In Mentor Graphics Corp. v. EVE-USA, Inc. [2015-1470, 2015-1554, 2015-1556](September 1, 2017), the Federal Circuit denied rehearing and rehearing en banc of  panel decision discussed here.

There are many benefits to employing means + function claiming under 35 USC §112(f) and the Federal Circuit recently pointed out a new one: protecting your claims from the application by the Broadest Reasonable Interpretation (BRI) claim construction paradigm employed by USPTO in reexaminations. reissues, PGRs, IPRs and CBMRs. In IPCOM GmbH & Co. v. HRC Corp., [2016-1474] (July 7, 2017), previously discussed here, the Federal Circuit said that the PTO may not disregard the structure disclosed in the specification corresponding to means + function elements when rendering a patentability determination.

Thus including some means + function claims in a claim set may prevent the Patent Office from using BRI to stretch an otherwise valid claim to the point of invalidity.  Of course there are other benefits from means + function claiming, including:

• It allows “gerrymandering” of claim scope through selectively  including or excluding corresponding structures in the specification.
• It helps avoid problems with the disclosure/dedication doctrine, where disclosed but unclaimed subject matter cannot be covered by the doctrine of equivalents, and is dedicated to the public.
• When claims are amended using means + function elements, statutory equivalents under §112(f) are available, even if prosecution history estoppel bars the doctrine of equivalents.

All of which suggest that means + function elements can be a valuable tool for getting the maximum claim scope.

On July 13, 2017, The Subcommittee on Courts, Intellectual Property and the Internet of the House Judiciary Committee held a hearing on The Impact of Bad Patents on American Businesses.  Such a loaded topic should strike fear in the hearts of the many of us who work diligently to protect our clients’ legitimate inventions. However, the statement of former Chief Judge of the Federal Circuit Paul R. Michel was a bright spot.  As Judge Michel correctly observed, “[p]atents are neither bad nor good.”

Judge Michel extended his long history of service to the patent community, detailing a recent sharp decline in the value of U.S. patents, which he attributes to, among other things, the failure of the three Branches of Government to adequately coordinate their interventions to improve performance of the system.  Judge Michel calls out the USPTO for implementing AIA reviews with procedures that, in certain respects, departed from Congressional intent.  He called out the Supreme Court for revolutionizing the law of patent eligibility, while providing wholly inadequate
guidance for those who must apply the new standards.  Finally he calls out Congress for focusing more on the relatively minor problem of frivolous assertion, rather than addressing the more significant issue of patent eligibility.

Judge Michel concludes that:

In view of all the developments of the past few years, to pile on still more patent “reform” at this juncture when the system is still reeling from the destabilizing and degrading effects of recent interventions by all three Branches seems inappropriate.

Hopefully, Congress will follow his very wise counsel.

The Supreme Court in Impression Products, Inc. v. Lexmark International, Inc., has once again reversed the Federal Circuit, holding that a sale of a patented product by (or on behalf of) the patent owner, whether in the U.S. or outside the U.S. exhausts the patent owner’s rights, allowing any subsequent purchase to use the patented patented product without infringing the patent.  The Supreme Court allowed that the first purchaser might be bound by contractual restrictions imposed by the patent owner, but said that these restrictions do not apply to subsequent purchasers, in effect allowing the first purchaser to sell more that the first purchaser acquired.

Since its the Supreme Court — the decision must be correct, but the Court did appear to get one thing wrong.  In his opinion, Chief Justice Roberts said “extending the patent rights beyond the first sale would clog the channels of commerce, with little benefit form the extra control that the patentees retain.”  While it may not have made a difference, the Court did not really examine the benefits of post sale restrictions.

In the case before it, post sale restrictions allowed Lexmark to make its products robust enough to be reused without fear that its own recycled products would be used against it.  While there are a number of strategies that Lexmark might employ post Impression Products, one would certainly be to redesign their products so that can only be used once.  This may clog the landfills, but it allows Lexmark to capture the value of its innovation.

Another example of the benefits of post sale restriction is in the pricing patented products for the local market.  A pharmaceutical manufacturer that sells a life saving daily medication for $2 in the U.S., might sell the same medication in a poorer country for less — this maximizes manufacturer’s revenue, and it makes the therapy more available.  However in a world with patent exhaustion, the manufacturer has to consider the effect of the potential reimportation of the drug, and may have to deny access to the therapy at a locally affordable price.

One can imagine a number of similar scenarios where post-sale patent restrictions not only benefit the patent owner, but the public at large.  While it might “clog the channels of commerce” if the patent owner imposed restrictions that were not apparent from the product, it seems a minor burden if the product is prominently labeled with the restrictions, and contrary to the Supreme Court’s assessment, such restrictions can provide more than a “little benefit.”

In the wake of Impression Products, there are certainly strategies that patent owners can follow to avoid the negative effects of exhaustion.  Prominent placement of trademarks on products is one strategy: If Lexmark’s cartridges had an embossed message: “Genuine Lexmark Toner Inside.”  Could a third party refill the cartridges and sell them? It may be possible to avoid the effects of foreign exhaustion through the use of separate entities, although this may require that manufacturing be moved off-shore, so that the U.S. Patent owner imports the products for the U.S. market, but does not otherwise participate in the manufacture and sale.

Congress should consider acting to restrict patent exhaustion, at least in the case of products that are prominently marked, and it should also consider restricting patent exhaustion for foreign sales.  These sales are often made in territories where the U.S. patent holder has no protection, and may even be facing competitive price pressure.  Finding the importation into the U.S. of a product sold abroad is an infringement, is no greater burden on commerce than finding the importation into the U.S. of a third party product is an infringement.  It is already an expectation that moving a product across a border can be an act of infringement.

The Supreme Court’s decision in Impression Products makes it harder for patentees to wring the full value of their innovations from their commercialization.  However, there still are strategies that patentees can take to address the more aggressive application of exhaustion, and Congress should reweigh the burden on commerce versus the benefits of allowing patentees to retain some control over the patented inventions.

In Douglas Dynamics LLC, v. Meyer Products LLC, [14-cv-886-jdp] (D. Wisc. Document # 68 April 18. 2017), the district court considered the scope of estoppel after an IPR. The Court identified three categories of potentially estopped grounds:

1. Grounds not petitioned.
2. Grounds petitioned but not instituted
3. Grounds instituted.

As to the instituted grounds, these are clearly estopped.  As to the grounds petitioned but not instituted, after weighing the competing policy considerations, the court concluded that these were not estopped, citing Verinata Health, Inc. v. Ariosa Diagnostics, Inc., No. 12-cv-5501, 2017 WL 235048, at *3 (N.D. Cal. Jan. 19, 2017) (collecting cases). Finally with respect to the grounds not petitioned, the court concluded that these were grounds that could have been raised, and thus were estopped.  The Court cited SAS Inst., Inc. v. ComplementSoft, LLC., 825 F.3d 1341, 1354 (Fed. Cir. 2016) (Newman, J., dissenting), as well as Precision Fabrics Grp., Inc. v. Tietex Int’l, Ltd., No. 13-cv-645, 2016 WL 6839394, at *9 (M.D.N.C. Nov. 21, 2016); Clearlamp, LLC v. LKQ Corp., No. 12-cv-2533, 2016 WL 4734389, at *8 (N.D. Ill. Mar. 18, 2016).

The impact of this decision, is that the PTAB’s decision not to institute on a particular grounds actually hurts the patent owner, because estoppel does not apply.  A patent owner would be much better off if the ground were instituted, and denied.  Then, the challenger could not re-raise the grounds in court.

While the district court’s decision that the grounds that were not included in the petition were grounds that “could have been raised” and thus estopped, this determination creates a perverse incentive for patent challengers.  A patent challenger is much better off including these grounds in the IPR petition, perhaps in a way that essentiall guarantees they won’t be instituted, thereby insulating these grounds from the application of estoppel.  The district court noted that it is not bound by a refusal to institute, and while it will consider the PTAB’s reasoning “to the extent it is persuasive”, if the reason for not instituting is that the grounds were not completely developed, a district court likely would allow the challenger not only to re-present the grounds, but to more fully develop it.

While the PTAB has the discretion not to institute an IPR, when they do so, they aren’t doing any favors for a Patent Owner.  The PTAB should liberally institute IPRs on the grounds that challengers present.  Denying the grounds in the final written decision instead of the institution decision better protects the  Patent Owner.

In Rembrandt Wireless Technologies, LP v.  Samsung Electronics CO., LTD., [2016-1729] (April 17, 2017), the Federal Circuit affirmed the district court’s claim construction and denial of JMOL, but vacated $15.7 million in damages and remanded because of a lack of patent marking.

In affirming the claim construction, the Federal Circuit found unambiguous statements in the prosecution history defined the meaning of “different types” of modulation, and Samsung’s arguments to the contrary do not diminish the unambiguous statements in
the prosecution history.  Samsung also attacked the use of the term “i.e.,” which Samsung argued introduces an exemplary item in a set, but the Federal Circuit found that the use of i.e. was “i.e., is often definitional, noting that i.e. is Latin for id est, which means “that is.”  The Federal Circuit also rejected Samsung’s reference to the broader construction in a related IPR, noting that the construction is not binding, and that IPR proceedings operates under a broader claim construction standard than the federal
courts.

In affirming the non-obviousness determination, the Federal Circuit rejected Samsung’s argument that it was a claim construction issue of the scope of “different types,” and characterizing it as a factual question of whether the reference disclosed “different types” of modulation. The Federal Circuit found that there was substantial evidence to support the jury’s presumed finding underpinning the non-obviousness determination.

On the marking issue prior to trial, Samsung moved to limit Rembrandt’s potential
damages award based on its failure to mark products covered by previously-asserted claim 40 of the ’580 patent.  Specifically, Rembrandt had licensed the ’580 patent to Zhone Technologies, Inc., and the license agreement between Rembrandt and Zhone did not require Zhone to mark its products with the patent number. Pursuant to the patent marking statute, 35 U.S.C. § 287, Samsung sought to limit Rembrandt’s damages to those incurred after Samsung received notice of Rembrandt’s patents, which, according to Samsung, occurred when Rembrandt filed its complaint. Eight days later, Rembrandt withdrew claim 40 from its infringement allegations and filed a statutory disclaimer pursuant to 35 U.S.C. § 253(a) and 37 C.F.R. § 1.321(a), disclaiming claim 40 in the U.S. Patent and Trademark Office. The court accepted
Rembrandt’s argument that any prior obligation to mark products embodying claim 40 vanished once it disclaimed claim 40.

The Federal Circuit held that Rembrandt cannot use disclaimer to avoid the marking requirement in 35 U.S.C. § 287, and vacated the judgment of the district court as it relates to marking.  While marking under 35 U.S.C. § 287 is permissive, there is a consequence if the patent owner chooses not to mark:

In the event of failure so to mark, no damages shall be recovered by the patentee in any action for infringement, except on proof that the infringer was notified of the infringement and continued to infringe thereafter, in which event damages may be recovered only for infringement occurring after such notice.

The Federal Circuit said that the marking statute protects the public’s ability to exploit an unmarked product’s features without liability for damages until a patentee provides
either constructive notice through marking or actual notice.  The Federal Circuit added that allowing Rembrandt to use disclaimer to avoid the consequence of its failure to mark undermines the marking statute’s public notice function.  While a disclaimer can disclaim the rights of the patent owner, the Federal Circuit said it has never held that a patent owner’s disclaimer relinquishes the rights of the public.  Considering the rights held by the public, the Federal Circuit held that disclaimer cannot serve to retroactively dissolve the § 287(a) marking requirement for a patentee to collect pre-notice damages.

Before the district court, Rembrandt argued, consistent with its disclaimer position, that the marking requirement is determined on a claim by claim basis, rather than on a patent-by-patent basis.  The Federal Circuit left this question for the district to determine in the first instance on remand.

In Life Technologies Corp. v. Promega Corp. [14-1538] (February 22, 2017), the Supreme Court reversed a Federal Circuit decision that supplying a single component of a multi-component invention from the United States is an infringing act under Patent Act section 271(f)(1):

Whoever without authority supplies or causes to be supplied in or from the United States all or a substantial portion of the components of a patented invention, where such components are uncombined in whole or in part, in such manner as to actively induce the combination of such components outside of the United States in a manner that would infringe the patent if such combination occurred within the United States, shall be liable as an infringer.

Promega’s U.S. Patent No. RE 37,984, is directed to a toolkit for genetic testing.  Life Technology made a competing test kit in the United Kingdom.  One of the kit’s five components, an enzyme known as the Taq polymerase, was manufactured by Life Technologies in the United States and then shipped to the United Kingdom, where the four other components were made, for combination there.  A jury found for Promega.  The district court granted JMOL finding that “all or a substantial portion” did not encompass the supply of a single component of a multicomponent invention. The Federal Circuit reversed the district court, holding that a single important component could constitute a “substantial portion” of the components of an invention under §271(f)(1) and finding that in this case Taq polymerase was such a component.

The threshold determination was whether §271(f )(1)’s requirement of “a substantial portion” of the components of a patented invention refers to a quantita­tive or qualitative measurement.  The Supreme Court found that The Patent Act itself does not define the term “substantial,” and turned to its ordinary meaning, which turned out to be of little help.  Everyone agreed that the term is ambiguous and, taken in isola­tion, might refer to an important portion or to a large portion.

The Supreme Court found the context in which “substantial” appears in the stat­ute pointed to a quantitative meaning.  The neighboring terms  “all” and “portion” convey a quantitative meaning.  The Supreme Court noted that if a qualitative meaning was intended, the statute probably would have been worded differently, referring instead to the invention rather than to the components.

After determining that the term “substantial portion” refers to a quantitative measurement, the Court turned to the question of whether a single component can ever constitute a “substantial portion” so as to trigger liability under §271(f )(1), and the Court held it could not.

The Supreme Court reached this result in part by comparison with §271(f )(2), the Court noting that reading §271(f )(1) to cover any single component would not only leave little room for §271(f )(2), but would also undermine §271(f )(2)’s express reference to a single component “espe­cially made or especially adapted for use in the inven­tion.”

The Court said it was not defining how close to “all” of the compo­nents “a substantial portion” must be, and said it was only holding that one component does not constitute “all or a substantial portion” of a multicomponent invention under §271(f )(1).