Sale and Offer for Sale Determined by Where “Substantial Activities of the Sales Transactions” Occur

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In Halo Electronics, Inc. v. Pulse Electronics, Inc., [2013-1472, 2013-1656](August 5, 2016), on remand from the Supreme Court, which held that 35 USC 284 gives district courts the discretion to award enhanced damages in egregious cases of misconduct beyond typical infringement, the Federal Circuit vacated the district court’s unenhanced damages award with respect to products that were delivered in the United States, and remand for further proceedings consistent with the Supreme Court’s opinion on enhanced damages. The Federal Circuit otherwise adopted its prior opinion on all other issues in the appeal.

In particular the Federal Circuit again agreed that the district court did not err in granting summary judgment of no direct infringement with respect to those products that Pulse manufactured, shipped, and delivered outside the United States because those products were neither sold nor offered for sale by Pulse within the United States.

The Federal Circuit said that although the place of contracting may be one of several possible locations of a sale to confer personal jurisdiction, it has not deemed a sale to have occurred within the United States for purposes of liability under §271(a) based solely on negotiation and contracting activities in the United States when the vast majority of activities underlying the sales transaction
occurred wholly outside the United States. For such a sale, one must examine whether the activities in the United States are sufficient to constitute a “sale” under §271(a), recognizing that a strong policy against extraterritorial
liability exists in the patent law.

The Federal Circuit noted that the patent statute does not define “sale” for purposes of §271(a).  The Federal Circuit pointed out that the ordinary meaning of a sale includes the concept of a transfer or title or property, and that Article 2 of the Uniform Commercial Code, which is recognized as persuasive authority on the sale of goods, provides that a sale consists in the passing of title from the seller to the buyer for a price.

The Federal Circuit found that substantial activities of the sales transactions at issue, in addition to manufacturing and delivery, occurred outside the United States. While Halo did present evidence that pricing negotiations and certain contracting and marketing activities took place in the United States, which
purportedly resulted in the purchase orders and sales overseas, such pricing and contracting negotiations alone are insufficient to constitute a “sale” within the United States.  Any doubt as to whether Pulse’s contracting activities in the United States constituted a sale within the United States under § 271(a) was resolved by the presumption against extraterritorial application of United States laws.

The Federal Circuit also affirmed there was no offer for sale, noting that in order for an offer to sell to constitute infringement, the offer must be to sell a patented
invention within the United States.

 

Markush Group Closed to Unlisted Elements, but Open to Blends of Listed Elements

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In Multilayer Stretch Cling Film Holdings, Inc., v. Berry Plastics Corp., [2015-1420, 2015-1477] (August 4, 2016) the Federal Circuit reversed the claim construction, and thus vacated summary judgment of non-infringement that was predicated on that claim construction.

At issue was U.S. Patent No. 6,265,055, related to multi-layer stretch
cling films having at least seven individual layers, which claimed:

each layer being selected from the group consisting of linear low density polyethylene, very low density polyethylene, ultra low density polyethylene, and metallocene-catalyzed linear low density polyethylene resins;

The district court construed this language as requiring each layer must contain only one class of the listed resins, and no other resins, thereby excluding blends of more than one type of listed resin and all unlisted resins.

The parties agreed that the claim language was an Markush group.  The Federal Circuit agreed with the district court that the group is closed to resins other than those listed in the group.  The Federal Circuit said that what was critical the transitional phrase “consisting of,” a term of art in patent law with a distinct and well-established meaning that creates a very strong presumption that that claim element is “closed.”

The Federal Circuit rejected the patent owners argument that dependent claims expanded the scope of the Markush group, noting that while other claims can be valuable sources of enlightenment as to the meaning of a claim term, the language of a dependent claim cannot change the scope of an independent claim whose meaning is clear on its face, observing:

The dependent claim tail cannot wag the independent claim dog.

However the Federal Circuit disagreed with the district court over whether the claims permitted mixtures of the four plastics set forth in the Markush group.  The Federal Circuit noted that under Abbott, the Markush group is therefore presumed closed to blends. The question is whether that presumption is overcome by a combination of other claim language and the specification itself.  The Federal Circuit found that the intrinsic evidence of the patent is unequivocal that the inner layers described in claims 1 and 28 are open, not closed, to blends of the recited resins.  The Federal Circuit noted that the resins listed do not constitute four entirely different species but instead overlap to some
extent.  Moreover, claim 24 recites that at least one layer comprises a blend of at least two of said resins.  Finally, the Federal Circuit observed that the specification similarly supports construing the element as open to blends, as it repeatedly and consistently references blends in describing any and all resins, including the four resins of the claim.

In the light of this strong intrinsic evidence, the Federal Circuit held that the Markush group must be read as open to blends of the four listed resins.

 

Denial of Preliminary Injunction because of Stay Still Requires the Court to State Findings and Conclusions

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In Murata Machinery USA v. Daifuku Co., Ltd., [2015-2094] (August 1, 2016), the Federal Circuit affirmed the district court’s refusal to lift a stay pending inter partes review, but vacated the denial of a preliminary injunction because the district court failed to state findings and conclusions supporting denial of a preliminary injunction as required by Rule 52(a)(2) of the Federal Rules of Civil Procedure.

 

Detailed Analysis of Specification and Prosecution History Revealed Meaning of Claims

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In WI-LAN USA, INC., v. Apple Inc., [2015-1256] (August 1, 2016) the Federal Circuit affirmed summary judgment of noninfringement of U.S. Patent Nos. 8,311,040 and 8,315,640.  At issue on appeal were two issues of claim construction: “specified connection” in the ‘040 patent, and “UL connection” in the ‘640 patent.

The parties disputed whether the term “specified connection” excludes embodiments where an intermediary device can maintain only one specified connection. The Federal Circuit found the claims inconclusive, and turned to the specification, whose consistent descriptions of multiple specified connections, suggested that the patent’s claims do not encompass an embodiment contrary to these descriptions.   The Federal Circuit said that consistent use of a term in a particular way in the specification can inform the proper construction of that term. Here, the Federal Circuit found that the specification’s consistent references to multiple “specified connections” to weigh in favor of a construction excluding embodiments where the intermediary node is
capable of maintaining only one “specified connection.”  The Federal Circuit also noted that the claims discussed allocating bandwidth, which suggested multiple connections over which the bandwidth is distributed.

The parties disputed the whether the term UL connection meant a connection between a user device and its intermediary node or the connection between an intermediary node and its base station.  The Federal Circuit found that the specification never
used the term “UL connections.”  Turning to the specification as a whole, the Federal Circuit found that the context required it to construe UL connection to refer to the intermediary node’s connections with user devices, not the base station, for three reasons.  IT was the only construction that squared with: (1) the scheme the patent sets out where the base station allocates bandwidth to its intermediary-node connections and the intermediary nodes allocate bandwidth to their user connections, (2) the network architecture the specification describes, and (3) representations Wi-LAN made in prosecution.

Because it affirmed both constructions against Wi-LAN’s challenges, the Federal Circuit also affirmed the district court’s grant of summary judgment of noninfringement.

Information is Intangible, so Methods of Manipulating it are Abstract

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In Electric Power Group, LLC, v. Alstom S.A., [2015-1778] (August 1, 2016), the Federal Circuit affirmed summary judgment of invalidity of U.S. Patent Nos. 7,233,843, 8,060,259, and 8,401,710, on systems and methods for performing real-time performance monitoring of an electric power grid by collecting data from multiple data sources, analyzing the data, and displaying the results.

The Federal Circuit noted that although lengthy and numerous, the claims do not go beyond requiring the collection, analysis, and display of available information in a particular field, stating those functions in general terms, without limiting them to technical means for performing the functions that are arguably an advance over conventional computer and network technology. The claims, defining a desirable information-based result and not limited to inventive means of achieving the result, fail under §101.

The Federal Circuit began with the familiar two-step analysis, noting that a claim falls outside § 101 where (1) it is “directed to” a patent-ineligible concept, i.e., a law of nature, natural phenomenon, or abstract idea, and (2), if so, the particular elements of the claim, considered “both individually and ‘as an ordered combination,’” do not add
enough to “‘transform the nature of the claim’ into a patent-eligible application.”  The Federal Circuit said that the Supreme Court’s formulation makes clear that the first-stage filter is a meaningful one, sometimes ending the § 101 inquiry.  The Federal Circuit explained that the first-stage inquiry looks at the “focus” of the claims, their “‘character as a whole,’” and the second-stage inquiry (where reached) as looking more
precisely at what the claim elements add—specifically, whether, in the Supreme Court’s terms, they identify an “‘inventive concept’” in the application of the ineligible matter to which (by assumption at stage two) the claim is directed.

The Federal Circuit reasoned that information as such is an intangible, and thus collecting information, including when limited to particular content (which does not change its character as information), as within the realm of abstract ideas.  In a
similar vein, the Federal Circuit said that it has treated analyzing information by
steps people go through in their minds, or by mathematical algorithms, without more, as essentially mental processes within the abstract-idea category.  Finally, the Federal Circuit added that it has recognized that merely presenting the results of abstract processes of collecting and analyzing information, without more (such as identifying a particular tool for presentation), is abstract as an ancillary part of such collection and analysis.

The Federal Circuit concluded that the claims are clearly focus on the combination
of abstract-idea processes.  The Federal Circuit distinguished the Enfish, which involved computer-functionality improvements, with the current case which uses existing computers as tools in aid of processes focused on “abstract ideas.”

Moving on to Step 2, the Federal Circuit noted that limiting the claims to the particular technological environment was not sufficient.  The Federal Circuit found nothing nothing significant to differentiate the claimed process from ordinary mental processes.  The Federal Circuit said that the claims do not require a new source or type of information, or new techniques for analyzing it.  As a result, they do not require an arguably inventive set of components or methods, such as measurement devices or techniques, that would generate new data. They do not invoke any assertedly inventive programming. Merely requiring the selection and manipulation of information—to provide a “humanly
comprehensible” amount of information useful for users, does not transform the otherwise-abstract processes of information collection and analysis.  The Federal Circuit also found that there was nothing in how the steps were accomplishes, because the claims did require any nonconventional computer, network, or display components, or even a “non-conventional and nongeneric arrangement of known, conventional pieces,” but merely call for performance of the claimed information collection, analysis, and display functions “on a set of generic computer components” and display devices.

The Federal Circuit concluded that nothing in the claims, understood in light of the specification, requires anything other than off-the-shelf, conventional computer, network, and display technology for gathering, sending, and presenting the desired information.

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Repeated and Consistent Usage, including in Rule 131 Declaration, Defines Term

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in GPNE Corp. v. Apple Inc., [2015-1825] (August 1, 2016), the Federal Circuit affirmed the district court’s determination of noninfringement of  U.S. Patent Nos. 7,570,954 and  7,792,492, relating to a two-way paging system.

The focus was on the construction of the term node, which aside from the claims, was only used in the abstract.  The Federal Circuit began by noting that the only meaning that matters in claim construction is the meaning in the context of the patent.  The Federal Circuit noted that when a patent repeatedly and consistently” characterizes a claim term in a particular way, it is proper to construe the claim term in accordance
with that characterization.  The Federal Circuit also relied upon the prosecution history citing the way the “invention” was consistently and exclusively described in the inventor’s Rule 131 declaration.  The patent owner’s arguments about claim differentiation were rejected because of the consistent usages in the specification and the prosecution history.

The Federal Circuit also found it proper to require that the node “operates independently of a telephone network,” even though it was derived from a “single summation sentence” from the specification. However, this sentence read:

Thus, the invention provides a two-way paging system which operates independently from a telephone system for wireless data communication between users.

The Federal Circuit noted that when a patent describes the features of the “present invention” as a whole, this description limits the scope of the invention.

The Federal Circuit also rejected the patent owner’s complaint that the district court should have construed the term “pager,” stating that where a district court has resolved the questions about claim scope that were raised by the parties, it is under no obligation to address other potential ambiguities that have no bearing on the operative scope of the claim.  A court need not attempt the impossible task of resolving all questions of meaning with absolute, univocal finality.  Only those terms need be construed that are in controversy, and only to the extent necessary to resolve the controversy.  This is because “[s]uch an endeavor could proceed ad infinitum, as every word—whether a claim term itself, or the words a court uses to construe a claim term—is susceptible to further definition, elucidation, and explanation.”

The Federal Circuit affirmed the jury verdict of no infringement.

 

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Patent Drafters: Leaving Coining to the Mint

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In Advanced Ground Information Systems, Inc. v. Life360, Inc., [2015-1732] (July 28, 2016) the Federal Circuit affirmed summary judgment of invalidity of U.S. Patent Nos. 7,031,728 and 7,672,681 for indefiniteness.

At issue was the term “symbol generator” in the claims in a cellular communication system.  The Federal Circuit agreed that “symbol generator” invoked 35 U.S.C. § 112, ¶ 6, but were indefinite under 35 U.S.C. § 112, ¶ 2.

The Federal Circuit said that the failure to use the word “means” creates a rebuttable presumption that §112, ¶ 6 does not apply.  Whether §112, ¶ 6, applies depends upon whether the words of the claim are understood by persons of ordinary skill in the art to have a sufficiently definite meaning as the name for structure. The Federal Circuit said that the term “symbol generator” invokes §112, ¶ 6 because it fails to describe a sufficient structure
and otherwise recites abstract elements “for” causing actions, or elements “that can” perform functions.

The Federal Circuit noted that the patentee’s expert testified that the term “symbol generator” is a term coined for the purposes of the patents-in-suit, and that it was not used in “common parlance or by persons of skill in the pertinent art to designate structure.”  While the expert testified that “symbol” and “generator” are well known terms, the Federal Circuit found that the combination of the terms as used in the context of the relevant claim language suggests that it is simply an abstraction that describes the
function being performed (i.e., the generation of symbols).  Finally, the Federal Circuit found that the claim term “symbol generator,” by itself,
does not identify a structure by its function.

Having found that §112, ¶ 6, applies, the specification must disclose the corresponding structure or the claim in indefinte.  However, the Federal Circuit agreed with the district court that the the specifications of the patents-in-suit did not disclose an operative algorithm for the claim elements reciting
“symbol generator.” The function of generating symbols must be performed by some component of the patents-in-suit; however, the Federal Circuit said that the patents-in-suit do not describe this component.

 

PTO Cannot Raise and Decide Unpatentability Theories Never Presented by the Petitioner

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In In re Magnum Tools International, Ltd., [2015-1300] (July 25, 2016) the Federal Circuit reverse the PTAB’s determination that the challenged claims U.S. Patent No. 8,079,413 were invalid for obviousness.

The Federal Circuit examined burden of proof, which encompasses both a burden of persuasion and a burden of production.  The Federal Circuit said that In an inter partes review, the burden of persuasion is on the petitioner to prove ‘unpatentability by a preponderance of the evidence,’ 35 U.S.C. § 316(e), and that burden never shifts to the patentee.”  Where, as here, the only question presented is whether due consideration of the four Graham factors renders a claim or claims obvious, no burden shifts from the patent challenger to the patentee.  This is especially true where the only issues to be considered are what the prior art discloses, whether there would have been a motivation to combine the prior art, and whether that combination would render the patented claims obvious.  The Federal Circuit said that the PTO’s burden shifting framework is directly at odds with its precedent holding that the decision to institute and the final written decision are “two very different analyses,” and each applies a “qualitatively different standard.”  Furthermore, because of the significant
difference between the standards of proof at institution and trial during an IPR, it is inappropriate to shift the burden to the patentee after institution to prove that the patent is patentable.

The Federal Circuit said the petitioner continues to bear the burden of
proving unpatentability after institution, and must do so by a preponderance of the evidence at trial. See 35 U.S.C. § 316(e). The Board has an obligation to assess the question anew after trial based on the totality of the record.

The patent owner argued that petitioner failed to establish a motivation to combine, pointing out that the Petition was based on a different reference than relied upon in the institution decision.  The Federal Circuit rejected the PTO’s position that this should have been challenged with a request for rehearing of the institution decision, holding that the patent owner can challenge a final Board opinion relying on the same rationale given in the institution decision.

The Federal Circuit agreed with the patent owner that the Board improperly shifted the burden to the patent owner to prove nonobviousness.  To satisfy its burden of proving obviousness, a petitioner cannot employ mere conclusory statements. The petitioner must instead articulate specific reasoning, based on evidence of record, to support the legal conclusion of obviousness.

Finding that the petitioner failed to separately meet its burden of establishing obviousness, the Federal Circuit reversed.

The Federal Circuit went on to reject the USPTO’s position that the Board is free to adopt arguments on behalf of petitioners that could have been, but were not, raised by the petitioner during an IPR. Instead, the Board must base its decision on arguments that were advanced by a party, and to which the opposing party was given a chance to respond.  The Federal Circuit said that while the PTO has broad authority to establish procedures for revisiting earlier-granted patents in IPRs, that authority is not so broad that it allows the PTO to raise, address, and decide unpatentability theories never presented by the petitioner and not supported by record evidence.

 

 

 

 
 
Bryan K. Wheelock
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