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Can’t Stop the FRAND: Navigating SEP Licensing Disputes

by | Nov 7, 2024 |

The US Court of Appeals for the Federal Circuit vacated a district court’s decision to deny an antisuit injunction prohibiting a patent owner from enforcing injunctions that it obtained in Columbia and Brazil on standard essential patents (SEPs). Telefonaktiebolaget LM Ericsson, et al. v. Lenovo (United States), Inc., Case No. 24-1515 (Fed. Cir. Oct. 24, 2024) (Prost, Lourie, Reyna, JJ.)

Lenovo and Ericsson entered into negotiations to cross-license their SEPs to each other. SEPs are patents declared essential to complying with a technical standard. Because SEPs by definition must be practiced to comply with a given standard, SEP holders wield significant power over standard implementers during licensing negotiations. Standard setting organizations therefore typically have an intellectual property policy under which SEP holders agree to license their SEPs on fair, reasonable, and nondiscriminatory (FRAND) terms. Here, the parties agreed that the FRAND commitment was a contract, governed by French law, that each party could enforce against the other, and that the FRAND commitment included an obligation to negotiate in good faith over licenses to SEPs.

After the parties were unsuccessful in reaching agreement, Ericsson sued Lenovo in US district court alleging that Lenovo infringed four of Ericsson’s US SEPs related to the 5G wireless communication standard. Ericsson also alleged that Lenovo breached its FRAND commitment by failing to negotiate in good faith and asked the district court to determine a FRAND rate for a global cross-license between the parties. Lenovo counterclaimed, alleging that Ericsson infringed four of Lenovo’s 5G US SEPs and asking for a similar outcome. Lenovo also asked the district court to enter an antisuit injunction prohibiting Ericsson from enforcing the preliminary injunctions Ericsson obtained in Colombia and Brazil that prohibited Lenovo from infringing Ericsson’s Columbian and Brazilian 5G SEPs. The district court denied Lenovo’s motion, following the antisuit injunction framework in the Ninth Circuit’s 2012 decision in Microsoft v. Motorola. The district court concluded that the instant suit was not dispositive of the foreign action, which was a threshold requirement to enter such an injunction. Lenovo appealed.

The Federal Circuit disagreed with the district court’s determination, finding that a party with a FRAND commitment must negotiate in good faith over a license to its SEPs before it pursues injunctive relief based on those SEPs. Interpreting the “dispositive” requirement, the Court concluded that the “requirement can be met even though a foreign antisuit injunction would resolve only a foreign injunction (and not the entire foreign proceeding), and even though the relevant resolution depends on the potential that one party’s view of the facts or law prevails in the domestic suit.” Here, the Court found that the requirement was met because the “FRAND commitment precludes Ericsson from pursuing SEP-based injunctive relief unless it has first complied with the commitment’s obligation to negotiate in good faith over a license to those SEPs.” If the district court were to determine that Ericsson had not complied with that obligation, that determination would dictate the impropriety of Ericsson pursuing SEP-based injunctive relief. Accordingly, the [...]

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Promises, Promises: Covenant Not to Sue for Patent Infringement Includes Downstream Users

by | Oct 31, 2024 |

The US Court of Appeals for the Tenth Circuit affirmed that a district court did not err in applying ordinary rules of contract construction to a covenant not to sue and properly found that under the patent exhaustion doctrine, the covenant encompassed downstream users. Fuel Automation Station, LLC v. Energera Inc., Case Nos. 23-1123; -1358 (10th Cir. Oct. 21, 2024) (Carson, Rossman, Federico, JJ.)

Fuel Automation Station (FAS) and Energera compete in the manufacture of automated fuel delivery equipment and related services. Energera holds patents related to its fuel delivery equipment. In 2016 and 2018, Energera sued FAS, alleging that it infringed two of its patents. The parties resolved the suits with a single settlement agreement in 2019. The agreement described the scope of the patent rights at issue and provided mutual covenants not to sue.

Less than a year later, FAS contracted with a Canadian corporation to operate its fuel automation equipment. Energera sued the Canadian corporation for infringement of one of its patents. FAS intervened, then separately sued Energera seeking a declaration that the covenant not to sue authorized FAS to sell or lease its own equipment and, therefore, the patent exhaustion doctrine prohibited Energera from suing downstream users, such as the Canadian corporation. FAS also brought two breach of contract claims asserting that Energera violated the settlement agreement and its included covenant since it was prohibited from suing the Canadian corporation for downstream use or from suing or “otherwise engag[ing]” FAS in legal proceedings.

FAS moved for summary judgment on its declaratory judgment count, which the district court granted. However, the court denied both parties’ later motions for summary judgment on the issue of whether the settlement agreement covered the asserted patent, finding that an ambiguity in the agreement created genuine issues of material fact. A jury subsequently found that the agreement did cover the asserted patent and that Energera breached the covenant. Energera appealed.

After first determining that the district court’s summary judgment ruling was an appealable legal ruling on the issue of the scope of the covenant, the Tenth Circuit found that the district court correctly interpreted the covenant to include downstream users. In the covenant, Energera promised “not to sue [FAS] or otherwise engage [FAS] in any domestic or foreign legal or administrative proceeding” related to the Patent Rights. Citing dictionary definitions of “engage” in its analysis, the Tenth Circuit found that the term “otherwise engage” reasonably could show the parties’ intent to prohibit Energera from suing FAS’s downstream users. The Court then invoked the patent exhaustion doctrine, which it called “the brooding omnipresence in the sky of patent law.” The Court explained that if a patent holder promises not to sue an entity for patent infringement when the entity sells or leases an item, “the doctrine recognizes an inherent promise not to sue downstream users of those items.” Otherwise, the Court pointed out, no reasonable customer would want to buy or lease a patented item from an authorized seller.

As to whether the [...]

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Pre-Markman Claim Construction Is OK, Within Limits

by | Oct 31, 2024 |

In an appeal stemming from the denial of a preliminary injunction and dismissal of the complaint, the US Court of Appeals for the Federal Circuit clarified its precedent and explained that a district court may construe claims at the motion to dismiss Rule 12(b)(6) stage, but only to the extent necessary to decide the motion. UTTO Inc. v. Metrotech Corp., Case No. 23-1435 (Fed. Cir. Oct. 18, 2024) (Prost, Taranto, Hughes, JJ.)

UTTO sued Metrotech in the US District Court for the Northern District of California for patent infringement and tortious interference with prospective economic advantage under California law. UTTO also moved for a preliminary injunction. The asserted patent describes and claims methods for detecting and identifying “buried assets,” which refers to underground utility lines. The district court denied the preliminary injunction because of UTTO’s failure to show a likelihood of success on the merits for infringement based on the district court’s construction. The district court adopted a construction of the term “group” as requiring at least two data points per buried asset. The district court then dismissed the original complaint for failure to state a claim on which relief could be granted but allowed UTTO to amend, explaining that infringement of the claims as construed at the preliminary injunction stage was not pled.

UTTO then filed an amended complaint, which the district court also dismissed, noting that UTTO failed to plead facts supporting infringement of other limitations under the claim construction issued at the preliminary injunction stage. The district court again granted UTTO leave to amend, which UTTO did. But the district court dismissed that third complaint as well, this time with prejudice, citing the claim construction in its order at the preliminary injunction stage.

On appeal, UTTO (citing 2018 Federal Circuit precedent Nalco v. Chem-Mod) challenged the district court’s claim construction and its reliance on a claim construction in an order denying summary judgment to dismiss a complaint. The Federal Circuit explained that claim construction by a district court “to resolve . . . particular claim construction issues in [a] case” may be necessary and is not categorically barred at the Rule 12(b)(6) stage. The Court explained that there is a “logical relationship of claim construction” between “infringement and the normal function of courts deciding whether to grant a Rule 12(b)(6) motion.” An infringement analysis first requires an analysis of the scope and meaning of the claims asserted and then the “properly construed claims” are compared to the accused device or method. Often, claims are construed based on intrinsic evidence alone, which the Federal Circuit concluded “is not different in kind from the interpretation of other legal standards, which is proper and routine in ruling on a motion under Rule 12(b)(6).” As an example, the Court cited its routine dismissals under Rule 12(b)(6) in connection with motions under 35 U.S.C. § 101.

The Federal Circuit cautioned that not all claim construction issues need to be construed at the Rule 12(b)(6) stage, but only those issues necessary to decide a [...]

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No Leave, No Appeal: UPC Court of Appeal Denies Request for Discretionary Review

by | Oct 24, 2024 | ,

The Court of Appeal (CoA) of the Unified Patent Court (UPC) ruled that if a party wishes to appeal against a procedural order, and leave to appeal has not already been granted in the order, the party must first apply to the Court of First Instance for leave to appeal. Only if such an application is rejected is it then possible to request a discretionary review by the CoA (pursuant to Rule 220.3 of the UPC Rules of Procedure (RoP)). Suinno Mobile & AI Technologies Licensing Oy v. Microsoft Corporation (_586/2024, APL_ 54732/2024) (UPC CoA Oct. 9, 2024) (Simonsson, Standing J.)

In the proceedings between Suinno and Microsoft before the UPC Central Division Paris (Court of First Instance in these proceedings), the latter ordered the claimant, Suinno, to provide security for costs. There was no indication in the order that it could be appealed.

Suinno did not request that the Court of First Instance grant leave to appeal, but instead directly lodged a request for discretionary review of the order with the CoA.

The CoA deemed this request inadmissible and dismissed the appeal. The standing judge (see Rules 345.5 and .8 of the RoP) noted that the Court of First Instance had neither granted nor denied leave to appeal and the first instance order did not contain any reference to Article 73 of the Agreement on a Unified Patent Court (UPCA) and Rule 220.2 of the RoP, contrary to Rule 158.3 of the RoP.

However, this did not relieve Suinno from its obligation to request a grant of leave to appeal from the Court of First Instance. Absent an express grant or refusal of a grant, there is no implied grant of leave to appeal, notwithstanding that the Court of First Instance did not mention the possibility of requesting leave to appeal. The CoA cited Rule 158 of the RoP but noted that the absence of the indication referring to Article 73 of the UPCA and Rule 220.2 of the RoP cannot be understood as an implied grant.

Practice Note: A discretionary review by the CoA pursuant to Rule 220.3 of the RoP is only permissible if the Court of First Instance has expressly granted or expressly refused to grant leave to appeal, which is in line with other CoA decisions on this issue (See, e.g., CoA, Order of August 21, 2024; UPC_CoA_454/2024, APL_44552/2024, para 21; Order of October 15, 2024, CoA_UPC 01/2024, ORD_41423/2024 in the main proceedings ACT_588685/2023, UPC_CFI_440/2023, para 6).

Even if, contrary to the RoP, a first instance decision of the UPC does not contain any indication that an appeal may be filed in accordance with the UPCA and the RoP (but is silent on the issue of appeal in general), there is no positive effect for a party wishing to appeal the decision; it is still necessary to request a grant of leave to appeal from the Court of First Instance. [...]

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No Matter How You Slice and Dice It, Conclusory Evidence Can’t Support Entire Market Value Damages

by | Oct 10, 2024 |

The US Court of Appeals for the Federal Circuit concluded that the entire market value rule was not applicable where conclusory expert testimony was the only evidence that a product’s infringing features drove consumer demand, and therefore reversed. Provisur Techs., Inc. v. Weber, Inc., Case No. 23-1438 (Fed. Cir. Oct. 2, 2024) (Moore, C.J.; Taranto, Cecchi, JJ.)

Provisur sued Weber in the Western District of Missouri over three patents related to slicing and packaging meats and cheeses. The jury determined that Weber willfully infringed several claims of the three asserted patents and awarded damages. Following the trial, Weber moved for judgment as a matter of law (JMOL) on the issues of infringement and willfulness, and a new trial on infringement, willfulness, and damages. The district court denied Weber’s motion in its entirety. Weber appealed.

The Federal Circuit affirmed the district court’s judgment with respect to two of the asserted patents but reversed the infringement finding on the sole asserted claim of the third patent. Provisur’s infringement theory was that the consumer could program the device to infringe the limitations of the claim. However, at trial, Provisur provided no evidence that it was actually possible for the consumer to configure the device to practice the claim or that any consumer had ever done so. Some of the software necessary to be configured in an infringing manner was not accessible to the consumer. Instead, only Weber service technicians could access it. Provisur also proffered no evidence that the devices had ever actually been configured to infringe the claims, instead only offering evidence that the claims could have been infringed.

Next, the Federal Circuit assessed willfulness. Weber’s primary argument was that the district court improperly allowed expert testimony in violation of 35 U.S.C. § 298, which states that a party’s failure “to obtain the advice of counsel with respect to any allegedly infringed patent . . . may not be used to prove that the accused infringer willfully infringed the patent.” Provisur’s expert, who testified about industry standards for intellectual property management, “did not distinguish between legal and non-legal services when testifying about consulting a third party.” The Court concluded that that portion of the testimony was inadmissible and the remaining evidence could not support a finding of willfulness.

Finally, the Federal Circuit addressed the damages issue, specifically focusing on the reasonable royalty award. The infringing features were subparts of a larger accused product – which had many non-infringing features. The accused product contained multiple separate machines unrelated to the alleged invention.

Provisur’s royalty award was predicated on its use of the entire market value rule, where the base to which the royalty rate is applied is the cost of the entire accused product as opposed the cost of just the infringing part. The Federal Circuit noted that the entire market value rule is an acceptable theory, but it requires a showing that the infringing part “is the basis for customer demand.”

Provisur’s damages expert used the entire market value rule in calculating the [...]

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End of an Era: PTO Terminates AFCP 2.0 Amid Fee Concerns

by | Oct 10, 2024 |

The US Patent & Trademark Office (PTO) announced the termination of the After Final Consideration Pilot Program (AFCP) 2.0, effective December 15, 2024. 89 Fed. Reg. 79899 (Oct. 1, 2024).

Launched in 2013, AFCP 2.0 aimed to streamline the patent examination process following a final rejection by allowing applicants to submit amendments without incurring additional fees. The program provided examiners with extra time to review these amendments, conduct additional searches, and potentially schedule interviews with applicants to discuss the results.

Since 2016, applicants have filed more than 60,000 AFCP 2.0 requests annually. The PTO noted that the high usage was due in part to the program’s benefits being provided at no direct cost to participants. However, the PTO estimated that it has incurred more than $15 million in costs due to the program. Consequently, on April 3, 2024, the PTO proposed a new fee to recuperate costs affiliated with AFCP 2.0 requests. This proposal sparked concerns among commenters about AFCP 2.0.

In light of these concerns, the PTO has decided to allow the AFCP 2.0 program to expire. Although the program was initially set to end on September 30, 2024, the PTO extended it to accommodate those currently participating or preparing to use the program. The final date to submit a request under the program is December 14, 2024.



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Got Pillaged? Not If You Didn’t Follow the APA and FTCA

by | Oct 10, 2024 |

The US Court of Appeals for the Federal Circuit affirmed a district court decision dismissing claims under the Administrative Procedure Act (APA) and Federal Tort Claims Act (FTCA) against the US Patent & Trademark Office (PTO) relating to “pillaged patents.” The Federal Circuit found that dismissal was appropriate because the plaintiff failed to exhaust administrative remedies and the claims were barred under collateral estoppel. Winfrey v. Dep’t of Com., Case No. 24-1260 (Fed. Cir. Sept. 25, 2024) (Prost, Hughes, Cunningham, JJ.) (per curiam).

Eula Winfrey filed a pro se complaint in district court seeking “relief for the issue of two pillaged patents,” one of which was directed to a “step-up diaper” and the other to a “stroller buddy.” Winfrey claimed that the PTO “improperly denied her two patent applications and wrongfully deemed the applications to be abandoned,” and that she was the true inventor of Huggies Pull-Ups diapers. Interpreting Winfrey’s requests for relief as claims under the FTCA and the APA, the district court dismissed the claims related to the step-up diaper patent application for failure to exhaust administrative remedies. The district court found that Winfrey never presented an administrative claim to the PTO as required by the FTCA and that she did not file a petition to revive the application after the PTO deemed it abandoned. The district court also dismissed Winfrey’s APA claim related to the stroller buddy patent application based on collateral estoppel because Winfrey had previously litigated that claim. Winfrey appealed.

Applying Eleventh Circuit law, the Federal Circuit affirmed the district court’s dismissal of all of Winfrey’s claims. Addressing the FTCA claim first, the Court noted that “nowhere in any of her extensive filings before this court do we find evidence that Ms. Winfrey filed the requisite administrative claim to bring a claim for money damages against the USPTO.” The Federal Circuit also affirmed the district court’s dismissal of claims related to the stroller buddy application based on collateral estoppel, finding that Winfrey had brought the claim unsuccessfully three times. Finally, with respect to the APA claim for the step-up diaper patent application, the Court affirmed the district court’s dismissal for failure to exhaust administrative remedies after finding that Winfrey failed to “present any evidence that she filed a petition with the USPTO to revive her application or challenge its abandonment determination.”



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Rewind: Federal Circuit Grants En Banc Rehearing Over Royalty Damages

by | Oct 3, 2024 |

The en banc US Court of Appeals for the Federal Circuit issued a per curiam order vacating its previous panel decision upholding a district court’s denial of the defendant’s motion for a new trial on damages. In that decision, the Federal Circuit found that the plaintiff’s damages expert adequately demonstrated the economic comparability of prior license agreements to a hypothetical negotiation between the parties. Now, the Court has granted the defendant’s petition for rehearing en banc. EcoFactor, Inc. v. Google LLC, Case No. 23-1101 (Fed. Cir. Sept. 25, 2024) (per curiam) (Moore, C.J.; Lourie, Dyk, Prost, Reyna, Taranto, Chen, Hughes, Stoll, Stark, JJ.) Judge Prost dissented in part in the original panel decision.

EcoFactor sued Google over Nest thermostats allegedly infringing EcoFactor’s HVAC patent. The initial appeal revolved around the validity of the patent, the infringement verdict, and the damages awarded. Google argued that the patent was directed to an abstract idea and therefore was patent ineligible under 35 U.S.C. §101. Google also argued that the district court erred in its rulings on noninfringement and damages. The Federal Circuit majority upheld the district court’s decisions, finding genuine issues of material fact on patent validity, substantial evidence of infringement, and admissible expert testimony supporting the damages award. The Court dismissed Google’s challenge to the expert’s use of license agreements for calculating royalties, as the Court found the methodology reasonable. However, Judge Prost’s dissent in the original panel decision criticized the damages calculation, arguing that the expert’s methodology lacked rigor, particularly for failing to apportion the patented technology’s value from other licensed patents.

The en banc Federal Circuit will now reconsider the practice of using a patent owner’s prior license agreements to determine royalty rates, a method that can become complicated when the scope of licenses varies or when lump sums and royalties are not clearly apportioned.

The en banc order directed the parties to file new briefs limited to the issue of whether “the district court[] adhere[d] to Federal Rule of Evidence 702 and Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993), in its allowance of testimony from EcoFactor’s damages expert assigning a per-unit royalty rate to the three licenses in evidence in this case.”



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No Boundaries? European UPC Confirms Its International Jurisdiction

by | Oct 3, 2024 | ,

The Court of Appeal (CoA) of the Unified Patent Court (UPC) ruled that the UPC has international jurisdiction for alleged infringement actions that originate outside the UPC’s Member States. Dish and Sling v. AYLO, Case No. UPC-CoA-188/2024 (CoA UPC Sept. 3, 2024) (Grabinski, Pres. CoA; Barutel, Blok, JJ.)

In its ruling, the CoA upheld the order of the Court of First Instance Local Division Mannheim. In the main proceedings, Dish and Sling brought an infringement action against AYLO. The patent in dispute concerned a method for presenting rate adaptive streams from a media player. AYLO was accused of indirectly infringing the patent in numerous UPC Member States, including Germany, by offering and supplying the video files made available for streaming and the media players for streaming videos. AYLO lodged a preliminary objection requesting that the infringement action be dismissed for lack of UPC jurisdiction, Rule 19.1(a) of the UPC Rules of Procedure. After the preliminary objection was rejected, AYLO lodged an appeal against the order of the Local Division Mannheim.

AYLO argued that the UPC does not have international jurisdiction on the basis of Article 7(2) in conjunction with Article 71b(1) of the Brussels I Recast Regulation because the harmful event would not occur in a UPC Member State since AYLO’s servers are located in the United States. The CoA disagreed, explaining that the Article 7(2) phrase “place where the harmful event occurred or may occur” is intended to cover both the place where the damage occurred and the place of the event giving rise to the damage. Consequently, the alleged infringer can be sued in either place.

The UPC has international jurisdiction with respect to an infringement action under two conditions:

  • The European patent in suit has effect in at least one contracting Member State.
  • The alleged damage may occur in that particular Member State.

Therefore, irrespective of the location of AYLO’s server, the UPC had jurisdiction over the infringement action because AYLO’s websites are accessible in Germany where the patent has effect. This access was sufficient to satisfy the likelihood of damage, which was allegedly caused via the internet. Users in Germany can obtain means (media players and video files) that allegedly relate to an essential element of the patented invention and are suitable and intended for putting the invention into practice. The CoA clarified that it is not necessary for a website to be directed at users in the territory of the concerned Member State. The actual availability of access to the website and damage to the European patent owner in a Member State are decisive.

Practice Notes:

  • While UPC courts may consider infringement allegations in a case when evaluating UPC jurisdiction, that consideration is limited to the context of what the patent owner must prove to establish its allegations. Argument as to the specific requirements of the infringement allegations is not necessary. In the reported case, which was based on allegations of indirect infringement, it was not necessary to determine whether AYLOS’s alleged [...]

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When Can Same Claim Limitation Have Different Meanings? When It’s Functional, Of Course

by | Sep 26, 2024 |

Addressing for the first time whether a functional limitation must carry the same meaning in all claims, the US Court of Appeals for the Federal Circuit determined that it need not, vacating a district court decision to the contrary. Vascular Sol. LLC v. Medtronic, Inc., Case No. 2024-1398 (Fed. Cir. Sept. 16, 2024) (Moore, Prost, JJ.; Mazzant, Dist. J., by designation).

The seven patents asserted by Teleflex syin this case all come from a common application and are directed to a “coaxial guide catheter that is deliverable through standard guide catheters by utilizing a guidewire rail segment to permit delivery without blocking use of the guide catheter.” The asserted patents all share a common specification. However, the asserted claims differ in how they refer to the “side opening.” Some claims include the side opening as part of the “substantially rigid portion/segment” while other claims recite that the side opening is separate and distal to the “substantially rigid portion/segment.”

This case has a long procedural history involving an initial preliminary injunction motion and multiple inter partes reviews (IPRs). At the second preliminary injunction stage, Medtronic and the district court grouped the asserted limitations into two mutually exclusive groups:

  • Group One, which included the “substantially rigid portion/segment” claim limitation.
  • Group Two, which “required that the side opening not be in the substantially rigid portion” (emphasis supplied).

In denying Medtronic’s preliminary injunction motion, the district court questioned “how a skilled artisan could possibly be expected to understand the scope of a patent when the same device could simultaneously infringe two mutually exclusive claims within that patent.”

The district court then proceeded to claim construction. It rejected both parties’ initial constructions and appointed an independent expert – former US Patent & Trademark Office Director Andrei Iancu – to propose a construction. Teleflex argued that Iancu should adopt a split construction (i.e., one construction for the Group One limitations and another construction for the Group Two limitations). Medtronic argued that the claims were indefinite. Iancu rejected both proposed constructions but agreed with the district court on the mutual exclusivity of the two groups. The district court determined that all claims that included the “substantially rigid portion/segment” were indefinite, and since all the asserted claims included that term, the parties stipulated to final judgment. Teleflex appealed.

Teleflex argued that the district court erred in determining that the boundary of the substantially rigid portion must be the same for all claims. Medtronic argued that the claims were indefinite.

The Federal Circuit concluded that the district court erred when it determined that the Group One and Group Two limitations were mutually exclusive and indefinite. The Federal Circuit cautioned that affirming the district court’s conclusion would mean that claims in a patent cannot vary in how they claim the disclosed subject matter and that independent claims must be entirely consistent with other independent claims, neither of which is a restriction in how patentees may claim subject matter. The Federal Circuit explained that at the claim construction stage [...]

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