 271(b) “means ‘[t]o lean on; to influence; to prevail on; to move by persuasion.” Each definition requires successful communication between the alleged inducer and the third-party direct infringer.

The Federal Circuit noted that in Dynacore Holdings it held that “[t]o prevail under a theory of indirect infringement, [plaintiff] must first prove that the defendants’ actions led to direct infringement of the [patent-in-suit].” And that in DSU Med. Corp. it held that the plaintiff has the burden of showing that the alleged infringer’s actions induced infringing acts,  The Federal Circuit concluded that under this precedent, a finding of induced infringement requires actual inducement, although this inducement may be proven via circumstantial evidence.

In other words, liability for inducement requires proof that (1) a third party directly infringed the asserted claims of the patent; (2) the defendant induced those infringing acts; and (3) defendant knew the acts it induced constituted infringement.

If the PTAB Doesn’t Say Why the Invention is Obvious, the Federal Circuit Has Nothing to Affirm

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In re Nuvasive, Inc., [2015-1670] (December 7, 2016), the Federal Circuit vacated and remanded the PTAB Decision finding claims of U.S. Patent No. 8,361,156 invalid for obviousness.  The Federal Circuit found that Nuvasive waived its argument that asserted references weren’t sufficiently public to qualify as printed publications. However, the on issue of obviousness, the Federal Circuit Federal Circuit sided with Nuvasive.

The Federal Circuit said that in assessing the prior art, the PTAB “consider[s]
whether a PHOSITA would have been motivated to combine the prior art to achieve the claimed invention.”  The Federal Circuit said that the factual inquiry whether to combine references must be “thorough and searching,” and that the need for specificity pervades its authority on the PTAB’s findings on motivation to combine.

Nuvasive pointed out that the Final Written Decision did not make adequately explained findings of the motivation to combine, relying upon a single conclusory statement by petitioner’s expert.  The Federal Circuit agreed, noting:

Two distinct yet related principles are relevant to our review. First, the PTAB must make the necessary findings and have an adequate “evidentiary basis for its
findings.”  . . . Second, the PTAB “must examine the relevant data and articulate a satisfactory explanation for its action including a rational  connection between the facts found and the choice made.”  The Federal Circuit said that the PTAB must provide “a reasoned basis for the agency’s action,” and it will uphold a decision of less than ideal clarity if the agency’s path may reasonably be discerned.

The Federal Circuit identified several instances with insufficient articulations of motivation: First, conclusory statements alone are insufficient; instead the finding must be supported by a “reasoned explanation.” Second, it is not adequate to
summarize and reject arguments without explaining why the PTAB accepts the prevailing argument.  Third although reliance on common sense may be appropriate in some circumstances, the PTAB cannot rely solely on common knowledge or common sense to support its findings.

Turning to the decision before it, the Federal Circuit said that the PTAB failed to explain the reason why a PHOSITA would have been  motivated to modify the prior art.  While the PTAB rejected Nuvasive’s arguments that the invention was not obvious, the PTAB never actually made an explanation-supported finding that the evidence affirmatively proved that the PHOSITA would modify the prior art as proposed by petitioner.

Because it could not reasonably discern the PTAB’s reasoning as to motivation
to combine, judicial review cannot meaningfully be achieved, so the Federal Circuit
vacated and the case remanded for additional PTAB findings and explanations regarding the PHOSITA’s motivation to combine the prior art references.

Injunction Against Dismissed Party Remanded to Make Sure it Had its Day in Court

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In Asmark Danmark A/S v. CMI USA Inc., [2016-1026, 2016-1183] (December 6, 2016), the Federal Circuit affirmed the district court’s rulings on infringement,
invalidity, and damages, but remanded as to the injunction insofar as it covered conduct of Cooler Master (who was not a party) that goes beyond abetting a new violation by CMI.

The Federal Circuit said that the standards for reaching conduct by persons
not adjudicated liable for the underlying wrong, reflected in Federal Rule of Civil Procedure 65(d), are highly fact specific, and the Federal Circuit said that a determination of the propriety of the injunction’s reach “would benefit from further findings and, if sought and needed, further record development.”

The district court granted the prevailing patent owner’s motion for an injunction against both CMI and Cooler Master, even though Cooler Master had dismissed as a party.
Cooler Master appealed the injunction, and rejoined as a party.  Cooler Master argued that its dismissal with prejudice precluded the district court from subjecting Cooler Master to the injunction’s obligations, and that in any event the injunction is too broad in scope insofar as the injunction reaches Cooler Master’s conduct (sale, importation, etc., involving the products other than conduct that abets a new violation by CMI, the only party adjudicated liable for infringement.

The Federal Circuit said that Cooler Master did not argue that the district
court lacked personal jurisdiction; that Cooler Master lacked notice
or an opportunity to be heard; or that the injunction is improper under eBay, or because Cooler Master does not sufficiently threaten to engage in the covered conduct. Cooler Master’s complaint was that the challenged obligations imposed on Cooler
Master were improper for reasons it could invoke if they were imposed through contempt.

The Federal Circuit rejected Cooler Master’s contention that it could not be enjoined because the dismissal with prejudice was an adjudication that has claim-preclusive effect. While the premise was correct, the “claim” covered by the dismissal, which concerned Cooler Master’s pre-dismissal conduct, which was different from the conduct subject to the injunction, which is Cooler Master’s future conduct.

The fundamental principle relevant to appellants’ narrower, scope objection to the injunction was that an injunction may not “make punishable the conduct of persons who act independently and whose rights have not been adjudged according to law.  However, the Federal Circuit said that an injunction may reach certain conduct by persons not held liable where the conduct is not undertaken “independently” of the persons who have been held liable.  The injunction imposed two sorts of obligations
on Cooler Master—it restricts conduct by Cooler Master that abets a new violation by CMI; but  it also restricts conduct by Cooler Master that does not abet a new violation by CMI.  The Federal Circuit found that there is a there is a current live dispute about the permissibility of barring Cooler Master from engaging in U.S.-focused activities involving the infringing products other than through CMI.  The Federal Circuit did not think it advisable to resolve the issue of the proper scope of the injunction without a fuller picture of the facts described by the district court, so it remanded the case for further development of the record, while leaving the injunction intact.

 

Supreme Court Vacates $399M Design Patent Damage Award, Finding an Article of Manufacture for Damage Purposes is Not Necessarily the Entire Product Sold

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In Samsung Electronics Co., Ltd. v. Apple Inc., 580 U.S. ____ (2016), the Supreme Court reversed the award of $399,000,000 for infringement of Apple’s design patents  covering the iPhone (U.S. Patent Nos. D618677, D593087, and D604305).

35 USC §289 sets for a special damage remedy for design patents:

Whoever during the term of a patent for a design, without license of the owner, (1) applies the patented design, or any colorable imitation thereof, to any article of manufacture for the purpose of sale, or (2) sells or exposes for sale any article of manufacture to which such design or colorable imitation has been applied shall be liable to the owner to the extent of his total profit, but not less than $250, recoverable in any United States district court having jurisdiction of the parties.

The Court of Appeals for the Federal Circuit identified the entire Samsung phone as the “article of manufacture” for purposes of calculating §289 damages because consumers could not separately purchase components of the smart phone.  The Supreme Court, after looking up article of manufacture in the dictionary, concluded that an article of manufacture is broad enough to encompass both a product sold to a consumer, as well as  a component of that product.

Finding that the Federal Circuit’s narrower reading of article of manufacture cannot be squared with the text of §289, the Supreme Court reversed the award, and remanded for determination of whether the relevant article of manufacture is the smartphone, or a particular component of the smartphone.

On remand, it is entirely possible that $399 million damage award could be affirmed, if it is determined that the article of manufacture covered is the Samsung smart phone, and not simply some part of the smart phone.  U.S. Patent Nos. D618677 and D593087 disclose and claim an “electronic device” — which presumably covers at least some of the “innards” of the phone,

d593087d618677

and U.S. Patent No. D604305 discloses and claims a “graphical user interface for a display screen or portion thereof” — which likewise would include at least some of the “innards” of the phone for generating the images on the display:

d604305

 

How these patents are treated on remand will be instructive on how design patents should be drafted going forward.  There may be an advantage in drafting the application so that the “article of manufacture” is a comprehensive (and profitable) as possible.

Double-Checking the PTAB

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The Federal Circuit’s docket is burgeoning with Patent Office appeals.  Three years ago there were 118 appeals from the USPTO pending before the Federal Circuit, today there are 578.  The bulk of this increase is due to appeals from the post grant procedures created by the AIA.

According to a recent post on the AIPLA website the Federal Circuit has decided 128 appeals of IPRs and CBMRs.  7 (5%) of these were dismissed, 101 (79%) of these were complete affirmances.  In only 20 (21%) of these did the Federal Circuit reverse any aspect of the Board’s decision.

The PTAB, at least according to the Federal Circuit, seems to be getting it right.

 

The Difficulty in Implementing an Idea Does Not Mean the Idea is Not Abstract

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In Apple, Inc., v. Ameranth, Inc., [2015-1703, 2015-1704] (November 29, 2016), the Federal Circuit affirmed in part and reversed in part the PTAB’s subject matter eligibility determination of claims of U.S. Patent Nos. 6,384,850, 6,871,325, and 6,982,733 in three separate CBM proceedings. The patent specifications disclose a first menu that has categories and items, and software that can generate a second menu from that first menu by allowing categories and items to be selected. The patents describe a preferred embodiment of the invention for use in the restaurant industry.

The Patent Trial and Appeal Board (“Board”) construed the claims, found that each patent met the statutory definition of “covered business method patent,” and instituted CBM reviews. In its final decisions, the Board found certain claims in each of the patents unpatentable under 35 U.S.C. § 101.

On appeal the patent owner did not contest that the claims were directed to a “financial product or service,” but it did argue that the patents fall within the exception for technological inventions. 37 C.F.R. § 42.301(b) provides:

In determining whether a patent is for a technological invention solely for purposes of the Transitional Program for Covered Business Methods (section 42.301(a)), the following will be considered on a case-by-case basis: 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.

The Federal Circuit observed that this regulation offers little towards understanding the meaning of the term “technological invention,” but noted that determining whether these patents are a technological invention does not require this court to determine “the full sweep of the term.” The Federal Circuit affirmed the Board’s determinations that the patents were not for technological inventions.

In the first step of the Alice test, the Board determined that the claims in all three patents are directed to the abstract idea of “generating a second menu from a first menu and sending the second menu to another location.” The patent owner complained that the characterization of the abstract idea changed from the institution decision to the final written decision. The Federal Circuit noted that an abstract idea can generally be described at different levels of abstraction, but concluded that the Board’s slight revision of its abstract idea analysis does not impact the patentability analysis. The Federal Circuit affirmed the Board’s conclusion that the claims in these patents are directed to an abstract idea.

In the second step of the Alice test, the Board found that the recited central processing unit, data storage device, and operating system components were “typical” hardware elements. The Board rejected the various elements identified by the patent owner as insignificant post-solution activity, and the Federal Circuit agreed. The Federal Circuit pointed out that the specifications describe the hardware elements of the invention as “typical” and the software programming needed as “commonly known.” Lastly the Federal Circuit rejected the patent owner’s argument that the required programming was difficult, and this difficulty indicated that the claims were not directed to an abstract idea. The difficulty of the programming details for this functionality is immaterial because these details are not recited in the actual claims. The degree of difficulty in implementing an abstract idea in this circumstance does not itself render an abstract idea patentable.

The Federal Circuit went on to reverse the confirmation of patentability of several of the claims.

Posted in 101

A Patent Does Not Become a CBM Patent Because its Practice Could Involve a Potential Sale of a Product or Service

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In Unwired Planet, LLC, v. Google, Inc., [2015-1812] (November 21, 2016) the Federal Circuit vacated and remanded the PTAB’s final written decision in Covered Business Method Patent Review No. 2014-00006, that found the claims of U.S. Patent No. 7,203,752 invalid, because the patent was not directed to a business method patent

The only issues on appeal was whether the patents are CBM patents and whether the challenged claims are directed to patentable subject matter under section 101. The Federal Circuit’s jurisdiction was based on 28 U.S.C. §1295(a)(4)(A) and 35 U.S.C. § 329, and included whether the ’752 patent is a CBM patent. Under the Administrative Procedure Act, the the Board’s actions are to be set aside if ‘arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law’ or ‘unsupported by substantial evidence.’”

In accordance with the statute, a CBM review is available only for a “covered business method patent,” which the AIA defines as “a patent that claims 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, except that the term does not include patents for technological inventions.” AIA § 18(d)(1).  The Federal Circuit said that while it might have been helpful if the PTO had used its authority to elaborate on its understanding of the definition of CBM provided in the statute, it did not do so, instead adopting by regulation the statutory definition of a CBM patent.

The Federal Circuit found that the Board did not apply the statutory definition, instead inquiring whether the patent claims activities that are financial in nature, incidental to a financial activity, or complementary to a financial activity.  The Federal Circuit said that the Board determined that the ’752 patent was a CBM patent because the claimed location service could involve an eventual sale of services.  The finding that sales could result from advertising related to the practice of the patent was the sole evidence the Board relied on to find that the ’752 patent is a CBM patent.

The Federal Circuit rejected the use of general policy statements, or the legislative history, noting  neither the legislators’ views nor the PTO policy statement provides the operative legal standard. The authoritative statement of the Board’s authority to conduct a CBM review is the text of the statute.  The Board is only empowered to review “the validity of covered business method patents.” AIA § 18(a)(1).  Patents that fall outside the definition of a CBM patent are outside the Board’s authority to review as a CBM patent, and the PTO’s regulatory authority does not permit it to adopt regulations that expand its authority beyond that granted by Congress.

The Federal Circuit criticized the incidental or complementary language in the test applied by the Board, noting that a patent for a novel lightbulb that is found to work particularly well in bank vaults does not become a CBM patent because of its incidental or complementary use in banks.  Likewise, a patent covering a method and corresponding apparatuses does not become a CBM patent because its practice could involve a potential sale of a good or service. All patents, at some level, relate to potential sale of a good or service.

The Federal Circuit vacated the Board’s decision.

Federal Circuit to PTAB: “Play Fair.”

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In In re Nuvasive, Inc., [2015-1672, 2015-1673] (November 9, 2016), the Federal Circuit reversed one of two PTAB decisions because the patent owner was not given adequate notice of the grounds of invalidity asserted against the patent.  The Federal Circuit said that the Board’s ultimate reliance on material not adequately identified by petitioner in the cited reference, together with the Board’s refusal to allow NuVasive to respond
fully once that material was called out, violated NuVasive’s rights under the Administrative Procedure Act.

The Federal Circuit described the Board’s conduct:

NuVasive objected to Medtronic’s argument regarding

Michelson’s Figure 18, which it contended was a new ground of invalidity asserted for the first time on reply. It requested leave to file motions to strike or, alternatively, surreplies, which the Board denied. NuVasive also attempted to address the matter at oral argument, but the Board refused to allow NuVasive to make substantive arguments in response. When Medtronic made arguments relating to Michelson’s Figure 18 in its rebuttal time, NuVasive objected again, but the Board assured NuVasive that it understood NuVasive’s position and would consider the propriety of Medtronic’s arguments when making a final decision.

Under the Administrative Procedure Act, the Federal Circuit must “hold unlawful and set aside agency action . . . not in accordance with law [or] . . . without observance of procedure required by law.” 5 U.S.C. § 706. A patent owner is undoubtedly entitled to notice of and a fair opportunity to meet the grounds of rejection, based on due-process and APA guarantees.   For a formal adjudication like the inter partes review considered here, the APA imposes particular requirements on the PTO: The agency must timely inform the patent owner of the matters of fact and law asserted, 5 U.S.C. §554(b)(3),
must provide all interested parties opportunity for the submission and consideration of facts and arguments and hearing and decision on notice, 5 U.S.C. §554(c), and must allow a party to submit rebuttal evidence as may be required for a full and true disclosure of the facts, 5 U.S.C. § 556(d).

The Federal Circuit said that although the Board is not limited to citing only portions
of the prior art specifically drawn to its attention, in this case it is clear that the Board treated Michelson’s Figure 18 as an essential part of its obviousness findings
identifying claim elements in the prior art.  Under the APA’s standards, NuVasive was entitled to an adequate opportunity to respond to the asserted facts about Michelson. And under the APA’s fact-specific standard, common sense, and this court’s precedent, that entitlement was not lessened in this case by virtue of the opportunity NuVasive had to respond to other factual assertions about Michelson.

In one of the IPRs the Federal Circuit found that the Notice was adequate, based upon the way that the reference  was described in the Petition, but in the other there was no notice before NuVasive filed its patent owner response.  It was only after the petitioner’s reply that NuVasive as given fair notice, but at no point after the Reply did the Board give NuVasive the required opportunity to respond to that point.

 

Federal Circuit Gives the Board a Lesson on Hearsay

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In REG Synthetic Fuels, LLC v. Neste Oil Oyj, [2015-1773] (November 8, 2016), the Federal Circuit affirmed-in-part, reversed-in-part, vacated-in-part, and remanded the PTAB’s unpatentability determinations or claims U.S. Patent No. 8,231,804 directed to paraffin compositions
containing primarily even-carbon-number paraffins, and the Board’s exclusion of certain REG exhibits.

REG complained that the allegedly anticipatory reference discloses area percentages rather than the claimed weight percentages, and petitioners conversion of the area percentages to weight percentages was unreliable.  The Federal Circuit agreed with Petitioner that the conversion was reliable, relying in part upon REG’s own expert who agreed that the conversion could be calculated, concluding that substantial evidence supported anticipation.

With respect to anticipation by other claims, the Federal Circuit found that REG had successfully antedated the allegedly anticipating reference based on admitted exhibits, and exhibits that the Board improperly excluded.   With respect to the excluded exhibits, the Board partially excluded emails with a third party in which the inventor disclosed his conception of the invention on grounds of hearsay.  However, the significance of the email was that they were written, not their content, and thus the Federal Circuit found that the email should not have been excluded.

The Federal Circuit reversed the exclusion of evidence, and based upon the evidence of conception in that improperly excluded evidence, concluded that REG has successfully antedated the reference, and reversed the finding of anticipate.