Federal Circuit Holds PTO Can’t Recover Expert Witness Fees under 35 USC § 145

In Hyatt v. Hirshfeld, [2020-2321, 2020-2323, 2020-2324, 2020-2325] (August 18, 2021), the Federal Circuit affirmed the district court’s denial of an award of the USPTO’s expert witness fees in defending a civil action under 35 USC § 145 brought by patent applicant Hyatt.

In a prior appeal the Federal Circuit held that 35 USC § 145 does not entitle the USPTO to recover its attorneys fees. The Patent Office also sought reimbursement of its expert witness fees under 35 U.S.C. § 145, which provides that “[a]ll the expenses of the proceedings shall be paid by the applicant.” The Patent Office cited a string of district court decisions awarding expert witness fees under the statute, but the district court found that these cases lacked any reasoning regarding the American Rule presumption against fee shifting, and noting recent Supreme Court emphasis of that presumption, the district court denied an award of expert fees.

The Federal Circuit agreed with the district court that 35 USC § 145 was not sufficiently specific to overcome the presumption against fee-shifting. The Federal Circuit said that No magic words are needed to override the American Rule, but the requirement that Congressional intent be specific and explicit is a high bar. The Federal Circuit said that vague terms like “costs” are also not enough.

The Federal Circuit looked to the Supreme Court’s decsion in NantKwest, noting that although the Court’s holding that attorney’s fees are not shifted does not inherently dictate that expert fees cannot be shifted, much of the Court’s reasoning in NantKwest applies equally with respect to expert fees. Tracking that decision, the Federal Circuit found the dictionary definitions of the words in the statute, the language of the statute, and the fact that in other stautes Congress specifically included expert fees, suggested that the central logic of NantKwest is applicable to its decision here, indicating that § 145 does not shift expert witness fees.

The Patent Office emphasized the long string of cases awarding expert witness fees, but the Federal Circuit said that longstanding practice is not enough to overcome the American Rule presumption.

The Specification may be Eligible; But the Claims Were Not

In Free Stream Media Corp., dba Samba TV v. Alphonso Inc., [2019-1506, 2019-2133] (May 11, 2021) the Federal Circuit reversed the denial of Alphonso Inc.’s motion to dismiss on the ground that U.S. Patent No. 9,386,356 claims ineligible subject matter under 35 U.S.C. §101.  The ’356 patent is entitled “Targeting with Television Audience Data Across Multiple Screens.”

The district court rejected the argument that the claims were directed to an abstract idea of tailored advertising as argued by Alphonso, but the Federal Circuit agreed with Alonso, finding that the claims were directed to (1) gathering information about television users’ viewing habits; (2) matching the information with other content (i.e., targeted advertisements) based on relevancy to the television viewer; and (3) sending that content to a second device.

The Federal Circuit said that a relevant inquiry at Alice Step 1 is whether the claims in the patent focus on a specific means or method that improves the relevant technology or are instead directed to a result or effect that itself is the abstract idea and merely invoke generic processes and machinery.  A claim must have the specificity required to transform the claim from one claiming only a result to one claiming a way of achieving it to avoid ineligibility. As a result, a claim is ineligible if it fails to recite a practical way of applying an underlying idea and instead is drafted in such a result-oriented way that it amounts to encompassing the principle in the abstract no matter how implemented.

The Federal Circuit noted that Samba asserted that its invention allows devices on the same network to communicate where such devices were previously unable to do so. However, the Federal Circuit noted that the asserted claims provide for how that is achieved only by stating that the mechanism used to achieve this communication is by piercing or otherwise overcoming a mobile device’s security sandbox. But the asserted claims do not at all describe how that result is achieved.

The Federal Circuit said that even assuming the specification sufficiently discloses how the sandbox is overcome, the asserted claims nonetheless do not.

There is nothing in the claims that demonstrates an improvement to computer functionality, and even assuming, as Samba argues, that the claimed advance is in the ability to pierce the sandbox of a mobile device, Samba has not demonstrated that this is something more than a mere use of a computer as a tool.  Therefore, the alleged technological improvement does nothing more than implement a computer to achieve the abstract idea of providing targeted advertising to the mobile device user.

The district court did not reach Alice Step 2, because it did not find the claims were directed to an abstract idea.  The Federal Circuit determined that the claims simply recite the use of generic features, as well as routine functions, to implement the underlying idea.  The claims here simply recite that the abstract idea will be implemented using conventional components and functions generic to the technology.

Hindsight May be 20-20, but it has no Place in Evaluating Obviousness

In Gillette Co. v. S.C. Johnson & Son, Inc., 919 F.2d 720, 16 U.S.P.Q.2d 1923 (Fed. Cir. 1990), the Federal Circuit affirmed the district court’s determination that U.S. Patent No. 3,541,581 on a shaving preparation was not invalid under 35 USC 103.

The Federal Circuit rejected Gillette’s obviousness argument as based upon hindsight, quoting from Milton’s Paradise Lost:

The invention all admired, and each how he

To be the inventor missed; so easy it seemed,

Once found, which yet unfound most would have thought,


PARADISE LOST, Part VI, L. 478-501

Can you Patent Something that Doesn’t Work?

One of the first requirements of patentability is the utility requirement of 35 USC 101: “Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.” Since something that doesn’t work is not useful, the short (and correct) answer is no, you cannot patent something that does not work.

While the USPTO is not supposed to issue patents on technology that doesn’t work, the Office is not always able to identify non-functioning technology. To be sure, if the disclosure is implausible, an Examiner would reject the application for failure to comply with the enablement requirement of 35 USC 112 (a): “The specification shall contain a written description of the invention, and of the manner and process of making and using it, in such full, clear, concise, and exact terms as to enable any person skilled in the art to which it pertains . . .  to make and use the same.” Moreover, if the Examiner is suspicious, then Examiner can require the applicant to provide a working model: “The Director may require the applicant to furnish a model of convenient size to exhibit advantageously the several parts of his invention.” 35 U.S.C. 114.

Where the applicant tips off the Examiner, for example with an crazy title or a deficient disclosure, the USPTO will likely reject the application.

PCT Patent Application WO2012/093272 entitled Alleged Magnetic Perpetual Motion Machine would likely draw a refusal, from an alert examiner.

However, not all applicants are accommodating enough to flag their disclosures as inoperative. Thus patents do issue that might not have with greater scrutiny. For example, U.S. Patent No. 6,362,718 on a Motionless Electromagnetic Generator, purportedly covers “a magnetic generator used to produce electrical power without moving parts, and, more particularly, to such a device having a capability, when operating, of producing electrical power without an external application of input power.” Interestingly, there is a U.S. patent classification (415/916) for perpetual motion, and ever more interestingly, in addition to 239 published applications, there are 27 issued patents in the class!

A better question than “can you patent inoperative technology” would be: “why would you want to?” No one can infringe a patent on technology that does not work, but enforcement is not always the ultimate goal for a patent. An issued patent is a sort of endorsement of the disclosed technology, and that endorsement alone may be sufficient reason to pursue a patent. However the issued patent is only an endorsement that the disclosure is novel and non-obvious, and not an endorsement of the technology per se.

Local Rules, unlike the Pirate Rules, Are More than Mere Guidelines, and Ignoring Them Can Cause a Loss of Rights

In Sowinksi v. California Air Resources Board, [2019-1558] (August 21, 2020), the Court of Appeals for the Federal Circuit affirmed the dismissal of Sowinski’s Complaint for infringement of U.S. Patent No. 6,601,033 on grounds of res judicata.

In 2015 Sowinski sued the California Air Resources Board (“CARB”) and several individual and corporate defendants associated with CARB in California Superior Court for among other things infringement of U.S. Patent No. 6,601,033.  After the case was removed to the United States District Court for the Central District of California, it was dismissed with prejudice and without leave to amend, because Sowinski failed to file a response to defendants’ motion to dismiss.  The dismissal was affirmed by the Federal Circuit. In 2018 Sowinski again filed suit on the ‘033 patent, limiting his damages claim to the period after dismissal of the 2015 action, and the district court dismissed it on grounds of res judicata.

The Federal Circuit said that res judicata arises when the prior case or claim was previously tried and the merits were adjudicated. Sowinski argued that the case was not a final judgment on the merits, because the dismissal was based on the technicality of a local deadline.  However, there is precedent that dismissal for failure to prosecute should be treated as an adjudication on the merits for purposes of preclusion.  Further, FRCP 41(b) states that a dismissal for failure to prosecuting or comply with the FRCP or a court order can operate as an adjudication on the merits.  Thus the Federal Circuit concluded that the district court properly precluded the claim.

As to Sowinski’s claim for damages subsequent to the dismissal, the Federal Circuit noted that preclusion does not apply to new or changed products or methods, but does apply when the accused products or methods are essentially the same.

Although Dr. Sowinski stresses the inequity that he did not obtain resolution of the question of infringement, CARB pointed out that he had the opportunity to do so. The Federal Circuit said that application of preclusion encourages reliance on judicial decisions, bars vexatious litigation, and frees the courts to resolve other disputes.

Local Rules, unlike the Pirate Rules in Pirates of the Caribbean, are more than mere guidelines, and ignoring them can cause a loss of rights.

Standard-Essentiality is a Question for the Factfinder

In Godo Kaisha IP Bridge 1 v. TCK Communication Technology, [2019-2215] (August 4, 2020), the Federal Circuit affirmed the jury determination of infringement based on patentee’s theory that (1) the patent claims are essential to mandatory aspects of the Long-Term Evolution (“LTE”) standard; and (2) the accused products practice that standard.

Defendant argued in a JMOL that the district court should have decided the question of the claims’ essentiality to the standard in the claim construction context and that the court needed to decide that question as a matter of law. The Federal Circuit found no error in the submission of these questions to the jury in the context of an infringement trial.

The Federal Circuit agreed that standard-essentiality is a question for the factfinder. The Federal Circuit added that determining standard-essentiality of patent claims during claim construction, moreover, hardly makes sense from a practical point of view. Essentiality is, after all, a fact question about whether the claim elements read onto mandatory portions of a standard that standard-compliant devices must incorporate. This inquiry is more akin to an infringement analysis (comparing claim elements to an accused product) than to a claim construction analysis (focusing, to a large degree, on intrinsic evidence and saying what the claims mean).

Institution Decision Not Carved in Stone; Final Written Decision Can Differ

In Fanduel, Inc. v. Interactive Games LLC, [2019-1393] (July 29. 2020), the Federal Circuit affirmed the PTAB’s determination that Fanduel, had failed to prove that claim 6 of U.S. Patent No. 8,771,058 was obvious in view of the asserted prior art.  Fanduel argued that the Board violated the APA by adopting in its final written decision a “new theory”—that the combination of Walker, Carter, and the Slot Payouts Webpage failed to disclose the claimed combination, after instituting on that ground.

The Federal Circuit said that the critical question for compliance with the APA and due process is whether patent owner received adequate notice of the issues that would be considered, and ultimately resolved, at that hearing.  The Federal Circuit added that FanDuel’s argument that it lacked notice that the Board might address and reject the obviousness arguments made in FanDuel’s own petition strains credulity.

Moreover, the Federal Circuit failed to see how the Board changed theories at all in this case. The Federal Circuit said that by finding at institution that Fan-Duel had a reasonable likelihood of succeeding in its obviousness challenge to claim 6, despite one reference’s contested prior art status, the Board was not adopting a position on the ultimate import of the three references. The Federal Circuit said that the Board said nothing in its institution decision endorsing FanDuel’s arguments such that later rejecting these arguments would have been a change in theory.

The Federal Circuit said that there is nothing inherently inconsistent about the Board instituting IPR on obviousness grounds and then ultimately finding that the petitioner did not provide preponderant evidence that the challenged claim was obvious. The Federal Circuit observed that this happens with some frequency, and that is has encouraged the Board to “change its view of the merits after further development of the record, if convinced its initial inclinations were wrong.

The Federal Circuit also rejected FanDuel’s suggestion that the patent owner’s failure to put forth rebuttal evidence regarding the substance of the references’ disclosures in any way limited the Board’s ability to decide for itself what the references would teach or suggest to a person of skill in the art.  The Federal Circuit noted that the Petitioner always has the burden of showing invalidity, and that the patent owner does not even have to file a response, and thus, a patent owner’s response, alone, does not define the universe of issues the Board may address in its final written decision.

The Federal Circuit concluded that from the moment FanDuel filed its petition, it was on notice that the Board would decide whether those references taught what FanDuel claimed they taught. That is exactly what the Board ultimately did. No APA violation results from such a course.  The Board’s purported new theory in this case was merely an assessment of the arguments and evidence Fan-Duel put forth in its petition.

On the substantive issues, the Federal Circuit agreed with Board that FanDuel failed to show that claim 6 was obvious.

Patent Owner is Not Always Indispensable

In Gensetix,Inc. v. Baylor College of Medicine, [2019-1424] (July 24, 2020), the Federal Circuit affirmed-in-part, reversed-in-part, and remanded  the dismissal of the suit for failure to join an indispensable party.

Gensetix, Inc. , exclusively licensed U.S. Patent Nos. 8,728,806 and 9,333,248 from the University of Texas, an arm of the state of Texas. Gensetix brought suit, naming the University of Texas as an involuntary plaintiff. The district court determined that the Eleventh Amendment barred joinder of UT as an involuntary plaintiff, and concluded that the suit could not proceed in UT’s absence.

The Federal Circuit agreed that sovereign immunity prevented UT from being joined as an involuntary plaintiff, noting that sovereign immunity is reflected in (rather than created by) the Eleventh Amendment, and transcends the narrow text of the Amendment itself. Sovereign immunity serves to avoid the indignity of subjecting a State to the coercive process of judicial tribunals at the instance of private parties. The Federal Circuit distinguished cases where the state is the plaintiff, noting that the Eleventh Amendment applies to suits against a state, not suits by a state. Thus, the fact that UT did not voluntarily invoke federal court jurisdiction was dispositive. Accordingly, Rule 19(a)(2) cannot be used to drag an unwilling UT into federal court.

However, the Federal Circuit found that the district court abused its discretion when it dismissed the suit because of the absence of UT. Rule 19(b) provides that, where joinder of a required party is not feasible, “the court must determine whether, in equity and good conscience, the action should proceed among the existing parties or should be dismissed.” Fed. R. Civ. P. 19(b). This inquiry involves consideration of four factors: (1) the extent to which a judgment rendered might prejudice the missing required party or the existing par-ties; (2) the extent to which any prejudice could be lessened or avoided (3) whether a judgment rendered in the required party’s absence would be adequate; and (4) whether the plaintiff would have an adequate remedy if the action were dismissed for nonjoinder.

The district court found that three out of the four Rule 19(b) factors weighed in favor of dismissing the case. However, the Federal Circuit concluded that the district court abused its discretion by collapsing the multi-factorial Rule 19(b) inquiry into one dispositive fact: UT’s status as a sovereign.

The Federal Circuit said that the proper analysis of the Rule 19(b) factors is far more nuanced than the district court’s. As to the prejudice to UT, the interests of UT and Gensetix are aligned. Despite UT’s sovereign status, given Gensetix’s identical interest in the validity of the patents-in-suit, any prejudice to UT is greatly reduced. There is also no risk of multiple suits be-cause, under the express terms of the parties’ agreement, UT may not sue Baylor once Gensetix has commenced liti-gation. And, as an exclusive licensee with less than all sub-stantial rights in the patents-in-suit, Gensetix cannot enforce its patent rights without the court allowing the suit to proceed in UT’s absence. Given this clear factual record, we conclude that it was an abuse of discretion to find that the suit may not proceed in UT’s absence. Accordingly, we reverse the district court on this point.

Gensetix provides some guidance when licensing from an arm of the state government. To be able to suit without joint the patent owner, the licensee should make sure that their license is exclusive, in all fields, and that the licensee can enforce the patent, and patent owner cannot bring suit once the licensee does. This should tip the balance of the FRCP 19(b) factors in favor of the licensee enforcing the patent.

Licensee’s Failure to Mark Ruined Patent Owner’s Claim for $3.5 Million in Pre-Suit Damages

In Packet Intelligence, LLC v. NetScout Systems, Inc. [2019-2041] (July 14, 2020), the Federal Circuit reversed the district court’s award of $3.5 million in pre-suit damages, vacated the court’s enhancement of that award, but affirmed the district court’s judgment in all other respects.

The Federal Circuit noted that an alleged infringer bears an initial burden of production to articulate the products it believes are unmarked patented articles subject to the marking requirement. This initial burden is a “low bar” and that the alleged infringer needed only to put the patentee on notice that certain licensees sold specific unmarked products that the alleged infringer believes practice the pa-tent. The burden then falss on the patentee to prove that the identified products do not practice the patent-at-issue.

NetScout argued that Packet Intelligence is not entitled to pre-suit damages because it failed to prove that MeterFlow, an unmarked product of Packet Intelligence’s licensee, did not practice the patent. The Federal Circuit agreed that under the standard articulated in Arctic Cat, Packet Intelligence bore the burden of proving that MeterFlow product identifed by NetScout did not practice at least one claim of the patent. Because Packet Intelligence failed to present substantial evidence to the jury that matched the limitations in any claim of the patent to the features of the Meter-Flow product, NetScout is entitled to judgment as a matter of law that it is not liable for pre-suit damages based on infringement of the patent.

Packet Intelligence further argued that the two method patents, which are not subject to the marking requirement, would alternatively support the award of pre-suit damages. However the Federal Circuit disagreed, noting that method claims are not directly infringed by the mere sale of an apparatus capable of performing the claimed process. Thus Packet Intelligence could not simply count sales of the software accused of infringing the ’789 patent as sales of the method claimed in the ’725 and ’751 patents. Instead, Packet Intelligence was required to produce evidence that the claimed method was actually used and hence infringed. The Federal Circuit rejected Packet Intelligence’s efforts to show that NetScout’s internal use justified the entire damage award, noting that the damages base was not tailored to any alleged internal use of the claimed methods.

Patent owners should police the marking by their licensees, and remember to always completely prove their entitlement to damages when challenged by the accused infringer.

Over-designation of Confidential Information Costs Plaintiff Protection

In Uniloc 2017 LLC v. Apple, Inc., [2019-1922, 2019-1923, 2019-1925, 2019-1926] (July 9, 2020), the Federal Circuit affirmed in part, vacated in part, and remanded, the district court’s denial of Uniloc’s motion to seal.

Uniloc asked the district court to seal most of the materials in the parties’ underlying briefs, including citations to case law and quotations from published opinions. It also requested that the court seal twenty-three exhibits in their entireties. These exhibits included matters of public record, such as a list of Uniloc’s active patent cases.

The Federal Circuit began by pointing to the strong presumption in favor of access to documents filed with a court. The Federal Circuit sorted the motions to seal into two groups: (1) documents with Uniloc’s own purportedly confidential and/or sensitive information and that of its related entities; and (2) documents with purportedly confidential and/or sensitive information of third parties.

As to Uniloc’s information, the Federal Circuit found that because Uniloc failed to comply with local rules setting out the standards for filing documents under seal, and requesting reconsideration, the district court did not abuse its discretion in denying Uniloc’s motions to seal its purportedly confidential information and that of its related entities.

As to third party information, the Federal Circuit noted that the third parties third parties were not responsible for Uniloc’s filing of an overbroad sealing request, and required independent analysis. The Federal Circuit concluded that the district court failed to make findings sufficient to allow it to adequately assess whether it properly balanced the public’s right of access against the interests of the third parties in shielding their financial and licensing information from public view, and vacated and remanded for the district court to consider in the first instance.

Litigants with confidential information should realistically evaluate the information, and only attempt protect genuinely confidential information, and comply with all of the court’s. It is a mistake to assume that the court will give free rein to designate information as confidential.