Among Other Things, the Federal Circuit Affirms Viability of Assignor Estoppel

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In Mentor Graphics Corporation v. EVE-USA, Inc., [2015-1470, 2015-1554, 2015-1556] (March 16, 2016), the Federal Circuit:

  • affirmed the jury verdict of infringement of U.S. Patent Nos. 6,240,376, the denial of JMOL, and the award of $36,000,000 in damages, and that that assignor estoppel bars Synopsys from challenging the validity of the patent.
  • reversed summary judgment that U.S. Patent No.
    6,132,109 is indefinite.
  • affirmed summary judgment that U.S. Patent No. 7,069,526 lacks patent-eligible subject matter.
  • vacated the motion in limine precluding Mentor from
    presenting evidence of willful infringement.
  • reversed summary judgment that U.S. Patent No. 6,947,882 lacks
    written description.
  • reverse summary judgment that Mentor’s infringement allegations
    regarding U.S. Patent Nos. 6,009,531 and 5,649,176 are barred by
    claim preclusion.

Regarding Assignor Estoppel, the Federal Circuit rejected Synopsys argument that the Supreme Court abolished the doctrinal underpinnings of assignor estoppel in Lear, Inc. v. Adkins.

Regarding the Damage Award, the Federal Circuit noted that the facts of this case are remarkably simple for a patent damages appeal and Synopsys does not dispute any of them.

The jury found, and Synopsys does not dispute on appeal, that Mentor
satisfied all of the Panduit factors with regard to the sales to Intel for which the jury awarded lost profits:
(1) there was a demand by Intel for the patented product; (2) there were no non-infringing alternative emulator systems acceptable to Intel; (3) Mentor had the manufacturing and marketing capability to satisfy Intel’s demand; and, (4) Mentor established the amount of profit it would
have made if Synopsys had not infringed.  Synopsys argued that the lost profits shuold be apportioned to cover only the patentee’s inventive contribution.  The Federal Circuit agreed with Synopsys that apportionment is an important component of damages law generally, and we believe it is necessary in both reasonable royalty and lost
profits analysis.  However, the Federal Circuit said that Panduit’s requirement that patentees prove demand for the product as a whole and the absence of non-infringing alternatives ties lost profit damages to specific claim limitations and ensures that damages are commensurate with the value of the patented features.

Regarding indefiniteness, the Federal Circuit said that “a method for displaying the results of synthesized circuit analysis visually near the
HDL source specification that generated the circuit” was not indefinite.The Federal Circuit held that the term “near” informs a person of ordinary skill in the art about the scope of the invention with
reasonable certainty, noting that a skilled artisan would understand “near” requires the HDL code and its corresponding circuit analysis to be displayed in a manner that physically associates the two.

Regarding patentable subject matter, the Federal Circuit held that claims containing “machine-readable medium” renders the claimed
subject matter invalid under 35 U.S.C. § 101.  The specification defined machine-readable medium as including carrier waves, found to be unpatentable in In re Nuijten, 500 F.3d 1346 (Fed. Cir. 2007).

With respect to willful infringement, the Federal Circuit found the district court erred in barring evidence of willful infringement.  Specificaly, the Federal Circuit rejected a rigid rule that post-filing willful infringement cannot be presented unless the party moves for a preliminary injunction.

With respect to written description, the Federal Circuit found that there was adequate written description.  The Federal Circuit found that the very language of claim 1 which the court held was not supported by the specification was present in the originally-filed claims. Original claims are part of the original specification and in many cases will satisfy the written description requirement.

Finally, with respect to claim preclusion, the Federal Circuit said that claim preclusion does not bar later infringement allegations with respect to accused products that were not in existence at the time of the previous actions for the simple reason that claim preclusion requires that in order for a particular claim to be barred, it is necessary that the claim either was asserted, or could have been asserted, in the prior action.

 

IPR – The Odds Still Favor Petitioners, and Greatly Favor Smart Petitioners

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The USPTO’s most recently published IPR statistics show that the odds still greatly favor the patent challenger:

Given that a settlement (presumably), a request for adverse judgment, and a finding of patentability are all good outcomes for the patent challenger, patent challengers have “won” 58.4% of the time, and when you add in invalidation at least some of the time, then the patent challenger improves its situation 63.9% of the time.

The odds are even better for petitioners who do their homework and present a grantable petition.  For petitions for which trial is instituted, the challengers win 77.8% of the time, and at least improve their situation 86.4% of the time.

 

Oh Diehr Me, Another Case With Patent Eligible Subject Matter

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In Thales Visionix, Inc., v. U.S., [2015-5150](March 8, 2017), the Federal Circuit reversed the Court of Claims determination that the claims of U.S. Patent No. 6,474,159 were directed to patent ineligible subject matter.

The Federal Circuit observed that the Supreme court “has not established a definitive rule to determine what constitutes an ‘abstract idea.'”  Because all inventions at some level embody, use. reflect rest upon or apply laws of nature, natural phenomenon, or abstract ideas, the Federal Circuit said it was important to articulate what the claims are directed to with sufficient specificity to ensure that the step one inquiry is meaningful.  The Federal Circuit looked to Rapid Litigation Management, Enfish, and Diamond v. Diehr, and concluded that for purposes of evaluating patent eligibility, the claims in the ‘159 patent were nearly indistinguishable from the claims at issue in Diehr, explaining that just as the claims in Diehr reduced the likelihood that the rubber molding process would result in over curing or under curing, the claims at issue result in a system that reduces errors in an inertial system that tracks an object on a moving platform.

The Federal Circuit also (and less aptly) analogized to Rapid Litigation, stating that just as claims directed to a new and useful technique for defining a database that runs on general-purpose computer computer equipment are patent eligible, so too are claims directed to a new an useful technique for using sensors to more efficiently track an object on a moving platform.  Editorial comment: the similarity of these two cases is hard to see.

In a line that is sure to be quoted by applicants (and patent owners), the Federal Circuit said:

That a mathematical equation is required to complete the claimed method and system does not doom the claims to abstraction.

The Federal Circuit explained that far from claiming the equations themselves, the claims seek to protect only the application of physics to the unconventional configuration of sensors as disclosed, and concluded that the claims pass Step 1 of the Alice test.

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It Was Over Before the Fat Lady Sang; Collateral Estoppel Applies to Partial Summary Judgment under §101

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In Intellectual Ventures I LLC v. Capital One Financial Corp., [2016-1077] (March 7, 2017), the Federal Circuit affirmed judgment that all claims of U.S. Patent Nos. 7,984,081 and 6,546,002 ineligible under 35 U.S.C. § 101, and barring Intellectual Ventures from pursuing claims based on U.S. Patent No. 6,715,084.  The district court granted Summary Judgment of invalidity of the ‘081 and ‘002 patents, and on the strength of a partial summary judgment order of ineligibility under § 101 for the ’084 patent in a separate proceeding in New York, granted summary judgment as the ‘084 patent under a collateral estoppel theory.

The Federal Circuit observed that the Fourth Circuit has established five requirements for collateral estoppel: (1) the issue in the prior proceeding be identical, (2) actually determined, (3) necessary, (4) final, and (5) that the affected party was afforded a full and fair opportunity to litigate the issue. However the parties only dispute the finality requirement, for which the Fourth Circuit requires a “final and valid” judgment, Intellectual Ventrues arguing that the district court erred because it based its collateral estoppel findings on a partial summary judgment order, rather than a final judgment.  The Federal Circuit concluded that under Fourth Circuit law, collateral estoppel attaches in light of the partial summary judgment order, because
this particular issue has reached such a stage that the
district court would see no really good reason for permitting
it to be litigated again.

 

The Federal Circuit agreed that the claims of the ‘081 and ‘002 patents failed step 1 of the Alice/Mayo test.

Don’t Take Your Eye Off the Ball or Your Patent Assignment Will End Up in the Dirt

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In Intellectual Ventures I LLC v. Erie Indemnity Company, [2016-1128, 2016-1132] (March 7, 2017), the Federal Circuit affirmed in part, vacated in part, and remanded in part the district court’s decision finding all claims of U.S. Patent Nos. 6,510,434, 6,519,581 and 6,546,002 ineligible under 35 U.S.C. § 101, and the infringement claim of the ’581 patent for lack of standing.

Lack of Standing

The rights of the parent application of the ‘581 patent, together with “all continuations” (including the ‘581 patent application, which was pending at the time, were assigned to ALLAdvantage.com.  AllAdvantage.com then assigned various patent (including the parent of the ‘581 patent) to Alset.  Although this agreement expressly identified the various patents and pending applications subject to assignment—including
the ’581 parent and several of its pending foreign patent application counterparts—it did not explicitly list the ’581 patent’s then-pending application.  The assignment generally provided:

The Federal Circuit concluded that the Alset Agreement did not include an assignment of rights to the ’581 patent and affirmed the district court’s Rule 12(b)(1) dismissal.  The Federal Circuit rejected the argument that the language implicitly included the ‘581 patent application.  Applying California contract law, the Federal Circuit agreed with the district court’s conclusion that there is no ambiguity within the Alset Agreement that could render it reasonably susceptible to an interpretation that the ‘581 patent application was transferred.  The fact that Alset recorded the assignment at the PTO, represented in a terminal disclaimer that it owned all the rights to the ’581 patent, and filed updated power of attorneys and paid the ’581 patent’s issuance fee.  The Federal Circuit said that although this evidence may lead one to reasonably conclude that Alset believed it owned the ’581 patent application at some later point in time, it would be error to rewrite the parties’ agreement to include that which was plainly not included.  The fact that other pending applications were expressly listed also did not help plaintiff’s cause.

Because the Federal Circuit agreed that plaintiff lacked standing to sue under the ‘581 patent, it vacated the finding that the ‘581 patent was invalid under §101.

Don’t Take Your Eye Off the Ball

Conveying a pending patent application should be routine.  And perhaps because it was so routine is the reason that things went wrong.  If you want to assign a pending application, it is a probably a good idea to specifically identify that application.  If you want to include all continuations, divisionals, and continuations in part, than it is a good idea idea to say “including all continuations, divisionals, and continuations in part” rather than “together with the goodwill of the business symbolized by said patents and applications and registrations thereof.”

Invalidity Under §101

As to the ‘434 patent, which contained twenty-eight claims relating to methods and apparatuses that use an index to locate desired information in a computer database:  Under step one of the Mayo/Alice test the Federal Circuit agreed with the district court that the invention is drawn to the abstract idea of “creating an index and using that index to search for and retrieve data.  The Federal Circuit noted that it had previously held patents ineligible for reciting similar abstract concepts that merely collect, classify, or otherwise filter data.  Under step two of the Mayo/Alice test the Federal Circuit agreed with the district court that they lack an “inventive concept” that transforms the abstract idea of creating an index and using that index to search for and retrieve data into a patent-eligible application of that abstract idea.  The fact that the claimed invention employed an index of XML tags was not significant in view of the patent’s admission that such tags are known.  Moreover limiting an abstract idea to a particular field does not make the idea any less abstract.  The Federal Circuit concluded that the claimed computer functionality can only be described as generic or conventional.

As to the ‘002 patent, which contained 49 claims relating to systems and methods for accessing a user’s remotely stored data and files:

Under step one of the Mayo/Alice test the Federal Circuit agreed with the district court that the claims are drawn to the idea of “remotely accessing user specific information.  Under step two of the Mayo/Alice test, the Federal Circuit concluded that the claims recite no “inventive concept” to transform the abstract idea of remotely accessing user-specific information into a patent eligible application of that abstract idea. Rather, the Federal Circuit said that the claims merely recite generic, computer implementations
of the abstract idea itself.

Prior Art Preference for an Alternative is Not Enough to Teach Away

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In Meirsonne v. Google, Inc., [2016-1755] (March 7, 2017), the Federal Circuit affirmed the PTAB determination that claims 16, 17, 19 and 20 of U.S. Patent No. 8,156,096 on a system whereby a
user can identify a supplier of goods or services over the
Internet, were invalid for obviousness.

The Federal Circuit began with the observation that a combination of known elements is likely to be obvious when it yields predictable results. The Federal Circuit observed that obviousness may
be defeated if the prior art indicates that the invention
would not have worked for its intended purpose or otherwise
teaches away from the invention. The Federal Circuit explained that a reference teaches away “when a person of ordinary skill, upon reading the reference, would be discouraged from following the path set out in the reference, or would be led in a direction divergent from the path that was taken” in the claim. However  a reference that “merely expresses a general preference for an alternative invention but does not criticize, discredit, or otherwise discourage investigation into” the claimed invention does not teach away.

Although Meiresonne argued that the references taught away from the combination of descriptive text and a rollover viewing area because both prior art references disparage and criticize the use of descriptive text.  The Federal Circuit concluded upon reviewing the references, substantial evidence supported the Board’s fact finding that the prior art does not teach away from the claimed combination, and therfore affirmed.  The Federal Circuit disinguished cases like Depuy Spine, where the prior art taught that the combination would be inoperative for its intended purpose.

Complaints About Claim Construction Irrelevant Without a Showing of How it Would Make a Difference

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In Comcast IP Holdings I LLC v. Sprint Communications Company LP, [2015-1992] (March 7, 2017) the Federal Circuit affirmed a $7.5 million dollar award for infringement of U.S. Patent Nos. 8,170,008,
7,012,916, and 8,204,046 directed to the use of computer network
technology to facilitate a telephone call.

Sprint complained about the construction of “switched telecommunication system” but the Federal Circuit failed to show how is construction would result in a different result.  Moreover, the Federal Circuit found that the claim language and the specification did not support Sprint’s proposed construction.

Sprint also complained that there was insufficient that its met the “call destination” and “identifier of a second party” limitations of the claims, which were given their plain and ordinary meaning because neither party requested a claim construction.  The Federal Circuit found that Sprint was essentially proffering a claim construction argument in the guise of a challenge to the sufficiency of the evidence of infringement.”

Finally, Sprint complained about the construction of “parsing,” arguing that the district court failed to apply disclaimers made by the patent owner during prosecution. But the Federal Circuit again found that Sprint failed to show how this affected the outcome.  However the Federal Circuit ultimately agreed with the district court’s construction.

The Federal Circuit also affirmed the award of prejudgment interest from the date of the earliest patent, finding that would be the date of negotiation of the undifferentiated reasonable royalty.

 

Licenses in Prior Settlement Agreements May be Relelvant to Reasonable Royalty Damages

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In Prism Technologies v. Sprint Spectrum L.P., [2016-1456, 2016-1457] (March 6, 2016) the Federal Circuit affirmed a $30 million judgment entered after a jury verdict against Sprint Spectrum L.P. lfor infringement of U.S. Patent Nos. 8,127,345 and 8,387,155.

Sprint raised several arguments why the district court should have granted JMOL, including error in admitting a prior settlement agreement with AT&T regarding the patents. Sprint claimed it was an abuse of discretion under FRE 403 to admit the Settlement Agreement, but the Federal Circuit disagreed.

The Federal Circuit said that a license agreement entered into in settling an earlier patent suit sometimes is admissible in a later
patent suit involving the value of the patented technology, and sometimes is not. A settlement involving the patented technology can be probative of the technology’s value if that value was at issue in the earlier case. The reason is simple: such a settlement can reflect the assessment by interested and adversarial parties of the range of plausible litigation outcomes on that very issue of valuation.  However the Federal Circuit recognized that for various reasons a
settlement may be pushed toward being either too low, as
in Hanson, or too high, as in LaserDynamics, relative to
the value of the patented technology at issue in a later
suit.  However the Federal Circuit also recognized that for various reasons a settlement may be pushed toward being either too low or too high relative to the value of the patented technology at issue in a later suit.  The Federal Circuit said that what is needed for assessing the probativeness and prejudice components of the Rule 403 balance, then, is consideration of various aspects of the particular litigation settlements offered for admission into evidence.

The Federal Circuit said that the mere fact that the license resulted from litigation does not automatically mean that the prejudice outweighs probativeness side, noting that Sprint itself relied upon settlement agreements (although with lower royalty rates).  The Federal Circuit found that the circumstances of the AT&T Settlement Agreement affected the Rule 403 assessment in ways that support
the district court’s admission of the Agreement.  The Federal Circuit noted that the AT&T Settlement was made after the entire case had been tried, so the entire record was developed, enhancing the reliability of the parties assessment of the value of the settlement.  The Federal Circuit found not abuse of discretion in admitting the AT&T settlement agreement.

The Federal Circuit also rejected per se rules suggested by Sprint for excluding settlement agreements.  The Federal Circuit noted the inconsistency of Sprint’s position, before Prism and AT&T settled, Sprint affirmatively urged the admission of various Prism licenses
resulting from patent-litigation settlements, and even moved to exclude the damages testimony of Prism’s expert on the ground that he failed to rely on such settlement agreements. Sprint contended that those agreements were “reliable marketplace evidence of the value of the patents-in-suit” and therefore “‘highly probative as to
what constitutes a reasonable royalty for those patent rights because such actual licenses most clearly reflect the economic value of the patented technology in the marketplace.’”  When Sprint first opposed admission of the AT&T settlement agreement, it did not invoke any categorical rule, which the Federal Circuit found was a strategic choice so that Sprint could urge for the admission of lower rate licenses while opposing higher rate licenses.

 

Disavowal is Not Limited to What is Necessary; A Patentee May Give Up More than Necessary

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In Technology Properties Limited LLC v. Huawei Technologies Co., Ltd., [2016-1306, 2016-1307, 2016-1309, 2016-1310, 2016-1311] (March 3, 2017), the Federal Circuit vacated and remanded the case because the district court erred in a portion of its construction
of “entire oscillator” in U.S. Patent No. 5,809,336 on a microprocessor with two independent clocks.

The claims require “an entire oscillator disposed upon said integrated
circuit substrate and connected to said central processing
unit.”  The district court construed the term to mean “an oscillator located entirely on the same semiconductor substrate as the central processing unit that does not require a control signal and whose frequency is not fixed by any external crystal.”  Appellee argued that the second part of this construction was required because of disclaimers made during prosecution to overcome Magar, U.S. Patent No. 4,503,500, and Sheets, U.S. Patent No. 4,670,837.

The Federal Circuit began noting that an applicant’s statements to the PTO characterizing its invention may give rise to prosecution disclaimer. The Fedeal Circuit said that prosecution disclaimer can
arise from both claim amendments and arguments made
to the PTO, but does not apply unless the disclaimer is “both clear and unmistakable to one of ordinary skill in the art.  When determining
whether disclaimer applies, applicant’s statements must be cosnidered in the context of the entire prosecution.  If the statements are ambiguous or amenable to multiple reasonable interpretations, prosecution disclaimer is not established.

After examining the applicants arguments regarding Magar during prosecution, the Federal Circuit agreed with the district court’s conclusion that the “entire oscillator” must be a variable frequency oscillator rather than a fixed-frequency crystal.  The Federal Circuit
said that the disclaimer may not have been necessary, but the statements made to overcome Magar were clear and unmistakable.

The Federal Circuit said that the patent owner presented clear and concise arguments about the distinctions between Magar and the
patent in its briefing, and add that had those same arguments been made to the Patent Office, the construction may have been different because the patentee likely disclaimed more than was necessary to overcome the examiner’s rejection. However, the Federal Circuit admonished:

the scope of surrender is not limited to what is absolutely necessary to avoid a prior art reference; patentees may surrender more than necessary.

As to disclaimers based upon Sheets, the Federal Circuit found that the district court went too far in limiting an “entire oscillator” to one “that does not require a control signal.” The Fedeal Circuit said that this was beyond the arguments made by application that the term is properly construed as one “that does not require a command
input to change the clock frequency.”

The Federal Circuit indicated that its minor modification to the district court’s construction likely does not affect the outcome in this case, because the parties stipulated to non-infringement under the district court’s construction, the proper course was to vacate.

 

PTAB Needed to Do A Better Job Supporting its Obviousness Determination in Inter Partes Reexamination

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In Icon Health and Fitness, Inc. v. Stava, Inc., [2016-1475] (February 27, 2017), the Federal Circuit vacated-in-part, affirmed-in-part, and remanded, the Board’s Decision in an appeal of a inter partes reexamination.

Ikon argued that the Examiner erred when he extensively cited to statements in the expert declarations submitted by Stava.  The Federal Circuit said that there is no per se prohibition against relying on an expert’s declaration in support of factual findings underlying a legal conclusion of obviousness solely because the declaration states that something “would have been obvious.”  To determine if an expert’s statement is directed to factual findings or the legal conclusion of obviousness, the court looks to the statement not in isolation, but in the context of the whole declaration.

As to claims 46, 57–62, 65, 74, 98-100, the Federal Circuit found that neither the PTAB nor the Examiner made the requisite factual findings or provided the attendant explanation, finding that both purported to incorporate by reference arguments drafted by Strava’s attorneys.  Thus the Federal Circuit vacated the decision and remanded the case for additional PTAB findings and explanation.  As to claim 43, 71, and 86, the Federal Circuit disagreed with Ikon, and found that The PTAB made the requisite factual findings with an adequate evidentiary basis and provided the attendant explanation.

This cases goes back to the Board, but O’Malley would have simply reversed, since the Board failed to meet its duty.  While certainly a pro-patentee position, it pins the fate of the challenger on the competence of the Board and the Examiner below, rather than the merits of the invalidity case.