IP UPDATE

Diamond in the Rough: Federal Circuit Polishes § 101’s Abstract Idea Test

by Keval Amin | Feb 20, 2025 | Patents

The US Court of Appeals for the Federal Circuit reversed and remanded a determination by the US International Trade Commission regarding subject matter ineligibility under 35 U.S.C. § 101. The Court concluded that the Commission’s “loose and generalized” analysis did not adequately consider the specific and technical improvements specified by the claims. US Synthetic Corp. v. International Trade Commission, Case No. 23-1217 (Fed. Cir. Feb. 13, 2025) (Dyk, Chen, Stoll, JJ.)

US Synthetic Corp. (USS) filed a complaint with the Commission, alleging that several entities (intervenors) violated § 337 of the Tariff Act by importing and selling certain products that infringed five of USS’s patents. The patent at issue concerned a composition of a polycrystalline diamond compact (PDC) and disclosed an improved method for manufacturing PDCs.

An administrative law judge (ALJ) determined that several claims of the patent were valid and infringed under 35 U.S.C. §§ 102, 103, and 112. However, the ALJ found the claims patent-ineligible under § 101, deeming them directed to an abstract idea. The Commission affirmed this finding while rejecting the intervenors’ argument that the claims lacked enablement under § 112. Consequently, the only bar to a § 337 violation was the § 101 ruling. USS appealed, challenging the Commission’s patent ineligibility determination, while the intervenors argued that the claims were not enabled.

The Federal Circuit determined that the patent claims were directed to a specific technological improvement rather than an abstract idea. The Court had consistently explained that claims that provide a concrete technological solution to a recognized problem in the field are patent-eligible under § 101. Here, the claimed invention was not merely an implementation of an abstract idea on a generic computer; rather, it provided a particularized solution rooted in the physical composition of matter defined by constituent elements, dimensional information, and inherent material properties.

Applying the Supreme Court’s two-step Alice framework, the Federal Circuit reasoned that, under Alice step one, courts must determine whether the claims are directed to an abstract idea or a patent-eligible improvement. In this case, the Court found that the patent claims were not directed to an abstract idea because they recited a specific solution that was directed to a non-abstract composition of matter: PDC. Unlike claims found ineligible in prior cases, USS’s patent did not merely recite a mathematical algorithm or fundamental economic practice but instead provided a tangible technological advancement for an improved method for manufacturing PDCs.

The Federal Circuit noted that even if the claims were directed to an abstract idea under Alice step one, the claimed invention contained an inventive concept sufficient to transform the nature of the claim into patent-eligible subject matter under Alice step two. The Court explained that an inventive concept exists when the claims recite a specific, unconventional solution that goes beyond well-understood, routine, and conventional activities previously known in the field. Here, the Court determined that the claimed invention included an innovative combination of components (diamond, cobalt catalyst, and substrate) in conjunction with particular dimensional information (grain size) and [...]

Continue Reading

Small-Market Segment Can Still Satisfy Domestic Industry Requirement

by Dexter Hamilton | Feb 20, 2025 | Patents

The US Court of Appeals for the Federal Circuit affirmed a US International Trade Commission finding, explaining that small-market segments can be significant and substantial enough to support the Commission’s domestic industry requirement. Wuhan Healthgen Biotechnology Corp. v. International Trade Commission, Case No. 23-1389, (Fed. Cir. Feb. 7, 2025) (Moore, Chen, Murphy, JJ.)

Ventria Bioscience Inc. owns a patent directed to cell-culture media, which supplies nutrients to cells grown in artificial environments. Ventria filed a complaint at the Commission alleging that Wuhan Healthgen Biotechnology violated § 337 of the Tariff Act by importing products that infringed the patent. The Commission ultimately found that Healthgen imported infringing products and that Ventria had satisfied the domestic industry requirement. Healthgen appealed.

The Federal Circuit affirmed the Commission’s domestic industry finding. The Court began by explaining the long-standing principle that patent infringement-based violations of § 337, which establishes unlawful import practices, require that “an industry in the United States, relating to the articles protected by the patent…exists or is in the process of being established.” This requirement is divided into economic and technical prongs. Here, Healthgen conceded that the technical prong was satisfied by a Ventria product (Optibumin) that practiced the patent.

The economic prong considers three factors, any of which are sufficient to satisfy the prong. As identified by the subsections of § 337(a)(3), “there is in the United States, with respect to the articles of the patent…(A) significant investment in plant and equipment; (B) significant employment of labor or capital; or (C) substantial investment in its exploitation, including engineering, research and development, or licensing.” The Commission found that each of these factors was met because, among other things, Ventria had 100% of its relevant investments in Optibumin located within the United States. The conclusion was further supported by a comparison of the investments to Obtibumin’s revenue.

Healthgen argued that the investments were too small to be significant or substantial, and that Optibumin’s revenue was low, which inflated investment-to-revenue ratios. The Federal Circuit rejected Healthgen’s argument, stating that “[s]mall market segments can still be significant and substantial enough to satisfy the domestic industry requirement.” The Court continued, stating that a domestic industry analysis “cannot hinge on a threshold dollar value or require a rigid formula; rather, the analysis requires a holistic review of all relevant considerations that is very context dependent.” Here, the Court found that “[t]hough the dollar amounts of Ventria’s Optibumin investments are small, the Commission found all of the investments are domestic, all market activities occur within the United States, and the high investment-to-revenue ratios indicate this is a valuable market.” The Court found that the Commission’s findings were supported by substantial evidence and affirmed the Commission.

Collateral Estoppel Doesn’t Apply to Unchallenged IPR Claims

by Jodi Benassi | Feb 20, 2025 | Patents

The US Court Appeals for the Federal Circuit found that despite a Patent Trial & Appeal Board determination that certain challenged patent claims were unpatentable based on a preponderance of the evidence standard, the patent owner is not collaterally estopped from asserting other, unreviewed claims of that patent in district court litigation. Kroy IP Holdings, LLC v. Groupon, Inc., Case No. 23-1359 (Fed. Cir. Feb. 10, 2025) (Prost, Reyna, Taranto JJ.)

Kroy sued Groupon for patent infringement. In response, Groupon filed two inter partes review (IPR) petitions challenging 21 claims of the patent at issue. After Groupon’s IPR deadline passed, Kroy amended its complaint to add additional claims from the challenged patent. The Board found all 21 challenged claims unpatentable. Kroy amended its complaint again, this time removing the 21 unpatentable claims and including only claims that were not at issue in the IPR proceedings.

In response, Groupon moved to dismiss the complaint, arguing that the Board’s prior IPR rulings on the unpatentable claims collaterally estopped Kroy from asserting the new claims. The district court agreed, finding that if the Board issues final judgment that a patent claim is unpatentable and another claim is immaterially different, then collateral estoppel applies to that other claim for purposes of invalidity. Applying that standard, the district court determined that the new claims were not materially different from the unpatentable claims in terms of invalidity and granted Groupon’s motion to dismiss with prejudice. Kroy appealed.

Kroy argued that collateral estoppel should not apply because the burden of proof for invalidity in an IPR proceeding (preponderance of the evidence) is lower than in the district court (clear and convincing). The Federal Circuit noted that this case presents a distinct question of collateral estoppel law; that is, whether a prior final written decision of the Board that certain patent claims are unpatentable precludes a patentee from asserting other claims from the same patent, even assuming the asserted claims are immaterially different from the unpatentable claims for purposes of invalidity.

Referring to its recent 2024 decision in ParkerVision v. Qualcomm, the Federal Circuit clarified that collateral estoppel does not apply to new claims that have not yet been adjudicated. The Court explained that Groupon must prove the invalidity of these new claims in the district court by clear and convincing evidence. The Court dismissed Groupon’s reliance on the 2013 Ohio Willow Wood decision, noting that this case addressed whether a prior district court’s invalidity ruling estopped the patentee from asserting claims in the district court that are immaterially different for purposes of invalidity. On the other hand, the Ohio Willow Wood estoppel scenario occurred in district courts involving the same burden of proof. Because the Board determined unpatentability on separate patent claims based on a preponderance of the evidence standard, courts cannot collaterally estop a patentee from asserting other, unadjudicated patent claims in district court litigation.

Trade Dress Requires Separate Articulation and Distinctiveness Requirements

by Ashley K. Justice | Feb 20, 2025 | Trademarks

The US Court of Appeals for the Second Circuit vacated and remanded a district court’s dismissal of a complaint for trade dress infringement and unfair competition, finding that the district court erred in requiring the plaintiffs to articulate distinctiveness of trade dress infringement at the pleading stage. Cardinal Motors, Inc. v. H&H Sports Protection USA Inc., Case No. 23-7586 (2d Cir. Feb. 6, 2025) (Chin, Sullivan, Kelly, JJ.)

Cardinal is a designer and licensor of motorcycle helmets. At issue was the “Bullitt” helmet, which Cardinal exclusively licenses to Bell Sports and is “one of the most popular helmets made by Bell.” H&H manufactures and sells the “Torc T-1” helmet. Both the Bullitt and Torc T-1 helmets have “flat and bubble versions,” feature “metallic borders around the bottom and front opening of the helmet,” and “share similar technical specifications.”

Cardinal sued H&H in September 2020, alleging unfair competition and trade dress infringement. Cardinal amended its complaint twice but both amended complaints were dismissed for failure “to adequately plead the claimed trade dress with precision or with allegations of its distinctiveness.” In Cardinal’s third amended complaint, it included two alternative trade dresses – a “General Trade Dress” and “Detailed Trade Dress” – which listed features of the Bullitt at different levels of detail.

Despite the amendment, the district court dismissed the third amended complaint with prejudice. Based on the general trade dress, the district court reasoned that Cardinal failed to allege distinctiveness and therefore failed to allege a plausible trade dress claim. The district court extended its reasoning to “summarily conclud[e]” that the detailed trade dress also failed to articulate distinctiveness. Cardinal appealed.

Prior to making any determinations, the Second Circuit clarified that distinctiveness and the articulation requirement are separate inquiries, and that the articulation requirement is evaluated first. A plaintiff meets the articulation “requirement by describing with precision the components – i.e., specific attributes, details, and features – that make up its claimed trade dress.” The Court explained that the articulation requirement assists courts and juries to evaluate infringement claims, ensures the design is not too general to protect, and allows a court to identify what combination of elements would be infringing.

Focusing on distinctiveness, the Second Circuit explained that a trade dress plaintiff must specifically allege that its product design has acquired distinctiveness. Acquired distinctiveness is when the mark has a secondary meaning, where the public primarily associates the mark with the “source of the product rather than the product itself.” Separate from the elements of trademark, the plaintiff must meet the articulation requirement, which entails listing the components that make up the trade dress.

Having clarified the pleading requirements, the Second Circuit found de novo that the district court erred in mixing the articulation requirement with the distinctiveness requirement at the pleading stage. The Second Circuit determined that the district court erred in dismissing Cardinal’s complaint for failure to meet the articulation requirement. The Court found that Cardinal met the articulation requirement because the general trade dress was “sufficiently [...]

Continue Reading

Religious Texts, Copyrights, and Estate Law: A Case of Strange Bedfellows

by Ashley K. Justice | Feb 13, 2025 | Copyrights

The US Court of Appeals for the Ninth Circuit affirmed in part and reversed in part a case involving a deceased religious leader who owned the copyrights to works reflecting his teachings. The Court found that the copyrighted works were not works for hire under copyright law, that the leader therefore had the right to license his copyrights, and that the subsequent owner of the copyrights (not a statutory heir) also had the right to terminate licenses. Aquarian Foundation, Inc. v. Bruce Kimberley Lowndes, Case No. 22-35704 (9th Cir. Feb. 3, 2025) (Hawkins, McKeown, de Alba, JJ.)

Aquarian Foundation is a nonprofit religious organization founded by Keith Milton Rhinehart. During his time as the leader of Aquarian, Rhinehart copyrighted his spiritual teachings. An Aquarian member, Bruce Lowndes, claimed that he obtained a license from Rhinehart in 1985. Upon Rinehart’s death in 1999, he left his estate, including interests in copyrights, to Aquarian. In 2014, Aquarian discovered that Lowndes was uploading Rhinehart’s teachings online and sent Lowndes takedown requests pursuant to the Digital Millennium Copyright Act (DMCA). In 2021, Aquarian sent Lowndes a letter terminating Lowndes’ license and sued Lowndes for copyright infringement, trademark infringement, and false designation of origin.

After a bench trial, the district court concluded that Rhinehart’s works were not works for hire under either the 1909 or the 1976 Copyright Act, so Rhinehart had the authority to grant Lowndes an unrestricted license. The district court also found that Aquarian did not have the authority to terminate the license as a nonstatutory heir and should have given Lowndes two years notice. The district court denied attorneys’ fees. Both parties appealed the district court’s ruling on ownership and attorneys’ fees, and Aquarian appealed the ruling on its lack of authority to terminate the license.

The Ninth Circuit, finding no clear error, affirmed the district court’s holding that Rhinehart’s works were not works for hire under either the 1909 or the 1976 Copyright Act. Under the 1909 Act’s “instance and expense” test, the Court found that “the creation and maintenance of the works was Rhinehart’s purview, and not the church’s domain.” Under the 1976 Act, which applies agency law, the Court similarly found that Rhinehart’s creation of the works was outside the scope of his employment as Aquarian’s president and secretary. Therefore, under either act, Rhinehart’s works were not works for hire, making Rhinehart the copyright owner. The Ninth Circuit affirmed the district court’s finding that as owner, Rhinehart had authority to grant the license to Lowndes. The Court also found that Lowndes’ license to “use copyrighted materials ‘without restriction’” referenced “a coming World Wide Network,” so Lowndes did not breach the license by posting the works online.

The Ninth Circuit also affirmed that the testamentary transfer of copyrights to Aquarian was permitted by both the 1909 and 1976 Copyright Acts: “Both the 1909 and 1976 Copyright Acts allow for the transfer of a copyright by will. 17 U.S.C. § 42 (repealed) (providing that copyrights ‘may be bequeathed by will’); [...]

Continue Reading