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.”

 

 

One of Ordinary Skill Would not Blindly Incorporate One Reference’s Exact Methodology into the Other

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In PGS Geophysical AS v. Iancu, [2016-2470, 2016-2472, 2016-2474] (June 7, 2018), the Federal Circuit affirmed the Board’s decisions finding certain claims of U.S. Patent No. 6,906,981 invalid.  After the Board issued its final written decisions, PGS settled with the Petitioner, leaving the Director to defend the final Written decision on appeal.

The Federal Circuit first considered its jurisdiction, concluding the Board’s decisions were final (and thus appealable) even though the decision not to institute as to some grounds is known after SAS to be erroneous, it was nonetheless final.

As to obviousness, the Federal Circuit noted that the obviousness inquiry entails
consideration of whether a person of ordinary skill in the art would have been motivated to combine the teachings of the prior art references to achieve the claimed invention,
and would have had a reasonable expectation of success in doing so.  Such a motivation and reasonable expectation may be present where the claimed invention
is the combination of familiar elements according to known methods that does no more than yield predictable results.

On appeal PGS could not dispute that the references disclosed all of the elements of the claims, but argued that the Board erred regarding the needed motivation.  The Federal Circuit noted that w it may not supply a reasoned basis for the agency’s action that the agency itself has not given, it will uphold a decision of less than ideal clarity if the agency’s path may reasonably be discerned.

PGS argued,with the support of expert testimony, that the combination of the references would result in an eight-fold loss of spatial resolution.  However the Federal Circuit noted that this argument relies on the presumption that one of ordinary skill would blindly incorporate one reference’s exact methodology into the other.  The Federal Circuit found that the Board properly did not view the proposed combination to be so limited.

 

 

No Littoral Infringement; Plaintiff Still Waiting for its Ship to Come In

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In FastShip, LLC v. U.S., [2017-2248, 2017-2249] (June 5, 2018), held that the U.S. Government did not infringe U.S. Patent Nos.
5,080,032 and 5,231,946 because the Freedom-class
Littoral Combat Ship allegedly covered by the claims was not “manufactured” by or for the Government before the patents expired.

A patent owner cannot sue the U.S. government or its suppliers for patent infringement.  Instead  28 U.S.C. § 1498(a) gives the patent owner a cause of action for the use of the patent.

A representative claim from plaintiff’s patent requires:

A vessel comprising:
a hull having a non-stepped profile which produces a high pressure area at the bottom of the hull in a stern section of the hull which intersects a transom to form an angle having a vertex at the intersection and hydrodynamic lifting of the stern section
at a threshold speed without the hull planing across the water at a maximum velocity determined by a Froude Number, the hull having a length in excess of 200 feet, a displacement in excess of 2000 tons, a Froude Number in between about 0.42 and 0.90, and a length-to-beam ratio between about 5.0 and 7.0;
at least one inlet located within the high pressure area;
at least one waterjet coupled to the at least one inlet for discharging water which flows from the inlet to the waterjet for propelling the vessel;
a power source coupled to the at least one waterjet for propelling water from the at least one inlet through the waterjet to propel the vessel and to discharge the water from an outlet of the waterjet; and
wherein acceleration of water into the at least one inlet and from the at least one waterjet produces hydrodynamic lift at the at least
one inlet which is additional to the lifting produced by the bottom of the hull in the high pressure area which increases efficiency
of the hull and reduces drag.

On May 18, 2010, when the patents-in-suit expired, one ship (the LCS-1) was completed and in use by the Navy, but a second ship (the LCS-3) was still under construction.  The Court of Federal Claims awarded plaintiff $6,449,585.82 in damages for LCS-1, but no damages for LCS-3, and plaintiff appealed.

The Federal Circuit affirmed, finding that the undisputed facts demonstrate that LCS-3 was not “manufactured” when the patents-in-suit expired in May 2010. The Federal Circuit said that the asserted claims disclose a vessel comprising “at least one waterjet coupled to the at least one inlet for discharging water which flows from the inlet to the waterjet for propelling the vessel,” while the record demonstrates that all four waterjets and impeller shafts were installed  in July 2010.  Moreover, the claims also required a hull, which was not completed until the erection of the bow module  . during August 2010,” at the earliest.

The Federal Circuit affirmed the denial of an award for LCS-3 ship, and upped the award for LCS-1 to $7,117,271.82.

 

 

Absence of “Means” Means §112(f) Did Not Apply

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In Zeroclick, LLC v. Apple Inc., [2017-1267] (June 1, 2018) the Federal Circuit vacated and remanded the district court determination that claims of U.S. Patent Nos. 7,818,691 and 8,549,443 were invalid for indefiniteness, finding the district court failed to undertake the relevant inquiry and make related factual findings to support its conclusion that the asserted claims recited means-plus-function terms.

At issue were the limitations “program that can operate the movement of the pointer (0)” and “user interface code being configured to detect one or more locations touched by a movement of the user’s finger on the screen without requiring the exertion of pressure and determine therefrom a selected operation” which the district court determined were means-plus-function limitations.

To determine whether § 112, para. 6 applies to a claim limitation, the presence or absence of the word “means” is important.  The failure to use the word “means” creates a rebuttable presumption that § 112, ¶ 6 does not apply. However, this presumption
can be overcome, and § 112, ¶ 6 will apply, if the challenger demonstrates that the claim term fails to recite sufficiently definite structure or else recites function without reciting sufficient structure for performing that function.  The essential inquiry remains 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 noted that neither of the limitations at issue uses the word “means,” so presumptively, § 112, ¶ 6 does not apply to the limitations.  The Federal Circuit noted that while Apple argued that the limitations must be construed under § 112, ¶ 6, it provided no evidentiary support for that position, and thus the presumption against
the application of § 112, ¶ 6 to the disputed limitations remained unrebutted. The Federal Circuit found that the district court’s discussion was couched in conclusory language, relying on Apple’s arguments, contrasting them against Zeroclick’s contentions, but pointing to no record evidence that supports its ultimate conclusion that  § 112, ¶ 6 applies to the asserted claims.

The Federal Circuit said that the district court legally erred by not giving effect to the unrebutted presumption against the application of § 112, ¶ 6.  The Federal Circuit noted that this was erroneous for at least three reasons: (1) the mere fact that the disputed limitations incorporate functional language does not automatically convert the words into means for performing such functions; (2) the court’s analysis removed the terms from their context, which otherwise strongly suggests the plain and ordinary meaning of the terms; and (3) the district court made no pertinent finding that compels the conclusion that a conventional graphical user interface program or code is used in
common parlance as substitute for “means.”  The Federal Circuit concluded that the district court thus erred by effectively treating “program” and “user interface code” as nonce words and concluding in turn that the claims recited §means-plus-function limitations.

 

Board Must Consider Applicant’s Reply to New Grounds in the Examiner’s Answer

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In In re Durance, [2017-1486] (June 1, 2018), the Federal Circuit vacated the Board’s determination of obviousness and remand for the Board to consider applicants’
reply-brief arguments in the first instance.

Durance, Fu, and Yaghmaee filed a patent application on improved methods and
apparatuses for “microwave vacuum-drying of organic materials, such as food products and medicinal plants.  Applicants appealed a final rejection of the claims, and in her Answer, the Examiner raised a new structural identify argument to counter applicant’s argument against the rejection.  Applicants challenged the examiner’s structural-identity
rejection in its reply brief. Durance explained that the Examiner’s never-before articulated understanding of the corresponding structure from the specification was
extremely inaccurate.   The Board affirmed the rejection, disregarding Durance’s
reply-brief arguments by citing 37 C.F.R. § 41.41(b)(2) and stating that these arguments were “not responsive to an argument raised in the Answer.”  The Board denied rehearing, reiterating that it would not consider applicant’s reply-brief arguments, because applicants did not provide such a showing or indicate where a new argument requiring such a response was raised in the Examiner’s Answer.

The Federal Circuit noted that throughout the examination, the Patent Office continually
shifted its position on which structures and what characteristics of those structures are the bases for the Office’s grounds of rejection, such that the Court was “not confident” in the reasoning for the rejection.  As to the failure to consider arguments in applicants’ reply brief, the Federal Circuit noted that Section 41.41(b)(2) permits a reply brief to respond to “an argument raised in the examiner’s answer.” The Federal Circuit added that nothing in this provision bars a reply brief from addressing new arguments raised in the Examiner’s Answer that are not articulated in the Final Office Action, regardless of whether the examiner designated that new argument as a “new ground of rejection.  The Federal Circuit said:

If an examiner’s answer includes arguments raised for the first time, i.e., not in the Final Office Action, an applicant may address those arguments in the reply.

The Federal Circuit said that the equivocal nature of the examiner’s and Board’s remarks throughout the examination of the application, including whether inherency was the basis for the rejection, clouded the issues before applicants.  Accordingly, applicants had no notice, prior to the examiner’s answer, of the grounds on which his application was being rejected, and it was therefore proper under § 41.41(b)(2) for applicants to
to respond to the argument raised in the examiner’s answer.  The Federal Circuit rejected the Patent Office’s argument that applicant should have petitioned to have the
examiner’s answer designated as a new ground of rejection, finding no such requirement in the regulations.

 

The Novelty of an Optical Isomer is not Negated by the Prior Art Disclosure of its Racemate

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In UCB, Inc. v. Accord Healthcare, Inc., [2016-2610, 2016-2683, 2016-2685, 2016-2698, 2016-2710, 2017-1001] (May 23 2018), the Federal Circuit affirmed the district court’s determination that UCB’s patents on lacosamide, an anti-epileptic drug, were not invalid for obviousness-type double patenting, obviousness, and anticipation.

On the issue of double patenting, the Federal Circuit noted that in chemical cases, the double patenting inquiry is not whether a person of ordinary skill in the art would select the earlier compound as a lead compound, but rather whether the later compound would have been
an obvious or anticipated modification of the earlier compound — the underlying patent in the double patenting analysis need not be prior art to the later claim.  The Federal Circuit found that the district court did not err by focusing its double patenting analysis on the claims’ differences, as well as the claims as a whole.  The Federal Circuit said that proving that a claim is invalid for obviousness-type double patenting “requires identifying some reason that would have led a chemist to modify the earlier compound to make the later compound with a reasonable expectation of success.  Acknowledging that it was a close case, because it discerned no clear error in the district court’s underlying fact finding that there would have been no reasonable expectation of success in making the modifications needed to make the claimed combination, the Federal Circuit agreed with the district court that the asserted claims of the ‘551 patent were patentably distinct from the ’301 patent.

With respect to obviousness, the Federal Circuit applied a lead compound analysis, rejecting the proposition that the test does not apply in purification cases.  The lead compound analysis first determines whether a chemist of ordinary skill would have selected the asserted prior art compounds as lead compounds, or starting points, for further development efforts, and then determines “whether the prior art would have supplied one of ordinary skill in the art with a reason or motivation to modify a lead compound to make the claimed compound with a reasonable expectation of success.  The Federal Circuit found substantial evidence supported the district court’s conclusion that a person of ordinary skill in the art would not have selected either of the proferred lead compounds.

On anticipation, appellants argued that because the prior art disclosed the chemical structure, it it necessarily disclosed the R-enantiomer (lacosamide) recited in claim 9 of the ’551 patent.  The district court concluded that the prior art disclosed neither the R-enantiomer, nor any of its characteristics.  The Federal Circuit noted that the novelty of an optical isomer is not negated by the prior art disclosure of its racemate, and that the references specifically stated that it prepared the racemic amino acid derivatives rather than the individual enantiomers.  Thus, the Federal Circuit found no clear error in the finding of no anticipation.

On-Going Royalty Should Consider the Fact that Patentee Won

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In XY, LLC v. Trans Ova Genetics, L.C., [2016-2054, 2016-2136] (May 23, 2018), the Federal Circuit affirmed the district court on all issues except the ongoing royalty rate, which the court vacated and remanded for recalculation in accordance with its opinion.

XY’s patents relate to the sorting of X- and Y- chromosome-
bearing sperm cells for selective breeding purposes.  XY licensed Trans Ova under these patents, but purported to terminate the licenses for breach.  XY then sued Trans Ova for patent infringement, later adding counts for breach of contract  and unjust enrichment.  Trans Ova counter claimed for invalidity, monopolization, and breach of contract.

The Federal Circuit affirmed summary judgment on Trans Ova’s antitrust counterclaims, and the denial of post trial motions on the breach of contract issues. The Federal Circuit found no abuse of discretion in the in
denying Trans Ova’s motion for a new trial on the issue of patent invalidity,finding the issue as to one patent mooted by its concurrent affirmance of a PTAB decision invalidating the patent.  Because XY did not appeal the failure to award damages, the Federal Circuit dismissed as moot, Trans Ova’s appeal of the finding of willfulness.

The district court calculated an ongoing royalty rate for gross sales by averaging the jury’s 15% rate with the 10% rate in XY’s prior licenses to
arrive at a rate of 12.5%. For reverse sorting services, the district court awarded an ongoing royalty rate of 2%, half of the jury’s rate for those services.  A district court’s methodology for calculating an ongoing royalty  is reviewed under the abuse of discretion standard. See ActiveVideo Networks, Inc. v. Verizon Commc’ns, Inc., 694 F.3d 1312, 1332 (Fed. Cir. 2012).

In Amado v. Microsoft Corp., the Federal Circuit held that there is a “fundamental difference” between “a reasonable royalty for pre-verdict infringement and damages for post-verdict infringement.” When calculating an ongoing royalty rate, the district court should consider the change in the parties’ bargaining positions, and the resulting change in economic circumstances, resulting from the determination of liability.  When patent claims are held to be not invalid and infringed, this amounts to a “substantial shift in the bargaining position of the parties.  District courts to consider changed economic circumstances, such as changes related to the market for the patented products.

The Federal Circuit found that the district court focused on pre-verdict factors that were either irrelevant or less relevant than post-verdict  factors. In particular, the district court awarded an ongoing royalty based on an average between the jury’s reasonable royalty for past infringement (15%) and the rate established in the parties’ pre-suit license Agreement (10%).  The Federal Circuited noted that the jury considered and rejected the 10% pre-suit license rate.  The Federal Circuit said that the district court’s focus should have been on XY’s improved bargaining position and any other changed economic factors, rather than XY’s behavior in the past.  Instead, the district court identified
no economic factors that would justify the imposition of rates that were lower than the jury’s.

Patent Owner Could Not Claim Priority to Provisional Application That Only Disclosed Species of Claimed Genus

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D Three Enterprises, LLC v. Sunmodo Corporation, [2017-1909, 2017-1910](May 21, 2018), the Federal Circuit affirmed the district court’s grant of summary judgment of invalidity of U.S. Patent Nos. 8,689,517, 9,068,339, and 8,707,655, based upon a determination that they could not claim priority to provisional application no. 61/150,301.

The patents-in-suit are directed to roof mount sealing assemblies, which allow users to mount objects on a roof and seal the mounting location against water.  The District Court determined that the patents-in-suit could not claim priority from the provisional application because the claims were broader than the invention disclosed in the provisional application, and thus the written description requirement pursuant to 35 U.S.C. §112(a).

The Federal Circuit noted that to claim a genus, a patentee must disclose a representative number of species falling within the scope of the genus or structural features common to the members of the genus so that a PHOSITA can visualize or recognize the members of the genus.  All of the asserted claims save one recite washerless assemblies.  The provisional application disclosed one washerless assembly, depicted in Figures 27−33 and 41, showing an an attachment bracket with W-shaped prongs.  The district court noted that all of the applications disclosed this attachment bracket, such that a PHOSITA would not understand the attachment bracket to be an “optional feature.”  However, the claims to the washerless version were not limited to attachment brackets with the W-shaped prongs.

The Federal Circuit first considered with summary judgement on the issue was appropriate, finding that the patent owner had sufficient notice, so that it was.   The Federal Circuit then turned to the merits, agreeing with the district court that washerless assemblies using attachments other than attachment bracket with the W-shaped prongs were not adequately disclosed in the provisional application, which in no way contemplated the use of other types of attachment brackets in a washerless assembly.  The Federal Circuit added that it was not sufficient for purposes of the written description requirement of § 112
that the disclosure, when combined with the knowledge in the art, would lead one to speculate as to the modifications that the inventor might have envisioned, but failed to disclose.

D Three argued that boilerplate language in the provisional application disclosed alternative attachment brackets:

[PHOSITAs] will recognize certain modifications, permutations, additions and sub-combinations therefore. It is therefore intended that the following appended claims hereinafter introduced are interpreted to include all such modifications, permutations, additions and subcombinations are within their true sprit [sic] and scope.

But the Federal Circuit found that this boilerplate language at the end of the provisional application was not sufficient to show adequate
disclosure of the actual combinations and attachments used in the Washerless Claims. The Federal Circuit noted that adequate written description does not ask what is permissible in view of the disclosure, rather, it asks what is disclosed.

The Federal affirmed that the provisional application lacked adequate written description of what was claimed, and thus did not support a claim of priority.

 

Printed Matter Cannot Be a Patentable Limitation Unless it is Functionally Related to the Claim Elements

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In Praxair Distribution, Inc. v. Mallinckrodt Hospital Products IP Ltd., [2016-2616, 2016-2656](May 16, 2018), the Federal Circuit affirmed the PTAB decision that claims 1–8 and 10–11 of U.S. Patent 8,846,112 directed to methods of distributing nitric oxide gas cylinders for pharmaceutical applications were unpatentable as obvious, and reversed the decision that claim 9 was not unpatentable.

In construing the claims, the Board applied the printed matter doctrine. The Board interpreted the providing information, evaluating, and recommendation claim limitations to be either printed matter or purely
mental steps not entitled to patentable weight, as those limitations lacked a functional relationship to the other claim limitations except in claim 9.  With respect to claim 9, however, the Board interpreted “in accordance with” to mean “based on, or as a result of” the recommendation to discontinue nitric oxide treatment from claim 7,
thereby establishing a functional relationship to the recommendation limitation.  The Board found that the cited prior art collectively taught each limitation of claims 1–8 and 10–19 that did have patentable weight, and held they were obvious.

The Federal Circuit began with the printed matter doctrine, applied by the PTAB.  The Federal Circuit explained that claim limitations directed to printed matter are not entitled to patentable weight unless the printed matter is functionally related to the substrate on which the printed
matter is applied.  However the printed matter doctrine is not limited to printed materials, and applies if the claims are directed to the content of information.

If a claim limitation is directed to printed matter, then the next step is to ascertain whether the printed matter is functionally related to its “substrate.” Printed matter that is functionally related to its substrate is given patentable weight, while where the printed matter is not functionally related to the substrate, the printed matter will not distinguish the
invention from the prior art in terms of patentability.  In in Ngai, there was no functional relationship between claimed instructions and a diagnostic kit, as the instructions “in no way depended on the kit, and the kit did not dependon the” instructions. However, Ngai distinguished Gulack, where
there was a functional relationship between printed digits on a circular band because “the printed matter and the circularity of the band were interrelated, so as to produce a new product useful for educational and recreational mathematical purposes.”

The Federal Circuit agreed that the Board properly addressed the printed matter doctrine during claim construction.  The Federal Circuit rejected Mallinckrodt’s argument that the printed matter/mental steps doctrines only apply to patent eligibility, noted that the printed matter doctrine raises an issue where the § 101 patent-eligibility inquiry and the
§ 102 and § 103 novelty and nonobviousness inquiries overlap.  The Federal Circuit explained because claim limitations directed to mental steps may attempt to capture informational content, they may be considered printed matter lacking patentable weight in an obviousness
analysis. Accordingly, a limitation that merely claims information by incorporating that information into a mental step will receive patentable weight only if the limitation is functionally related to the substrate.

The Federal Circuit noted that claim 3’s requirement that the medical provider weigh “the potential benefit of treating the [neonatal patient]
with 20 ppm inhaled nitric oxide vs. the potential risk that inhaled nitric oxide could cause an increase in PCWP” merely requires a medical provider to think about the information claimed in the providing information limitation of claim 1.  The Federal Circuit said that adding an ineligible mental process to ineligible information still leaves the claim limitation directed to printed matter. To hold otherwise would make
the printed matter doctrine a dead letter, requiring no more than a “think about it” step to give patentable weight to a claim limitation directed to information content.

The Federal Circuit found that the reference to “pharmaceutically acceptable” referred to the nature of the nitric acid gas, not the prescribing information that may accompany it, and thus there was no functional relationship between the information and methods of providing and potentially administering the drug.  Since no other functional relationship was asserted, the Federal Circuit held that the printed matter in claims 1–8 and 10 lacks a functional relationship to its substrate, and thus cannot be the basis of patentability.

The Federal Circuit then turned to claim 9, which survived the IPR, summarizing it as: (1) determining that a neonatal patient has preexisting LVD; (2) treating that neonate with nitric oxide, whereupon
the neonate experiences pulmonary edema; (3) providing information and a recommendation to the medical provider to discontinue nitric oxide treatment for a patient with preexisting LVD who experiences a pulmonary edema; and (4) “based on” the  recommendation,  discontinuing nitric oxide treatment due to the pulmonary edema. The Federal Circuit noted that claim 9 requires a medical provider to take a specific action, discontinuing treatment, as a result of the  recommendation limitation, and agreed that this creates the required functional relationship with the rest of the claim.  However the Federal Circuit disagreed with the Board that claim 9 as a whole would not have been obvious.

The Federal Circuit found the Board improperly construed claim 9 as requiring the exclusion of persons from the treatment, rather than discontinuing persons from treatment if edema occurs, and thus the prior art teaching of treatment with monitoring  made the claimed invention obvious.

There Can Be Only One (District for Venue Purposes)

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In In re Bigcommerce, Inc., [2018-122] (May 15, 2018), the Federal Circuit granted petitions for mandamus, requiring that transfer of cases from the Eastern District of Texas.

The Federal Circuit held that a domestic corporation incorporated in a state having multiple judicial districts “resides” for purposes of the patent-specific venue statute, 28 U.S.C. § 1400(b), only in the single judicial district within that state where it maintains a principal place of business, or failing that, the judicial district in which its registered office is located.  Because the petitioner did not “reside” in the Eastern District of Texas under this interpretation, the Federal Circuit granted the petitions for mandamus.