Communication of an Idea that Makes the Claimed Invention Obvious, Is Not Enough to Show Derivation

In Cumberland Pharmaceuticals, Inc.v. Mylan Institutioal LLC, [2016-1155, 2016-1259] (January 26, 2017) the Federal Circuit affirmed the district court holding that U.S. Patent No. 8,399,445, which describes and claims acetylcysteine compositions substantially free of chelating agents, was not derived from the FDA.

Mylan argued that the claimed invention was obvious from the FDA’s action on Cumberland’s petition to market the predecessor composition that contained a chelating agent.  The FDA asked Cumberland for data supporting the function of the chelating agent, which Mylan argued was proof that the FDA conceived of the idea of acetylcysteine free of chelating agents.

The district court found that Mylan proved neither (1) that anyone at the FDA conceived of the claimed invention before the  patent named inventor nor (2) that there was a reasonable expectation that the claimed formulations, without any chelating agents, would succeed.  The Federal Circuit agreed, noting “[a] request for justification of the inclusion of EDTA, supported by data, is not the same as a suggestion to remove it, let alone to remove it and not replace it with another chelating agent.” The Federal Circuit also rejected the argument that the FDA’s request for data to support the inclusion of EDTA required Cumberland to undertake
research that would have inevitably led it to the invention. Noting that derivation is not proved by showing conception and communication of an idea different from the claimed invention even where that idea would make the claimed idea obvious.

It’s a Good Idea to Actually Own the Patents you Sue on

In National Oilwell Varco, L.P. v. Omron Oilfield and Marine, Inc., [2015-1406] (January 25, 2017), in a non-precedential opinion, the Federal Circuit affirmed the dismissal of claim for infringement of U.S. Patent No. 5,474,142 because of problems with the chain of title which deprived NOV of standing.

Bobbie Bowden, the named inventor on the ’142 Patent assigned the patent to Wildcat Services, L.P., on October 9, 2001.  Wildcat Services, L.P. assigned the ’142 Patent to MD/Totco, a Division of Varco, L.P.,1 on June
30, 2004.  NOV claimed it purchased the ’142 Patent from Varco, L.P., pursuant to an Asset Contribution Agreement dated January 1, 2006.

NOV initially refused to produce the ACA, instead producing only a “Assistant Secretary’s Certificate,” which assigned only “physical assets.” After being forced to produce the ACA, Omron renewed its motion to dismiss for lack of standing.  The district court agreed that that the NOV could not prove ownership of the ’142 Patent as of the filing date of this case, and dismissed the case, with prejudice, for lack of standing.

The Federal Circuit agreed with the district court, noting that the ACA contains no reference to patents except within Exhibit A, which had a column labeled “Patents – Patents.”  The Federal Circuit said that the district court correctly interpreted the ACA to find that its plain meaning did not include transferring the ’142 Patent from Varco, L.P. to NOV because the Exhibit A spreadsheet shows a “0” where the patents row intersects with the MD/Totco column.  The Federal Circuit concluded that a plain
reading of the ACA reveals that it did not transfer the ’142 Patent from MD/Totco to NOV.

Are All Troll Cases Exceptional?

In Iris Connex, LLC, v. Dell, Inc., [2:15-cv-1915-JRG] (January 25, 2016), district judge Gilstrap, after granting summary judgment to Dell, awarded attorneys fees, noting Dell’s arguments that Iris Connex’s claim construction position was unsupportable, that its infringement position was not plausible, that its litigation was primarily settlement driven; and Iris Connex was an intentionally empty shell company and, as a consequence, had no capacity to pay such fees even if the case were ultimately declared to be exceptional.

Judge Gilstrap took the extraordinary step of ordering further discovery into the extended identity of Iris Connex, because the court was concerned that the structure would effectively avoid any deterrence from an award of attorneys fees.  In Judge Gilstrap’s words “[a]s the post-judgment discovery progressed, it became obvious that Iris Connex was not simply a non-practicing entity seeking to vindicate its patent rights—albeit with an
exceptionally bad infringement case.”  Judge Gilstrap found that Iris Connex is the first level of two shell corporations which were intended to shield the real actor, Mr. Brian Yates, from personal liability. Judge Gilstrap found that Mr. Yates and those in active concert with him exploited the corporate form to operate largely in secret and to insulate the true party in interest from the risk associated with dubious infringement suits—that risk being fee shifting under Section 285.

Judge Gilstrap made 28 specific findings, including:

  • Iris Connex has no assets except for the ’950 patent and it holds no working capital.
  • Iris Connex has no employees.
  • Iris Connex was formed for the sole purpose of enforcing its lone asset.
  • Iris Connex paid no cash value for the ’950 patent.
  • Iris Connex pays no rent, (and shares its office with 15 to 20 other entities owned directly or indirectly by Brian Yates,
  • There is no sign for Suite 600-A displayed on any door in the building
    identifying Iris Connex as an occupant.

After a detailed analysis of the law, Judge Gilstrap identified a general and uncontroversial principle: that the corporate form cannot be used as a shield to insulate officers and parent corporations against liability for
their own tortious conduct or tortious conduct they control.  Judge Gilstrap rejected a narrow view of his authority to award fees under Section 285.

Judge Gilstrap noted said that the case “crossed the Rubicon of exceptionality” when the Court concluded that Iris Connex’s case was so weak from the outset that it lacked any real merit. Judge Gilstrap has “its fair share of claim construction arguments” and found that Iris Connex’s “clearly stand out.”

Moreover Judge Gilstrap’s finding of exceptionality was not based solely on the weak merits of the case, or litigation conduct.  Judge Gilstrap found two additional factors supported the finding:  First, that Mr. Yates made an intentional decision to create and undercapitalize Iris Connex as an empty shell, and second, the admitted sloppiness in prosecuting this case, brought about predominantly by Mr. Yates.  Judge Gilstrap found and held Iris Connex and Mr. Yates are jointly and severally liable for $355,000 of fees pursuant to 35 U.S.C. § 285.

Not finished dispensing Eastern District of Texas justice, Judge Gilstrap also sanctioned one of the more culpable counsel $25,000, and Mr. Yates an additional $152,000.


Instructions Induced Prescribing Physicians to Infringe

In Eli Lilly and Company v. Teva Parenteral Medicines, Inc., [2015-2067] (January 12, 2017), the Federal Circuit affirmed judgment of inducement of infringement of U.S. Patent No. 7,772,209, and that the the asserted claims were not invalid for indefiniteness, obviousness, or obviousness-type double patenting.

The claims in suit all required pretreatment by administration of folic acid.  The parties agreed, for purposes of appeal, that no single actor performs all steps of the asserted claims.  Rather, the steps are divided between physicians and patients. Though physicians administer vitamin B12 and
pemetrexed, patients self-administer folic acid with guidance from physicians.  Specifically, the Physician Prescribing Information and the Patient Information accompanying the product instructed the patient to self-administer folic acid.

The Federal Circuit noted that where no single actor performs all steps of a method claim, direct infringement only occurs if the acts of one are attributable to the other such that a single entity is responsible for the infringement.  The performance of method steps is attributable to a single entity in two types of circumstances: (1) when that entity directs or controls others performance, or (2) when the actors form a joint enterprise.  In  Akamai V, the Federal Circuit held that directing or controlling others’ performance includes circumstances in which an
actor: (1) conditions participation in an activity or receipt of a benefit upon others’ performance of one or more steps of a patented method, and (2) establishes the manner or timing of that performance.  However the Federal Circuit also said that other factual scenarios may arise which warrant attributing others’ performance of method steps to a single actor.

Regarding the first Akamai V prong, the district court found from the product labelling that “taking folic acid in the manner specified is a condition of the patient’s participation in [the] treatment.”  Regarding the
second prong, the district court found that physicians would “prescrib[e] an exact dose of folic acid and direct[] that it be ingested daily.” The district court concluded that the performance of all steps of the
asserted claims would be attributable to the prescribing physicians. The Federal Circuit agreed, finding the record replete with evidence that physicians delineate the step of folic acid administration that patients must perform if they wish to receive pemetrexed treatment.  The Federal Circuit further found that the evidence regarding the critical nature of folic acid pretreatment and physicians’ practices supported a finding that physicians cross the line from merely guiding or instructing patients to take folic acid to conditioning the treatment on their administration of folic
acid.  The Federal Circuit rejected the argument that an actor
can only condition the performance of a step by imposing a legal obligation to do so, by interposing that step as an unavoidable technological prerequisite to participation, or both.  Conditioning is not limited to legal obligations or technological prerequisites.

The Federal Circuit also found sufficient control over the manner and timing of performance, again relying upon the written instructions and the testimony.

Although the Federal Circuit found that the two-prong Akamai V
test was met, it did not end the inquiry because the patent owner also has the burden of further proving “specific intent and action to induce
infringement.”  Takeda argued that Lily did not show what physicians do, just what they may do.  The Federal Circuit rejected this argument, finding taht the label simply must encourage, recommend, or promote infringement, and that it is irrelevant that some users may ignore the warnings in the proposed label.

The Federal Circuit rejected arguments that “Vitamin B12” made the claims indefinite, and arguments that the claims were obvious, and that they were invalid for obviousness type double patenting.



An IPR Petitioner Does Not Necessarily Have Standing to Appeal if it Loses

In Phigenix, Inc. v. ImmunoGen, Inc., [2016-1544] (January 9, 2017), the Federal Circuit held that Phigenix, the losing petitioner in an IPR, lacked standing to appeal the PTAB’s decision that claims 1–8 of U.S. Patent No. 8,337,856 were nonobvious.  The Federal Circuit said that although Article III standing is not necessarily a requirement to appear before an administrative agency, an appellant must nevertheless supply the requisite proof of an injury in fact when it seeks review of an agency’s final action in a federal court.  To show this standing, an appellant must have (1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the appellee, (3) that is likely to be redressed by a favorable judicial decision.

The Federal Circuited noted that in some cases, an appellant’s standing to seek review of administrative action is self-evident; no evidence outside the administrative record is necessary for the court to be sure of it.  When the appellant’s standing is not self-evident, however, the appellant must supplement the record to the extent necessary to explain and substantiate its entitlement to judicial review. In so doing, an appellant may submit arguments and any affidavits or other evidence to demonstrate its standing. Taken together, an appellant must either identify record evidence sufficient to support its standing to seek review or, if there is none because standing was not an issue before the agency, submit additional evidence to the court of appeals, such as by affidavit or other evidence.

The Federal Circuit noted that Phigenix does not contend that it faces risk of infringing the patent, that it is an actual or prospective licensee of the patent, or that it otherwise plans to take any action that would implicate the patent.  Instead, Phigenix asserted that it has suffered an actual economic injury because the existence of the patent increases competition between Phigenix and ImmunoGen, which the Federal Circuit found unsubstantiated.  The Federal Circuit also rejected Phigenix contention  that it has suffered an injury in fact because 35 U.S.C. §141(c) “provides a statutory basis for appeal.”  While §141(c) permitted the filing of an appeal, it does nothing to establish Article III standing.  Finally, the Federal Circuit rejected the argument that the estoppel provisions of  35 U.S.C. § 315(e) created standing, but the Federal Circuit found it did not constitute an injury in fact when the appellant is not engaged in any activity that would give rise to a possible infringement suit.

When it’s Over, it’s Over

In Walker v. Health International Corp., [2015-1676] (January 6, 2017), the Federal Circuit affirmed the district court’s award of sanctions for vexatious actions in continuing to litigate after the parties settled all claims, and further found the appeal to be frivolous, both as filed and as argued, and granted further sanctions.

The district court dismissed all claims and found “that Plaintiff’s actions have unnecessarily multiplied the proceedings at a time when the underlying claims have admittedly been resolved.  The district court entered final judgment awarding HSN $20,511.50 in attorneys’ fees because Walker’s “litigation conduct after entering into the Agreement was vexatious and had unnecessarily multiplied the proceedings.”

Applying the Tenth Circuit’s test for the award of attorneys fees, where an award will be reversed only in circumstances which do not show a reasonable ground for the conclusion that vexatiousness existed, the Federal Circuit affirmed the district court’s award, finding ample support in the record for the district court’s conclusion of vexatiousness.  The Federal Circuit said that district court correctly concluded that there remained no legitimate reason to continue litigation once the parties entered into a comprehensive settlement of all claims.

The Federal Circuit also examined appellant’s conduct on appeal, noting that it continued to press frivolous arguments and raise new arguments in its Reply amounting to baseless accusations against opposing counsel.  The Federal Circuit concluded that the positions taken by Walker on appeal in the briefs and at oral argument were frivolous.  Noting that it has “has long disdained” frivolous appeals, the Federal Circuit awarded an additional $51,801.88 in additional attorneys fees and double costs.

USPTO Decisions on §315(b) May be appealable

In Wi-Fi One, LLC v. Broadcom Corp., [2015-1944, -1945, -1946] (January 4, 2017), the Federal Circuit granted Wi-Fi One’s petition for rehearing en banc to address the question:

Should this court overrule Achates Reference Publishing, Inc. v. Apple Inc., 803 F.3d 652 (Fed. Cir. 2015) and hold that judicial review is available for a patent owner to challenge the PTO’s determination that the petitioner satisfied the timeliness requirement of 35 U.S.C. §315(b) governing the filing of petitions for inter partes review?

The PTAB’s decisions applying the one year bar under §315(b) have been inconsistent, and Achates effectively insulates the misapplication of the bar from review, leaving patent owners without remedy should the Board institute a proceeding that is in fact barred.