Board Not Limited to Prior Art in the Grounds, as Long as Patent Owner Had Notice

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In Genzyme Therapeutic Products Limited v. Biomarin Pharmaceutical, Inc., [2015-1720, 2015-1721](June 14, 2016), the Federal Circuit affirmed the PTAB’s decisions in IPR2013-00534 and IPR2013-00537 that certain claims of  U.S. Patent No. 7,351,410 and U.S. Patent No. 7,655,226 were invalid for obviousness.

Genzyme’s APA challenged the result under the Administrative Procedures Act because the Board cited references in its final written decisions that were not specifically included in the combinations of prior art on which the Board instituted review.  The Federal Circuit was unmoved, explaining that the introduction of new evidence in the course of the trial is to be expected in inter partes review trial proceedings and, as long as the opposing party is given notice of the evidence and an opportunity to respond to it, the introduction of such evidence is perfectly permissible under the APA.

The Federal Circuit said that Genzyme’s argument reflected a misunderstanding
of the role of the institution decision in inter partes review proceedings before the Board. There is no requirement, either in the Board’s regulations, in the APA, or as a matter of due process, for the institution decision to anticipate and set forth every legal or factual
issue that might arise in the course of the trial.  The critical question for compliance with the APA and due process is whether Genzyme received “adequate notice of the issues that would be considered, and ultimately resolved, at that hearing.” Ultimately the Federal Circuit blamed Genzyme for not either moving to exclude the added references or seeking leave to file a surreply.

The Federal Circuit held in Ariosa that the Board may consider a prior art reference to show the state of the art at the time of the invention, regardless of whether that reference was cited in the Board’s institution decision, and that is how the Board used the contested references.

 

Halo Recognizes that Not All Infringers are Angels

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In Halo Electronics, Inc. v. Pulse Electronics, Inc., 579 U.S. — (2016), the Supreme Court rejected the Federal Circuit’s two-step Seagate test for the award of enhanced damages under 35 USC 284, holding that the aware of enhanced damages was within the discretion of the trial court, subject to review for abuse of that discretion.

The award of enhanced damages under Section 284 has had ups and downs under the Federal Circuit’s supervision.  Shortly after the Federal Circuit was created, in Underwater Devices, the Federal Circuit announced an “affirmative duty to exercise due care.”  Three years later in Kloster Speedsteel,  the Federal Circuit created an adverse inference from not introducing an opinion of counsel to demonstrate a lack of willfulness.  This adverse inference persisted until 2004, when the Federal Circuit recognized the gamesmanship surrounding opinions of counsel, and eliminated the adverse inference in Knorr-Bremse.  Then in 2007 the Federal Circuit raised the bar higher in Seagate establishing a two part, objective/subjective test.

Halo

Under Seagate, a patent owner must first show by clear and convincing evidence that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent. Second, the patentee must demonstrate, again by clear and convincing evidence, that the risk of infringement was either known or so obvious that it should have been known to the accused infringer.  The Supreme Court said that this test is not consistent with 35 USC 284.

§284 provides simply that “the court may increase the damages up to three times the amount found or assessed.”  The Supreme Court noted that the statute contains no explicit limit or condition, and that the word “may” clearly connotes discretion.  However discretion is not without limits: a motion to a court’s discretion is a motion, not to its inclination, but to its judgment; and its judgment is to be guided by sound legal principles.

The Supreme Court instructed that awards of enhanced damages under the Patent Act over the past 180 years establish that they are not to be meted out in a typical infringement case, but are instead designed as a “punitive” or “vindictive” sanction for egregious infringement behavior. The Court said that:

The sort of conduct warranting enhanced damages has been variously described in our cases as willful, wanton, malicious, bad-faith, deliberate, consciously wrongful, flagrant, or—indeed—characteristic of a pirate.

Seagate reflects a sound recognition that enhanced damages are generally appropriate under §284 only in egregious cases, but the Supreme Court found the test “unduly rigid, and it impermissibly encumbers the statutory grant of discretion to district courts.”  In particular, the court was critical of the requirement of a showing of objective recklessness, finding no reason for the requirement in the context of deliberate wrongdoing.  The Federal Circuit said that the requirement of objective recklessness insulates an infringer from enhanced damages, so long has he or she can mount a reasonable defense, even if he did not act on the basis of a  defense or was even aware of it. The Supreme Court complaint that:

Under that standard, someone who plunders a patent—in- fringing it without any reason to suppose his conduct is arguably defensible—can nevertheless escape any come- uppance under §284 solely on the strength of his attorney’s ingenuity.

The Supreme Court said that culpability is generally measured against the knowledge of the actor at the time of the challenged conduct.  The Court found no reason to look to facts that the defendant neither knew nor had reason to know at the time he acted.  The Court said that Section 284 allows district courts to punish the full range of culpable behavior, although nothing says they must do so. As with any exercise of discretion, courts should continue to take into account the particular circumstances of each case in deciding whether to award damages, and in what amount. Consistent with nearly two centuries of enhanced damages under patent law, however, such punishment should generally be reserved for egregious cases typified by willful misconduct.

 

The Board Cannot Adopt a Surprise Claim Construction

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In SAS Institute, Inc. v. Complementsoft,LLC, [2015-1346, 2015-1347] (June 10, 2016), the Federal Circuit agree with the Board in an IPR involving U.S. Patent No. 7,110,936 on all of the challenged constructions resulting in finding of invalidity of all but one of the challenged claims.  The Federal Circuit also confirmed that the Board did not need to address in its final written decision claims for which IPR was not instituted.  Finally, the Federal Circuit vacated the Board’s determination that claim 4 is patentable and remanded so that the parties may address a new construction that the Board adopted in its final written decision after interpreting the claim differently before.

With respect to claim 4, which was sustained based upon a different construction of the phrase “graphical representations of data flows, the Federal Circuit remanded so that the parties could address the construction in the final written decision.  The Federal Circuit agreed with the construction of graphical representations of data flows” as “a graphical representation comprised of icons depicting data processing steps and arrows to depict the movement of data through source code.”  The Federal Circuit noted that the term was not used in the specification, and agreed with the Board’s use of the definition of the term “data flow diagrams,” which did appear in the specification.

The Federal Circuit rejected petitioner’s argument that because the construction was narrow, it could not be the broadest reasonable interpretation, saying:

While we have endorsed the Board’s use of the broadest reasonable interpretation standard in IPR proceedings, we also take care to not read “reasonable” out of the standard. This is to say that “[e]ven under the broadest reasonable interpretation, the Board’s construction cannot be divorced from the specification and the record evidence, and must be consistent with the one that those skilled in the art would reach.”

The Federal Circuit also relied upon the structure of the claims, noting that some of the claims speak broadly of flows, while others speak of data flows and program flows, was instructive as to the meaning of the claims (although this is not claim differentiation).

The Federal Circuit affirmed the Board’s invalidation of claims in the face of patent owner’s arguments that the claim constructions were incorrect.  The Federal Circuit specifically noting that because the specification and prosecution history did not conclusively resolve construction, it was appropriate for the Board to rely on dictionaries and expert testimony to aid its construction.

The most interesting aspect of the case may be the Federal Circuit’s treatment of the Board’s change in claim construction between the Institution Decision and the Final Written Decision, which gave the Federal Circuit “pause.”  The Federal Circuit noted that the Board’s new construction of “graphical representations of data flows” as “a graphical representation comprised of icons depicting data processing steps and arrows to depict the movement of data through source code,” varied varied significantly from its initial interpretation of the term as “a map of the path of data through the executing
source code.”  The Federal Circuit was not concered that the Board changed its construction, which the Federal Circuit said it was free to do, but that it Petitioner was not given an opportunity to address the new construction since the Patent Owner agreed with the original construction, and never suggested that the Board adopt the
construction that eventually materialized in the final written decision. Under these circumstances, the Federal Circuit said that it was difficult to imagine either party anticipating that already-interpreted terms were actually moving targets, and it is thus unreasonable to expect that they would have briefed or argued hypothetical constructions not asserted by their opponent.  The Federal Circuit vacated the decision, and remanded for further proceedings.

And That’s Final . . .

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The MPEP specifies when a rejection can be made final:

MPEP70607(a)

 

A second Office Action on the merits should be final, except where the examiner introduces a new ground of rejection that was not necessitated by either amendment or an information disclosure statement.  This is in accord with the philosophy espoused by the Federal Circuit in In re De Blauwe, 736 F.2d 699, 706 n.9, 222 USPQ 191, 197 n.9 (Fed. Cir. 1984), where the court stated that when the Office advances “a position or rationale new to the proceedings, an applicant must be afforded an opportunity to respond to that position or rationale by submission of contradicting evidence.”

Patent Applicants: Anything You Say Can and Will Be Used Against You in a Court of Law

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In Indacon, Inc. v, Facebook, Inc., [2015-1129] (June 6, 2016), the Federal Circuit affirmed the district court’s claim construction, leaving intact the parties stipulation of non-infringement based upon that construction.

At issues was U.S. Patent No. 6,834,276, claiming a system for replacing link terms with links.  Facebook argued that the claims of the patent required all of the link terms with links, while Indacon argued that the claims did not require replacement of all of the link terms.

The Federal Circuit began with the observation that “link term” these terms had no plain or established meaning to one of ordinary skill in the art, and as, they ordinarily
cannot be construed broader than the disclosure in the specification.  The Federal Circuit then noted that the specification explains that “[t]he link module
enables association of any selected link term with any of the plurality of files in the selectable database.” Which the Federal Circuit took to mean all of the selected link terms, and then pointed out in the specification, language that it found reinforced the idea that all of the link terms were replaced.

The nail in the coffin, however, was the “additional support” the Federal Circuit found in the prosecution history, where the patent owner argued that

Applicants’ invention provides a user with a linking
control panel in which the user can designate
a specific file to be linked with every instance of a
specified word (and any associated alias terms) in
the database. After the index is generated, the
program displays every instance of that custom
term (and its alias terms, if any) as a hyperlink to
the designated file. . . . These innovations distinguish
Applicants’ invention from [the prior art].

Indacon argued that because the references to “every instance” in the prosecution history were not the “critical contrast that applicants were trying to make over the cited reference,” these statements cannot form the basis for disavowal.  However the Federal Circuit did not need to make a finding of disavowal, given the fact that the link claim terms lacked a plain or ordinary meaning in the art, and because the specification suggested limiting the scope of these claim terms to allowing each instance of a defined term to be identified and displayed as a link.  Indacon’s attempts to use claim differentiation were also rejected because the claims were not otherwise identical in scope, and in any event, it “cannot enlarge the meaning of a claim beyond that
which is supported by the patent documents.”

 

 

Incorrect Position on Infringement is not a Defense to Inducement

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In Warsaw Orthopedic, Inc. v. NuVasive, Inc., [2013-1576, 2013-1577] (June 3, 2016), on vacatur and remand from the Supreme Court (for further consideration in light of Commil) the Federal Circuit reaffirmed its the district court’s judgment with respect to induced infringement of U.S. Patent No. 7,470,236 and reinstated its earlier judgment in other respects.

The only question was whether there was substantial evidence for the jury to conclude that the counterclaim defendant, MSD, induced infringement of the ’236 patent.  The Federal Circuit reviewed the law of inducement, noting that under Global-Tech and Commil proof of induced infringement requires not only knowledge of the patent, but also proof the defendant knew the induced acts were infringing, and that Commil reaffirmed that willful blindness can satisfy the knowledge requirement for active inducement. The Federal Circuit further said that Global-Tech also held that knowledge of infringement can be inferred from circumstantial evidence.

At issue was the claim limitation:

increasing the intensity level of said stimulus signal until said predetermined neuro-muscular response is elicited by said stimulus pulse and stopping the emission of said stimulus signal immediately after said predetermined neuromuscular response is detected.

MSD argued that no reasonable jury could have inferred that it had knowledge of (or was willfully blind to) its customers’ infringement of the ’236 patent, arguing that under its claim construction, the acts were not ifnringement.  The Federal Circuit found that MSD’s position was “clearly inconsistent” with the claim construction.  The Federal Circuit said that the undisputed evidence before the jury showed that, immediately
after nerve stimulation, the NIM-Eclipse device stopped “stimulus pulses” within the meaning of the claims. The Federal Circuit found that there is no support in the language of claim or its prosecution history to support MSD’s construction.

The Federal Circuit said that given the strength of the evidence presented, a reasonable jury could have concluded that MSD must have known, or was willfully blind to the fact that its device met the properly construed claims, and in particular the “stopped” limitation.

After Commil, a belief of invalidity was no longer a defense of inducement,  Now, after NuVasive, an incorrect belief that the actions do not infringe also is not a defense to infringement.  The Federal Circuit did not appear concerned with the reasonableness of MSD’s position, just its correctness,  Thus, if a party induces conduct that is eventually found to infringe a valid patent, that party had induced infringement if it knew about the patent.