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  • Tinnus Enterprises, LLC v. Telebrands Corp. (Fed. Cir. 2018)

    When the PTAB Attacks!

    By Andrew Williams —

    Federal Circuit SealIn the past few years, the public's perception of the patent system in the United States has been at a low point.  One of the causes of this lack of confidence in the system has been the increase in abusive patent litigation from entities that have been labelled as "patent trolls."  This problem has been magnified (and likely blown out of proportion) by the mainstream media that has been reporting on (and exaggerating) the evils of the current patent system.  The patent system's alleged failings appeared to reach the public consciousness with the two episodes of the NPR show "This American Life" entitled "When Patents Attack!" and "When Patents Attack . . . Part Two!"  As we reported at the time, these episodes concluded by focusing on a single case and extrapolated all of its "perceived problems to be indicative of the entire patent system, leaving the uninitiated to probably question why we even have a patent system in the first place."  This was followed by even more one-sided "reporting" from the NPR "Planet Money" podcast (see "When NPR Podcasters Hit the Patent System") and John Oliver's HBO commentary/comedy show "Last Week Tonight."  A response from defenders of the patent system (outside of the blogosphere) has been slow in coming.  But a couple of new videos released by, of all places, the Federalist Society does just that by highlighting the plight of Josh Malone and his struggles defending his invention "Bunch O Balloons" (see here and here).  Mr. Malone's company Tinnus Enterprises has been embroiled in multiple district court litigations and post-grant review proceedings before the PTAB.  The latest chapter of that saga occurred on May 30, 2018, when the Federal Circuit reversed and remanded the Board's final written decision in PGR2015-00018.

    For those readers unfamiliar with "Bunch O Balloons," (and who have not yet watched the above-referenced videos), they can be seen in the following figure next to an accused infringing device (taken from a prior Federal Circuit opinion on the subject patents):

    Figure 1These devices can fill multiple water balloons (or as they are known in the art "fluid-filled inflatable containers") in less time than it normally takes to fill and tie a single water balloon.  Figure 1 from U.S. Patent 9,051,066 provides a more detailed explanation of the device:

    Figure 2These devices have been very popular, from the initial Kickstarter campaign to the alleged copying of the accused infringing devices.

    The history of the PTAB proceedings and the concurrent district court litigation is extensive.  In short, on the day the '066 patent issued, June 9, 2015, Tinnus filed suit against Telebrands and moved for a preliminary injunction.  Telebrands filed its first PGR against a Tinnus patent (and the PGR that is the subject of this appeal) on June 22, 2015.  On September 11, 2015, after the Board instituted the PGR, the Eastern District of Texas granted the injunction after determining that Telebrands had "not raised a substantial question concerning the validity of the '066 [p]atent based on the claim term 'substantially filled' being indefinite."  That decision was affirmed by the Federal Circuit in a prior opinion on January 24, 2017.  The month prior, the PTAB issued its final written decision finding the same claim term to be indefinite, thereby rendering all challenged claims to be unpatentable.  Tinnus appealed both this determination and the Board's decision granting institution.

    What the Patent Office Gives, the Patent Office Takes Away

    This case highlights the frustration experienced by patent owners when their patents are challenged at the Patent Office in post-issuance proceedings.  In essence, the same institution that granted the intellectual property right turns around and takes it away, often after substantial investment has been made in reliance on that grant.  In this case, issued claim 1 read (with the relevant section highlighted):

    1.  An apparatus comprising:
        a housing comprising an opening at a first end, and a plurality of holes extending through a common face of the housing at a second end;
        a plurality of flexible hollow tubes, each hollow tube attached to the housing at a respective one of the holes at the second end of the housing;
        a plurality of containers, each container removably attached to a respective one of the hollow tubes; and
        a plurality of elastic fasteners, each elastic fastener clamping a respective one of the plurality of containers to a corresponding hollow tube, and each elastic fastener configured to provide a connecting force that is not less than a weight of one of the containers when substantially filled with water, and to automatically seal its respective one of the plurality of containers upon detaching the container from its corresponding hollow tube, such that shaking the hollow tubes in a state in which the containers are substantially filled with water overcomes the connecting force and causes the containers to detach from the hollow tubes thereby causing the elastic fasteners to automatically seal the containers, wherein the apparatus is configured to fill the containers substantially simultaneously with a fluid.

    The claim term "substantially filled" was not defined in the specification, nor were the two words used in conjunction at any point in the disclosure.  Instead, the term was added by the Examiner in an Examiner's Amendment that was included in the Notice of Allowability.  And the focus of the Amendment was not on the "substantially filled" limitation, but rather was included in a description of the configuration and functional capability of the elastic fasteners, that was described by the Examiner as necessary to distinguish the prior art.  As the Federal Circuit put it, it "presume[d] that an examiner would not introduce an indefinite term into a claim when he/she choose to amend the claim for the very purpose of putting the application in a condition for allowance."

    Correspondingly, the Federal Circuit found that the patent was "not indefinite under the Nautilus standard because the claims, viewed in light of the specification and prosecution history, inform a person of ordinary skill about the scope of the invention with reasonable certainty."  In addition, the Court found that "the claims, in the context of the specification, 'notify the public of what is within the protections of the patent, and what is not,'" thereby also satisfying the standard articulated in In re Packard.  This conclusion was perhaps not surprising in view of the prior Federal Circuit decision in which the Court found "it difficult to believe that a [person of ordinary skill in the art, defined as] a person with an associate's degree in a science or engineering discipline[,] who has read the specification and relevant prosecution history would be unable to determine with reasonable certainty when a water balloon is 'substantially filled.'"  As a result, the Court reversed and remanded for the Board to consider the obviousness allegations.

    There were other interesting legal and procedural issues considered by the Court that were ultimately deferred to the future.  And did we mention that this was one of the first (if not the first) PGR appeals considered by the Federal Circuit.  Nevertheless, this case stands as a prime example of why patent owners are frustrated with the current system, and why the attack on the patent system has perhaps gone too far.

    Tinnus Enterprises, LLC v. Telebrands Corp. (Fed. Cir. 2018)
    Nonprecedential disposition
    Panel: Circuit Judges O'Malley, Wallach, and Hughes
    Opinion by Circuit Judge O'Malley

  • XY, LLC v. Trans Ova Generics, L.C. (Fed. Cir. 2018)

    By Kevin E. Noonan —

    Federal Circuit SealJudge Pauline Newman has been concerned regarding constitutional issues raised by the U.S. Patent and Trademark Office Patent Trial and Appeal Board's implementation of inter partes review as provided by the Leahy-Smith America Invents Act (codified at 35 U.S.C. § 311 et seq.).  Specifically, Judge Newman's concerns involve separation of powers issues and accordingly, are different from the issues raised in Oil States Energy Services, LLC. v. Greene's Energy Group, LLC.  As she wrote in her dissent in Fresenius USA, Inc. v. Baxter Int'l, Inc., 721 F.3d 1330 (Fed. Cir. 2013):

    The court today authorizes the Patent and Trademark Office, an administrative agency within the Department of Commerce, to override and void the final judgment of a federal Article III Court of Appeals.  The panel majority holds that the entirety of these judicial proceedings can be ignored and superseded by an executive agency's later ruling.

    Judge Newman had an opportunity to reiterate her concerns in her dissent (in part) from the Federal Circuit's decision in XY, LLC v. Trans Ova Generics, L.C.

    The case arose from a lawsuit between the parties alleging mutual breach of contract, patent infringement by Trans Ova, and invalidity and antitrust allegations by Trans Ova against XY.  The technology involved sperm cell sorting (to separate X- and Y-chromosome containing sperm) (of direct, U.S. Patent Nos. 6,149,867 and 6,524,860, and reverse, U.S. Patent Nos. 7,713,687 and 7,771,921, varieties), sorted, frozen sperm cell preparations (U.S. Patent No. 7,820,425), and methods for using the sorted sperm cells for in vitro fertilization (U.S. Patent No. 8,569,053).  The '867 and '860 patents involve devices and methods for providing "optimum pre- and post-sorting fluid environments for the cells to 'achieve as unaffected a sorted result as possible.'"  The '425 patent claims methods for "'cryopreserving sperm that have been selected for a specific characteristic.'"  The '687 and '921 patents claim methods for first freezing and then sorting sperm, distinguished from the '867 and '860 patents by the use of "a relatively high concentration of dye for staining the sperm cells," specifically 40 micromolar versus 9 micromolar.  The '053 patent claims use of both types of sorted sperm for in vitro fertilization methods.

    The breach of contract issues between the parties stemmed from a license to the patents-in-suit between Trans Ova and XY, which Trans Ova entered into after becoming dissatisfied with sperm it purchased from another XY licensee, Inguran.  When Inguran acquired XY it notified Trans Ova that it was terminating the license for material breach.  Despite this notice, Trans Ova continued to pay the license royalty during years of negotiations between the parties (which XY did not accept but one, asserted to be in error).  Also, during the negotiation period XY alleged additional instances of material breach by Trans Ova.

    The District Court granted summary judgment to XY in rejecting Trans Ova's antitrust claims, on the grounds that the 4-year statute of limitations on Sherman antitrust actions had run and that Trans Ova did not satisfy the "continuing conspiracy" exception (Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321, 338 (1971)) to the limitations statute under Tenth Circuit law, citing Champagne Metals v. Ken-Mac Metals, Inc., 458 F.3d 1073, 1088 (10th Cir. 2006).  In the subsequent trial, the jury found each party liable for damages for breach of contract and awarded damages to each.  In addition, because the jury found XY had properly terminated the license by its Termination Letter, Trans Ova's activities thereafter constituted willful infringement (in view of the Supreme Court's intervening decision setting the willful infringement standard in Halo Electronics, Inc. v. Pulse Electronics, Inc., 136 S. Ct. 1923 (2016)).  Finally, the jury found that Trans Ova had not satisfied its burden to show invalidity by clear and convincing evidence.

    The District Court denied Trans Ova's post-trial motions and granted XY's motions for a continuing royalty (12.5% for direct sales and 2% royalty for the "reverse" sorting methods) but denied its motion for enhanced damages for prior, willful infringement and injunctive relief (based on the jury's finding that XY had unclean hands).

    The Federal Circuit affirmed-in-part, vacated-in-part, and remanded, in an opinion by Judge Chen joined in full by Judge Dyk; Judge Newman concurred-in-part and dissented-in-part.  The Court's decision on summary judgment against Trans Ova on its antitrust counterclaims affirmed that the burden to present evidence that the continuing conspiracy exception applied rested with Trans Ova, which had not adduced sufficient evidence to have borne its burden.  With regard to the cross-claims for breach of contract, the panel rejected Trans Ova's three arguments in affirming the District Court.  First, the panel held that "Trans Ova's breaches were [not] excused by XY's prior material breach and continuing breaches," because "a reasonable jury could have found that Trans Ova materially breached before XY by underpaying royalties and developing improvements to XY's technology without disclosing such improvements to XY."  Trans Ova's second argument, that "the jury's findings that both parties breached were irreconcilably inconsistent," was never presented to the District Court, the panel stating that it would not consider the argument on appeal.  Finally, with regard to Trans Ova's argument that the District Court had abused its discretion by adopting XY's proposed jury verdict form, the Federal Circuit held that "the jury was properly instructed on materiality, [therefore] the jury was adequately equipped to determine how a material breach by one party affected later breaches by the opposing party."

    Turning to Trans Ova's invalidity argument, the Court stated that it "need not address" the question of invalidity of the '425 patent in light of its summary affirmance of the PTAB's determination that these claims were invalid in an IPR instituted by a third party.  This decision collaterally estops XY "from asserting the patent in any further proceedings," according to the majority, basing its decision on its precedent in Mendenhall v. Barber-Greene Co., 26 F.3d 1573, 1576 (Fed. Cir. 1994); Dana Corp. v. NOK, Inc., 882 F.2d 505, 507–08 (Fed. Cir. 1989); and other cases, and ultimately on the Supreme Court's decision in Blonder-Tongue Labs., Inc. v. Univ. of Ill. Found., 402 U.S. 313 (1971).  Contrary to Judge Newman's argument (see below), the majority saw no distinction between whether a patent was invalidated by a district court or the PTAB with regard to its collateral estoppel effect.  The majority found this to be "a straightforward application of this court's and Supreme Court precedent."  It justified the application of collateral estoppel by the parties joint expectations that it would apply, and in an effort to avoid "unnecessary judicial waste," citing Pharmacia & Upjohn Co. v. Mylan Pharm., Inc., 170 F.3d 1373, 1379 (Fed. Cir. 1999).

    As for the invalidity arguments, the panel held that the District Court did not abuse its discretion in denying Trans Ova's post-trial motions and that the jury's verdict was supported by substantial evidence (from XY's expert).

    Regarding the damages determinations, the District Court's decision not to award enhanced damages mooted appeal of the willfulness determination, but the Federal Circuit found that the District Court's imposition of the differential royalty rates were improperly arrived at.  Specifically, the District Court had not appreciated the distinction between "a reasonable royalty for pre-verdict infringement and damages for post-verdict infringement," citing Amado v. Microsoft Corp., 517 F.3d 1353, 1360 (Fed. Cir. 2008).  This included considerations such as the change in bargaining position occasioned by a verdict that claims were not invalid and infringed in a negotiation between the parties for an on-going royalty.  The Federal Circuit held that the District Court had focused inappropriately on pre-verdict factors (which were either "irrelevant or less relevant than post-verdict factors") and in using a license rate arrived at by using the pre-verdict positions of the parties.  This would have led to the "absurd" result that it would have been economically more lucrative for XY to continuously sue Trans Ova for future infringement (and thus get a higher royalty for "past" infringement) than to accept an on-going royalty at the District Court's on-going royalty rate.  The Federal Circuit vacated this portion of the District Court's decision and remanded for the Court to recalculate the on-going royalty rate in light of this opinion.

    Judge Newman's dissent was focused on the collateral estoppel issue.  She stated her constitutional concerns at the start of her dissenting opinion:

    [T]his holding that judicial authority is estopped by an administrative agency ruling between non-mutual parties warrants attention to the constitutional balance among the branches of government.

    And she believes (and was further concerned) that the panel's "sua sponte creation" of collateral estoppel under these circumstances occurred "without notice to the parties, without briefing, and without opportunity to respond."

    Judge Newman recognized that the PTAB is empowered to decide questions of validity in IPRs before it, but the estoppel provided in the statute is against the petitioner under 35 U.S.C. § 315(e)(2).  Here, the majority imposed an estoppel against a decision from a district court where the petitioner before the PTAB was neither a party nor its privy.  According to Judge Newman, "the agency decision does not automatically override and estop the district court's earlier validity judgment, and remove that judgment from our appellate cognizance," which is what the majority's decision does.  The point is also procedural:  the fact that the Court has validated the PTAB decision in a separate decision "cannot ratify our concurrent refusal to apply the Article III standard of review to the district court decision here on appeal" and this outcome is not mandated by the law of collateral estoppel in Judge Newman's view.  To this end, the dissent cites United States v. Mendoza, 464 U.S. 154 (1984), for the principle and Mackey v. Mendoza-Martinez, 362 U.S. 384, 387 (1960), for "the constitutional concerns raised by collateral estoppel."  Application of collateral estoppel is not automatic under Blonder-Tongue, according to Judge Newman, and "is subject to a variety of exceptions" under Montana v. U.S.  But according to this dissent, the majority's decision provides "no opportunity [] to raise possible exceptions and objections" because it imposes the estoppel on the basis solely of the PTAB's decision.  Judge Newman relies on the Restatement of Judgments §§ 28–29 for eight separate and distinct exceptions, and states that

    Applying these principles to this appeal, we need understand no more than the different standards of validity in the PTAB and the district court, the different burdens of proof, and the different standards of appellate review in this court, to appreciate that inconsistent decisions can be reached in the PTAB and the district court, all weighing heavily against estoppel.

    Characterizing the majority's decision as "appellate surprise," Judge Newman concluded that the Federal Circuit precedent relied upon by the majority, Dana Corp. v. NOK, Inc., 882 F.2d 505 (Fed. Cir. 1989), can be distinguished from this case because here "estoppel was not raised on this appeal, was not briefed, not argued at the hearing, not briefed post-hearing" (regardless of the parties "expectations" which cannot be known because estoppel was never discussed on the record, citing Justice Story's concurrence in Trs. of Dartmouth Coll. v. Woodward, 17 U.S. 518, 697 (1819), for the point that "[t]he fallacy of the argument consists in assuming the very ground in controversy").

    And in a footnote, she makes the broader point about the issues between decisions by district courts and the PTAB:

    My colleagues rely on this panel's concurrent affirmance of the PTAB's invalidation of the Freezing Patent in a non-mutual proceeding, XY, LLC v. ABS Global, Inc., Appeal No. 16-2228.  On the standard of "substantial evidence," the PTAB decision is supportable.  However, on the district court's standard of "clear and convincing evidence," or even applying the standard of "preponderant evidence," the Freezing Patent retains validity.  This discrepancy and the ensuing uncertainty of outcome illuminate a major flaw in the America Invents Act.  Although it is now confirmed that Congress has authority to authorize the PTAB to invalidate issued patents, see Oil States Energy Services, LLC v. Greene's Energy Group, LLC, No. 16-712, 2018 WL 1914662 (U.S. Apr. 24, 2018), it cannot be inferred that Congress also authorized the PTAB to override the judgments of Article III courts.

    Ultimately, Judge Newman's concern is due process, which it will be recalled is an area where the Supreme Court has left open the possibility for further judicial review of how the PTAB implements the IPR provisions of the AIA.  "The indispensable ingredients of due process are notice and an opportunity to be heard by a disinterested decision-maker," Judge Newman writes, citing the Federal Circuit's application in Abbott Labs. v. Cordis Corp., 710 F.3d 1318, 1328 (Fed. Cir. 2013), of Supreme Court precedent from Caperton v. A.T. Massey Coal Co., 556 U.S. 868, 876–81 (2009).  These very due process concerns were absent in Dana Corp., providing Judge Newman with a distinction that vitiates the majority's reliance thereupon in supporting its decision to apply collateral estoppel here.  While judicial efficiency (another principle the majority cites) may be admirable, "[d]ue process is not 'unnecessary judicial waste'" and failing to provide the parties with due process is improper.

    After citing the Court's own precedent supporting her position on how collateral estoppel must be imposed, Judge Newman closes her dissent by saying:

    Here, collateral estoppel was not pleaded and was not argued, yet is imposed on appeal without opportunity for response—contrary to precedent requiring that the precluded party "had a full and fair opportunity to present its arguments" concerning estoppel.  Transclean Corp. v. Jiffy Lube International, Inc., 474 F.3d 1298, 1308 (Fed. Cir. 2007).  The cases cited by the panel majority do not support their position; they support the contrary position.

    These departures from statute, precedent, practice, and due process add to the uncertainty of the patent grant, and thus add disincentive to patent-supported innovation.  I discern no benefit to the public.  I respectfully dissent.

    Once again, Judge Newman appears to make the better argument on this issue.

    XY, LLC v. Trans Ova Generics, L.C. (Fed. Cir. 2018)
    Panel: Circuit Judges Newman, Dyk, and Chen
    Opinion by Circuit Judge Chen; opinion concurring-in-part and dissenting-in-part by Circuit Judge Newman

  • Valmont Industries, Inc. v. Lindsay Corp. (Fed. Cir. 2018)

    Shapes and Shading of Graphical User Interface Not Enough to Uphold Validity

    By Joseph Herndon —

    Federal Circuit SealIn a nonprecedential decision, the Federal Circuit found all challenged claims directed to a graphical user interface of a U.S. Patent obvious over a combination of prior art.  Valmont Industries, Inc. appealed from the final decision of the Patent Trial and Appeal Board in an inter partes review, finding claims 1–10, 12–15, 17, and 18 of U.S. Patent No. 7,003,357 unpatentable as obvious.  Lindsay Corp. also cross-appealed the Board's determination that claim 11 was not obvious.  Reviewing all prior art, the Federal Circuit found that all of these claims were, in fact, obvious.

    The '357 patent is directed to remotely monitoring and controlling irrigation equipment using handheld devices.  A remote user interface displays icons, referred to in this patent as graphical user interfaces ("GUIs"), which show the status of irrigation equipment and allow its control.  Prior art systems monitored and controlled irrigation equipment through personal computers.  Because personal computers are typically located at a base station, these systems required users to return to the base station to control the irrigation equipment.  The '357 patent is directed to the use of handheld devices to allow a user to view the status of and control irrigation equipment from any location using wireless telemetry technology, as shown below in Figure 1 of the patent.

    FIG. 1
    Claim 1 is illustrative and reads as follows:

    1.  A remote user interface for reading the status of and controlling irrigation equipment, comprising:
        a hand-held display;
        a processor;
        wireless telemetry means for transmitting signals and data between the remote user interface and the irrigation equipment; and
        software operable on said processor for:

    (a) displaying data received from the irrigation equipment as a plurality of GUIs that are configured to present said data as status information on said display;
    (b) receiving a user's commands to control the irrigation equipment, through said user's manipulation of said GUIs; and
    (c) transmitting signals to the irrigation equipment to control the irrigation equipment in accordance with said user's commands.

    Dependent claim 6 requires GUIs shaped to identify particular types of irrigation equipment, and dependent claim 10 requires GUIs shaped to identify operating irrigation patterns for specific irrigation equipment.  Claim 11, which depends from claims 1, 6, and 10, further requires:

    11.  The remote user interface of claim 10 wherein said software is further operative on said processor to change the shape of said plurality of GUIs change [sic] in response to a change in the status of the irrigation equipment.

    The Board found that all of the challenged claims, except claim 11, would have been obvious to a person of ordinary skill in the art, but that claim 11 would not have been obvious.

    In particular, the Board found that claims 1–3, 6–10, 12–14, 17, and 18 would have been obvious in view of two prior art references including a primary reference that described remotely monitoring and controlling an irrigation system using a computer to display GUIs, and a secondary reference brought in for describing remotely monitoring and controlling various types of field devices for industrial processes using a handheld device displaying GUIs.

    On appeal, Valmont argued that there was insufficient evidence of a motivation to combine the references because the handheld devices in the secondary reference lacked sufficient display capabilities and computing capacity to operate the system described in the primary reference.  The '357 patent has a 2001 priority date, and expert testimony was provided to demonstrate that at the time of the invention, a person of ordinary skill would be able to employ the system of the primary reference on a mobile device disclosed in the secondary reference.  In particular, mobile phones at the time, could display GUIs and receive user commands through manipulation of GUIs.

    The Federal Circuit agreed and found that substantial evidence supported the Board's determination that a person of ordinary skill would have had a reasonable expectation of success in combining the references and would have been motivated to make the combination.

    Addressing dependent claim 11, which requires that the software be operative "to change the shape of said plurality of GUIs change [sic] in response to a change in the status of the irrigation equipment," a third reference was cited for teaching a display of circle-shaped or square-shaped GUIs in which status information as to irrigation patterns is indicated in various ways, including by shading.

    The question to consider was whether a change in shading constituted a change in "shape."  Applying the broadest reasonable construction, the Board concluded that "shading within the original GUI does not change the shape of the GUI."  But the Federal Circuit disagreed and found that a change in shape occurs when there is a change in pattern, such as through shading.

    The Federal Circuit first turned to a dictionary definition of "shape" as "the visible makeup characteristic of a particular item or kind of item," and found that a change in shading falls within this definition as it is a change in the visible makeup characteristics of the circle.

    Most importantly, however, the specification discusses shading and discloses that shading constitutes a change in shape as well.  For example, the specification describes a GUI to represent a pivot irrigation system that could be partitioned into wedges to depict different settings along the pivot path.  It then states, "[d]ifferent colors or patterns can be used to shade each wedge to depict the particular spray pattern chosen for each wedge," and further describes how "cross-hatching" may represent one setting and a "speckled pattern" may represent another.  Thus, changes in shading of the GUI reflect a change in status of irrigation patterns.  The Federal Circuit thus found that this suggests that a change in shading is a change in shape within the scope of claim 11.

    Additionally, during oral argument before the Board, Valmont conceded that shape includes the color within a GUI, by responding that:

    One thing to keep in mind is that when it says the shape or the status information in the GUI, shape doesn't necessarily have to be just that it's a circle or just that it's a triangle.  It could potentially be that it's a circle that's got lines through it or a triangle that has a checkerboard pattern across it.  So there's different kinds of shapes that it could be that would allow it to show all of these different products.

    Thus, under Valmont's own definition or under the broadest reasonable construction standard, a change in shading would constitute a change in shape of the GUI.  As a result, since the third reference describes a change in shading to reflect a change in irrigation pattern, the resulting combination of references encompassed the limitations of claim 11.  Thus, the Federal Circuit also found claim 11 obvious as well.

    Valmont Industries, Inc. v. Lindsay Corp. (Fed. Cir. 2018)
    Nonprecedential disposition
    Panel: Circuit Judges Lourie, Dyk, and Hughes
    Opinion by Circuit Judge Dyk

  • Conference & CLE Calendar

    CalendarMay 29, 2018 – "The Impact of Oil States and SAS Institute on Your PTAB Strategy" (IAM) – 4:00 (BST)

    May 31, 2018 – "Oil States and SAS: Implications of the Supreme Court's Decisions for Patent Practice" (Strafford) – 1:00 to 2:30 pm (EDT)

    May 31, 2018 – "The Defend Trade Secrets Act Turns Two: New Perspectives and Analysis on the Current State of the Law" (LexisNexis) – 1:30 to 2:00 pm (ET)

    May 31, 2018 – "A New PTAB Landscape: The Impact of SAS, Recent Federal Circuit Decisions, and the Proposed Change to the BRI Standard" (Intellectual Property Owners Association) – 2:00 to 3:00 pm (ET)

    June 4-7, 2018 – BIO International Convention (Biotechnology Innovation Organization) – Boston, MA

    June 5, 2018 – "Functional Claiming for Software Patents: Leveraging Recent Court Treatment — Surviving 112(f) and Disclosing Functional Basis for Software to Meet Heightened Standard of Review" (Strafford) – 1:00 to 2:30 pm (EDT)

    June 7, 2018 – "Views on Patent Cases from the Chambers — PTAB, VA, and MD" (Federal Circuit Bar Association, Virginia Bar Association IP Department, Maryland State Bar Association IP Department, and Bar Association of the District of Colombia IP Department) – Eastern District of Virginia courthouse, Alexandria, VA

    June 13-15, 2018 – Patent Fundamentals Bootcamp 2018: An Introduction to Patent Drafting, Prosecution, and Litigation (Practising Law Institute) – New York, NY

    June 14, 2018 – "Secondary Considerations at the PTAB: Combating Obviousness Challenges, Establishing Nexus" (Strafford) – 1:00 to 2:30 pm (EDT)

    June 19, 2018 – "Protecting Software as a Medical Device: Patents, Design Patents and Trade Secrets" (Strafford) – 1:00 to 2:30 pm (EDT)

    June 25-27, 2018 – Summit on Biosimilars (American Conference Institute) – New York, NY

    July 18-20, 2018 – Patent Fundamentals Bootcamp 2018: An Introduction to Patent Drafting, Prosecution, and Litigation (Practising Law Institute) – San Francisco, CA

    September 21, 2018 – "USPTO Post-Grant Patent Trials 2018: Change & Recalibration" (Practising Law Institute) – New York & Groupcasts in Philadelphia, Indianapolis, New Brunswick, NJ, Pittsburgh, and Mechanicsburg, PA

  • IPO Webinar on the New PTAB Landscape

    IPO #2The Intellectual Property Owners Association (IPO) will offer a one-hour webinar entitled "A New PTAB Landscape: The Impact of SAS, Recent Federal Circuit Decisions, and the Proposed Change to the BRI Standard" on May 31, 2018 from 2:00 to 3:00 pm (ET).  Hon. David Ruschke, Chief Judge of the Patent Trial and Appeal Board of the U.S. Patent and Trademark Office; Gregory Castanias of Jones Day; and Erika Arner of Finnegan, Henderson, Farabow, Garrett & Dunner, LLP will discuss the path ahead after the recent host of major developments that will affect PTAB practice, including tips on how to build a successful appeal that results in remand or reversal, the impact of Federal Circuit decisions on PTAB practice, and how to try to convince the PTAB to change its mind about invalidating a patent on remand.

    The registration fee for the webinar is $135 (government and academic rates are available upon request).  Those interested in registering for the webinar can do so here.

  • Webinar on Impact of Oil States and SAS Institute

    IAMIAM will be offering a free webinar on "The Impact of Oil States and SAS Institute on Your PTAB Strategy" on May 29, 2018 starting at 4:00 (BST).  IAM North America editor Richard Lloyd will moderate a roundtable discussion of attorneys from Oblon, McClelland, Maier & Neustadt; Knobbe Martens; and Finnegan, Henderson, Farabow, Garrett & Dunner to discuss the implications of the Supreme Court's decision in decisions in Oil States v Greene's Energy and SAS Institute v Iancu and how they will affect the Patent Trial and Appeal Board (PTAB), inter partes review petitioners, and patent owners.  The roundtable will address the following topics:

    • Key takeaways from both the majority and dissenting opinions in Oil States
    •     Where the decision in Oil States leaves further challenges to inter partes reviews
    • The likely impact of SAS on petitioners and patent owners
    • How the PTAB intends to implement SAS
    •     The long-term effects on PTAB strategy for both petitioners and patent owners
    • The likely impact of a move away from broadest reasonable interpretation to the Philips claim construction standard in post-issuance reviews

    Those interested in registering for the webinar, can do so here.

  • Program Offers Views on Patent Cases from the Chambers

    Federal Circuit Bar AssociationThe Federal Circuit Bar Association, Virginia Bar Association IP Department, Maryland State Bar Association IP Department, and Bar Association of the District of Colombia IP Department will be hosting a program entitled "Views on Patent Cases from the Chambers — PTAB, VA, and MD" on June 7, 2018 at Eastern District of Virginia courthouse in Alexandria, VA.  A panel consisting of Chief Judge David Ruschke of Patent Trial and Appeal Board, U.S. Patent and Trademark Office; Magistrate Judge John F. Anderson, Eastern District Court of Virginia; District Judge Liam O'Grady, Eastern District Court of Virginia; and District Judge Marvin J. Garbis, District Court of Maryland will each provide insight into the day-to-day operations of their chambers and how they handle patent cases and answer questions from attendees.

    Additional information regarding the program can be found here.  The registration fee for the program is $25 (members of the sponsoring bar associations and non-members); there is no registration fee for jduges or students.  Those interested in registering for the conference can do so here.

  • Webinar on Secondary Considerations at the PTAB

    Strafford #1Strafford will be offering a webinar entitled "Secondary Considerations at the PTAB: Combating Obviousness Challenges, Establishing Nexus" on June 14, 2018 from 1:00 to 2:30 pm (EDT).  Matthew L. Fedowitz, Philip L. Hirschhorn, and Christopher M. Cherry of Buchanan Ingersoll & Rooney will guide patent counsel on the use of secondary considerations at the Patent Trial and Appeal Board (PTAB), examine what works and what does not when seeking to defeat validity challenges, review Federal Circuit decisions addressing secondary considerations evidence presented in an IPR trial, and offer best practices for arguing secondary considerations at the PTAB.  The webinar will review the following issues:

    • What lessons can be learned from cases where secondary considerations successfully defeated validity challenges?
    • What trends can be observed from unsuccessful attempts when using secondary considerations?
    • How have the federal courts addressed secondary considerations?

    The registration fee for the webcast is $297.  Those interested in registering for the webinar, can do so here.

  • Webinar on Protecting Software as a Medical Device

    Strafford #1Strafford will be offering a webinar entitled "Protecting Software as a Medical Device: Patents, Design Patents and Trade Secrets" on June 19, 2018 from 1:00 to 2:30 pm (EDT).  Cory C. Bell, Elizabeth D. Ferrill, and Susan Y. Tull of Finnegan Henderson Farabow Garrett & Dunner will guide counsel for companies in the medical device industry on protecting software as a medical device (SaMD), and discuss the new FDA rules regulating SaMD and how to leverage IP law to protect SaMD.  The webinar will review the following issues:

    • What are the hurdles for patent counsel to demonstrate a software-related claim is not abstract?
    • What factors should counsel consider when determining what type of IP protection to seek?
    • What guidance have the courts provided in recent decisions concerning patent eligibility for software-related inventions?

    The registration fee for the webcast is $297.  Those interested in registering for the webinar, can do so here.

  • AIDS Healthcare Foundation, Inc. v. Gilead Sciences, Inc. (Fed. Cir. 2018)

    By Kevin E. Noonan —

    Federal Circuit SealEver since the Supreme Court loosened the reins on declaratory judgment actions in patent cases twelve years ago, in MedImmune v. Genentech, courts have decided cases fleshing out the metes and bounds of the factual predicates thereof.  One of the most persistent questions is what is the extent to which a declaratory judgment plaintiff can base the action not on traditional grounds (such as those between competitors for a patented product) but rather on the effects of patents on consumers or beneficiaries of a patented compound; these questions have arisen with greatest vigor over patented drug products.  The public policy issues surrounding drug costs and regulation, and those of the proper interplay with patent law was considered by the Federal Circuit (and rejected) in AIDS Healthcare Foundation, Inc. v. Gilead Sciences, Inc. earlier this month.

    The case arose when AIDS Healthcare Foundation (AHF) filed suit against defendants Gilead Sciences, Inc., Japan  Tobacco Inc., Johnson & Johnson, and Janssen Sciences Ireland UC over various drugs comprising the anti-HIV compound tenofovir alafenamide fumarate ("TAF") used in the treatment of AIDS.  Such drugs included TAF itself (sold as Genvoya®) as well as several embodiments comprising assorted other antiviral drugs (including Descovy® and Odefesey®).  Each defendant was either an owner of a patent relating to these drugs or licensee of such patents.  AHF provides healthcare to AIDS patients, including TAF-comprising drugs.  In filing its declaratory judgment action, AHF frankly stated that it was interested in "clear[ing] out the invalid patents" to enable generic drug companies to enter the marketplace as soon as possible; to that end AHF filed this action a mere two months after the FDA approved Genvoya® and thus almost four years before a generic competitor could file an Abbreviated New Drug Application.  AHF's justification for taking this preemptive strike so early was the "lengthy time consumed by litigating patent validity"; the opinion notes that it was "undisputed that no unlicensed source was offering a TAF product or preparing to do so when this declaratory action was filed."  AHF freely admitted that it was a consumer of AIDS treatment products and would not be involved in manufacturing any generic equivalents of any of the drugs protected by the patents-in-suit.

    The District Court dismissed AFH's declaratory judgment complaint on these grounds, that "encouraging others to produce generic TAF products in the future, and Healthcare's interest in purchasing such products," did not satisfy the "case or controversy" requirements for declaratory judgment relief.  This appealed followed.

    The Federal Circuit affirmed, in a precedential opinion by Judge Newman joined by Judges Dyk and Stoll.  The opinion notes at the outset the jurisdictional implications of AHF's complaint, and that a court is without authority to render a judgment unless the jurisdictional requirements are satisfied (which is complainant's burden to carry).  The facts comprising this burden are that there is "injury-in-fact, [a] connection between the challenged conduct and the injury, and redressability by the requested remedy," the Court citing Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 103–04 (1998).  The mere existence of a patent is not enough, without more, to establish these grounds.

    The panel rejected the three bases for jurisdiction asserted by AHF on appeal:

    (1) Healthcare is an indirect infringer of the TAF patents based on its requests to potential producers to provide the patented products;

    (2) Gilead's non-response to Healthcare's request for a covenant not to sue created a present controversy; and

    (3) public policy favors invalidation of invalid patents and thus the testing of "weak" patents.

    The facts adduced before the District Court did not establish that "under all the circumstances, []here is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment" as required under MedImmune Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007) (quoting Maryland Cas. Co. v. Pac. Coal & Oil Co., 312 U.S. 270, 273 (1941)).  The alleged lengthy time incurred by patent litigation was not enough, according to the opinion, to provide the required "immediacy and reality" because there was no current infringement (or preparation for infringing activity) and thus no threat of patent infringement litigation.  "If a declaratory judgment plaintiff has not taken significant, concrete steps to conduct infringing activity, the dispute is neither 'immediate' nor 'real' and the requirements for justiciability have not been met," according to the opinion, citing  Cat Tech LLC v. Tubemaster, Inc., 528 F.3d 871, 880 (Fed. Cir. 2008).  And "the mere possibility of future infringement does not meet the immediacy and reality criteria, for '[a] party may not obtain a declaratory judgment merely because it would like an advisory opinion,'" citing Matthews Int'l Corp. v. Biosafe Eng'g, LLC, 695 F.3d 1322, 1328 (Fed. Cir. 2012).  Here, AHF was only an "encourager" of future infringing activity and a future consumer of any  product resulting therefrom, and this was not enough to satisfy the "immediacy and reality" requirement.  And the Federal Circuit notes the procedures constituting the Hatch-Waxman generic drug regime (including the filing of an ANDA) none of which had occurred.

    Moreover, AHF alleged activities that at most would incur infringement liability for inducing infringement under 35 U.S.C. § 271(b).  However such liability depends on there being a direct infringer under § 271(a), and because of the lack of an ANDA filer or any party as a direct infringer, this basis also failed to establish declaratory judgment jurisdiction.  AHF had solicited third parties to produce a generic (and infringing) version of TAF-containing anti-AIDS drugs.  But no party had responded to AHF (they "elicited no response from the solicited pharmaceutical manufacturers") by taking steps to produce such infringing products, and under these circumstances AHF's supplications were not enough to establish declaratory judgment jurisdiction.  And AHF's role as a purchaser was also not enough, the opinion stating that "[s]uch an economic interest alone, however, cannot form the basis of an 'actual controversy' under the Declaratory Judgment Act," citing Creative Compounds, LLC v. Starmark Labs., 651 F.3d 1303, 1316 (Fed. Cir. 2011) (quoting Microchip Tech. Inc. v. Chamberlain Group, Inc., 441 F.3d 936, 943 (Fed. Cir. 2006)).  The Federal Circuit agreed with the District Court that "a potential customer's interest in buying infringing product does not create present liability for induced infringement," citing Arris Grp., Inc. v. British Telecomms. PLC, 639 F.3d 1368, 1374–75 (Fed. Cir. 2011).

    Finally, the Federal Circuit rejected AHF's argument that it had established that its legal interests were adverse to any of the defendants or that this created an existing controversy.  Once again, the Court relied on its Arris precedent that an adverse economic interest was by itself insufficient to support declaratory judgment jurisdiction.

    The panel also affirmed the District Court's holding that Defendants' refusal to grant AHF a covenant not to sue did not support declaratory judgment jurisdiction, even in light of Gilead's alleged known penchant for protecting its patent rights.  Citing BP Chems. Ltd. v. Union Carbide Corp., 4 F.3d 975, 980 (Fed. Cir. 1993) and SanDisk Corp. v. STMicroelectronics, Inc., 480 F.3d 1372, 1380–81 (Fed. Cir. 2007), the panel held that this by itself (i.e., in the absence of any affirmative actions by Defendants) was not enough ("[D]eclaratory judgment jurisdiction generally will not arise merely on the basis that a party learns of the existence of a patent owned by another or even perceives such a patent to pose a risk of infringement, without some affirmative act by the patentee." (emphasis added)).  And the Court rejected out of hand the policy considerations, for access to generic drugs, as being properly within the scope of the Hatch-Waxman regulatory regime, which provides "a balance of several policy interests, seeking to preserve the patent incentive to invent new drugs, while enabling validity challenge by ANDA filers before actual infringement occurs," citing Andrx Pharm., Inc. v. Biovail Corp., 276 F.3d 1368, 1371 (Fed. Cir. 2002).

    The entirety of the Federal Circuit's opinion reinforces the focus since MedImmune on the totality of the circumstances (rather than some bright line formula) as the proper measure of whether a declaratory judgment plaintiff has alleged sufficiently for a court to find declaratory judgment jurisdiction has been established.  Using this approach, while lacking the consistency of a bright line rule appears robust enough to prevent expansion of declaratory judgment jurisdiction into the realm of permitting public or patient interest groups interested in promoting their agendas onto the patent and regulatory frameworks for innovator and generic drugs, regardless of any purported societal benefits these groups may assert in support of their efforts.

    AIDS Healthcare Foundation, Inc. v. Gilead Sciences, Inc. (Fed. Cir. 2018)
    Panel: Circuit Judges Newman, Dyk, and Stoll
    Opinion by Circuit Judge Newman