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New WDTX Order Shakes Up Initial Judge Assignments

A recent order from Chief Judge Garcia of the US District Court for the Western District of Texas (WDTX) changes how judges are initially assigned to cases filed in its Waco Division. As of July 25, 2022, patent cases filed in the Waco Division shall be randomly assigned to one of 12 judges. The list includes at least one judge from each of the district’s seven divisions. The order states that the new practice is due to “consideration of the volume of new patent cases assigned to the Waco Division, and in an effort to equitably distribute those cases.”

It’s no secret that the Waco Division has been a magnet for patent lawsuits in the last four years. The only judge in Waco—Judge Alan D. Albright—has presided over more than 2,500 patent cases since September 2018. Those 2,500 patent cases account for about 17% of all patent cases filed nationally in district courts in that timeframe. Plaintiffs’ preference to file in Waco is due in part to Judge Albright’s knowledge of patent cases, his interest in patent cases and his promulgation of local patent rules aiming for a predictable and quick path to trial.

Although Waco cases may now initially be assigned to other judges, whether they choose to keep the assignments remains to be seen. The recent order contains a footnote stating that its previous order for assigning judges “remains in full force and effect.” That previous order allows judges to reassign any case “by mutual consent.” (See Item XVIII(a).) Thus, judges may self-select out of these cases. A large criminal docket is one example of why a judge might self-select out of a patent case.

Even if another judge is assigned and decides to keep a Waco patent case, it remains to be seen whether they will adopt Judge Albright’s local patent rules. Judge Albright has put extensive efforts into the local rules, including procedures related to discovery disputes, pre-Markman discovery, Markman hearings, infringement and invalidity contentions, US Patent & Trademark Office inter partes review effects and more. His cases have averaged about eight months to a Markman hearing and about 24 months to trial. Other judges may decide to make use of that framework to save time and effort or to avoid inconsistencies within the division.

Stay tuned for updates as this new assignment practice unfolds and more patent cases are assigned.




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Court to Counsel: Be Frivolous at Your Own Risk

The US Court of Appeals for the Federal Circuit may “award just damages and single or double costs to the appellee” under the Federal Rule of Appellate Procedure 38 if an appeal is frivolous as filed or as argued. In a non-precedential decision, the Court granted-in-part and denied-in-part a party’s motion for sanctions and request to hold the opposing party’s counsel jointly and severally liable. Pop Top Corp. v. Rakuten Kobo Inc., Case No. 21-2174 (Fed. Cir. July 14, 2022) (Moore, C.J.; Newman, Stoll, JJ.) (per curiam). (Newman, J., dissenting). The Court granted attorneys’ fees and double costs, although it lowered the requested amount for attorneys’ fees.

Pop Top owns a patent describing methods and systems related to enabling highlighter functionality on web pages. The patent’s claim requires an “internet document [that] includes code for invoking a highlighting service to operate with the internet document.” Pop Top alleged that Kobo’s e-books on an app infringed as they are “highlightable” and “include code.” Kobo explained that all highlighting-related code was in the app, not the e-books, an assertion supported by a declaration from its chief technology officer. The district court granted summary judgment of noninfringement.

Pop Top appealed, arguing that the district court erred by not resolving the parties’ alleged claim construction dispute regarding the limitation “code for invoking,” and by deciding that Pop Top’s citation of the Kobo declaration and the infringement contentions (for the first time on appeal) was insufficient evidence of infringement to survive summary judgment.

An appeal is frivolous as filed if “the judgment by the tribunal below was so plainly correct and the legal authority contrary to appellant’s position was so clear that there really is no appealable issue.” The Federal Circuit decided that the appeal was frivolous as filed, explaining that there was no reasonable basis to appeal the summary judgment. The district court had determined that Pop Top offered “no evidence whatsoever” that the e-books included “code for invoking a highlighting service” but relied solely on the Kobo declaration, which stated that the app, not the e-books, contained the highlighting functionality.

An appeal is frivolous as argued if “the appellant engages in misconduct in arguing the appeal.” The Federal Circuit decided that Pop Top’s appeal was frivolous as argued because it “blatantly misconstrue[d] Kobo’s position” when arguing disputed scope for “code for invoking.” Kobo explained that there was no dispute; even under Pop Top’s construction, there was no infringement because the e-books do not contain code invoking the highlighting service. Pop Top further compounded its misconduct in arguing that it presented sufficient evidence to survive summary judgment, failing to explain how any cited evidence, such as the Kobo declaration, showed that Kobo’s e-books contain code related to highlighting.

The Federal Circuit explained that it may hold that counsel be jointly and severally liable for a sanctions award if “an appeal is frivolous due to the nature of the advocacy in support of it.” Because Pop Top’s appeal was frivolous “entirely because of the baseless [...]

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Standard Techniques Applied in Standard Way to Observe Natural Phenomena? Not Patent Eligible

In what may be another blow to diagnostic patents, the US Court of Appeals for the Federal Circuit affirmed the patent ineligibility of claims that it held to be directed to detecting natural phenomena by conventional techniques. CareDx, Inc. v. Natera, Inc., Case No. 2022-1027 (Fed. Cir. July 18, 2022) (Lourie, Bryson, Hughes, JJ.)

CareDx is the exclusive licensee of three Stanford University patents directed to diagnosing or predicting organ transplant status by using methods to detect a donor’s cell-free DNA (cfDNA). When an organ transplant is rejected, the recipient’s body destroys the donor cells, releasing cfDNA from the donated organ’s dying cells into the blood. Detecting the naturally increased levels of donor cfDNA (due to the deteriorating organ condition) can be used to diagnose the likelihood of an organ transplant rejection.

The representative claims were summarized as having four steps for detecting a donor’s cfDNA in a transplant recipient:

  1. “Obtaining” or “providing” a “sample” from the recipient that contains cfDNA
  2. “Genotyping” the transplant donor and/or recipient to develop “polymorphism” or “SNP” “profiles”
  3. “Sequencing” the cfDNA from the sample using “multiplex” or “high-throughput” sequencing, or performing “digital PCR”
  4. “Determining” or “quantifying” the amount of donor cfDNA.

CareDx filed two lawsuits, one alleging that Natera’s kidney transplant rejection test infringed the patents, and another alleging that Eurofins Viracor’s various organ transplant rejection tests infringed one of the patents. Natera and Eurofins moved to dismiss the complaints for failing to state a claim because of a lack of patent-eligible subject matter under 35 U.S.C. § 101. The magistrate judge who reviewed the motions recommended that they be denied, finding that the claims were a “purportedly new, unconventional combination of steps” to detect natural phenomena. Although the recommendation was vacated with regard to Natera because the complaint was amended, the district court adopted the magistrate’s recommendation as to Eurofins with modified reasoning that the patent “specifications raise doubts about the patents’ validity” by suggesting that the steps were neither new nor unconventional. Still, the district court was wary of ruling prematurely and denied the motion so that the parties could conduct discovery to develop the record on what was considered conventional in the art.

Following expert discovery relating to § 101 eligibility, Natera and Eurofins moved for summary judgment on patent ineligibility. The district court denied summary judgment, citing a factual dispute as to the conventionality of the techniques for performing the claimed methods. Natera and Eurofins moved for certification of interlocutory appeals of the district court’s denial. After conferring with the parties, the district court agreed to reconsider its decision in view of case law raised in the certification motion. After reconsideration, the district court granted the summary judgment motions of ineligibility, finding that the asserted claims were directed to the detection of natural phenomena—specifically, the presence of donor cfDNA in a transplant recipient and the correlation between donor cfDNA and transplant rejection—and concluding that based on the specification’s many admissions, the claims recited only conventional techniques.

CareDx appealed, arguing [...]

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PTO Proposes Standardization of the Patent Term Adjustment Statement Regarding Information Disclosure Statements

The US Patent & Trademark Office (PTO) announced on July 12, 2022, that it intends to revise the rules pertaining to patent term adjustment to require that the patent term adjustment statement regarding information disclosure statements (IDS) be submitted on a PTO form. The PTO believes that the use of the form will streamline prosecution and be more accurate and efficient by eliminating the need for a manual review of the patent term adjustment statement.

The regulations in 37 CFR 1.704(c)(1) through (14) establish the circumstances that constitute an applicant’s failure to engage in reasonable efforts to conclude processing or examination of an application and the resulting reduction of any patent term adjustment. 37 CFR 1.704(d)(1) also provides a safe harbor for filing IDS. Filing only an IDS in compliance with §§ 1.97 and 1.98 or a request for continued examination with only a compliant IDS is not considered a failure to engage in reasonable efforts to conclude prosecution (processing or examination) of the application under 37 CFR 1.704(c)(6), (8), (9) or (10) if it is accompanied by the required statement. The statement required to accompany the paper or request for continued examination must affirm that each item of information contained in the IDS meets one of the following requirements:

  • It was first cited in any communication from a patent office in a counterpart foreign or international application or from the PTO, and this communication was not received by any individual designated in § 1.56(c) more than 30 days prior to the filing of the IDS.
  • It is a communication that was issued by a patent office in a counterpart foreign or international application or by the PTO, and this communication was not received by any individual designated in § 1.56(c) more than 30 days prior to the filing of the IDS.

The PTO proposes adding new paragraph (d)(3) to 37 CFR 1.704(d), which requires filers to submit the patent term adjustment statement under 37 CFR 1.704(d)(1) on a form PTO/SB/133 to derive the safe harbor benefit under 37 CFR 1.704(d). Form PTO/SB/133 includes the required statement described above. Filers who submit a 37 CFR 1.704(d)(1) patent term adjustment statement without using the form PTO/SB/133 and filers who submit the form PTO/SB/133 with any modification to the patent term adjustment statement will not receive the benefit of the safe harbor under 37 CFR 1.704(d). Under such circumstances, the IDS or the request for continued examination, with no submission other than an IDS, will be treated as unaccompanied by a patent term adjustment statement under 37 CFR 1.704(d)(1).

Comments on the proposed rule must be received by September 12, 2022, to ensure consideration.




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Clearly, the Disclosure Was an Error

The US Court of Appeals for the Federal Circuit affirmed a Patent Trial & Appeal Board (Board) finding that claimed subject matter was not disclosed in asserted prior art where the prior art reference contained an “obvious error of a typographical or similar nature that would be apparent to one of ordinary skill in the art,” even though the error went unrecognized and uncorrected for 20 years until an expert conducted an extensive analysis. LG Electronics Inc. v. ImmerVision, Inc., Case Nos. 21-2037; -2038 (Fed. Cir. Jul. 11, 2022) (Stoll, Newman, Cunningham, JJ.) (Newman, J., dissenting)

The issue before the Federal Circuit was whether an error in the prior art that remained uncorrected in the public domain for 20 years and took an expert many hours of analysis to uncover, was an obvious error that would meet the standard set in the 1970 Court of Customs and Patent Appeals (CCPA) case In re Yale. Since the CCPA is a predecessor court to the Federal Circuit, its decisions are mandatory authority. Under the Yale standard, “where a prior art reference includes an obvious error of a typographical or similar nature that would be apparent to one of ordinary skill in the art who would mentally disregard the errant information as a misprint or mentally substitute it for the correct information, the errant information cannot be said to disclose subject matter. . . . The remainder of the reference would remain pertinent prior art disclosure.”

The patent at issue pertains to capturing and displaying panoramic images using an objective lens. The claims require a certain image point distribution function and that the objective lens “compresses the center of the image and the edges of the image and expands an intermediate zone of the image located between the center and the edges of the image.”

LG’s expert reconstructed a lens depicted in an embodiment of the asserted prior art using information found in Table 5 of the reference. Based on this reconstruction, LG argued that certain limitations of the claims at issue were found in a prior art patent to Tada, and thus the claims at issue were obvious.

ImmerVision had its own expert attempt to create the same lens model based on the same information. However, ImmerVision’s expert noticed something was wrong, as the resulting output image from the lens was distorted. Upon further investigation, ImmerVision’s expert discovered that the disclosure in Tada Table 5, on which LG’s expert relied, was intended to correspond to a different embodiment. The inconsistency was caused by a transcription error from the Japanese priority application in terms of the embodiment associated with Table 5. It was undisputed that when the correct values were used, the subject matter was not disclosed.

The question on appeal was whether the Board correctly held that the error in Tada would have been apparent to a person of ordinary skill in the art such that the person would have disregarded the disclosure or corrected the error to meet the Yale standard. [...]

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Threat of ITC Exclusion Order Is Too Speculative to Constitute Irreparable Harm

The US Court of Appeals for the Federal Circuit affirmed a decision by a federal district court denying a defendant’s motion for a preliminary injunction seeking to enjoin a parallel International Trade Commission (ITC) investigation against it. The Federal Circuit agreed that the defendant’s alleged irreparable harm (a “cloud” over its business) was too conclusory and speculative to support relief. Koninklijke Philips N.V. v. Thales Dis Ais USA LLC, Case No. 21-2106 (Fed. Cir. July 13, 2022) (Moore, C.J., Dyk, Chen, JJ)

Koninklijke filed a complaint at the ITC requesting a Section 337 investigation based on alleged infringement by Thales of four patents designated essential to the 3G and 4G telecommunications standards. Koninklijke simultaneously filed a parallel district court action against Thales in the Delaware district court based on those four patents. At the district court, Thales moved for a preliminary injunction seeking to enjoin Koninklijke from pursuing an exclusion order at the ITC because of an alleged breach of contract. The district court denied that motion, and Thales appealed to the Federal Circuit.

Meanwhile, the ITC investigation continued, and the administrative law judge (ALJ) issued an initial determination finding no violation of Section 337 with respect to any of the four patents. Subsequently, the Federal Circuit held oral arguments on the district court appeal, during which the judges questioned whether there could be irreparable harm if the ITC were to adopt the ALJ’s determination and consequently not issue an exclusion order. Thales argued that the threat of an exclusion order had left a “cloud” over its business and cited customer concerns that Thales might not be able to deliver products in the future. The ITC subsequently affirmed the ALJ’s finding of no violation and terminated the investigation without issuing any exclusion order.

A week later, the Federal Circuit issued a decision affirming the district court’s denial of the preliminary injunction motion. The Court held that Thales had failed to meet its burden to establish irreparable harm because it had not presented any evidence that it had actually lost any customers, that any customers had delayed purchases or that it had struggled to gain new customers because of the threat from the ITC investigation. The Court also found that the cloud over Thales’ business and the potential loss of business were too speculative to justify a preliminary injunction.

Practice Note: While the ITC investigation was ongoing, Thales filed a civil action in France against Koninklijke—a fellow European company—alleging that Koninklijke’s attempt to obtain injunctive relief in the United States for standard essential patents constituted an anti-competitive act that violated French civil law. Thales sought EUR 13.5 million in damages for the legal fees that it had incurred in defending the ITC investigation.




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Patent Infringement Verdict Nixed over Judge’s Stock Ownership

The US Court of Appeals for the Federal Circuit reversed a district court’s opinions and orders and remanded the case for further proceedings before a different district court judge because the original judge had failed to divest all financial interests in the case. Centripetal Networks, Inc. v. Cisco Systems, Inc., Case No. 21-1888 (Fed. Cir. June 23, 2022) (Dyk, Taranto, Cunningham, JJ.)

Centripetal sued Cisco for patent infringement. The original district court judge presided over a 22-day bench trial, which included a more than 3,500-page record, 26 witnesses and more than 300 exhibits. The court heard final arguments on June 25, 2020. While the case was still pending before the district court, the judge learned that his wife owned Cisco stock, valued at $4,687.99. The district court judge notified the parties on August 12, 2020, that he had discovered that his wife owned 100 shares of Cisco stock. He stated that his wife purchased the stock in October 2019 and had no independent recollection of the purchase. He explained that at the time he learned of the stock, he had already drafted a 130-page draft of his opinion on the bench trial, and virtually every issue had been decided. He further stated that the stock did not—and could not have—influenced his opinion on any of the issues in the case. Instead of selling the stock, which might have implied insider trading given his knowledge of the forthcoming order, the judge placed it in a blind trust. Under the terms of the trust, the judge was to be notified when the trust assets had been completely disposed of or when their value became less than $1,000.

Centripetal had no objections. Cisco, however, filed a motion for recusal under 28 U.S.C. § 455(a) and (b)(4). The judge ordered Centripetal to file a response. On October 2, 2020, the court denied Cisco’s motion for recusal. On October 5, 2020, the court issued a 167-page opinion and order containing the judge’s findings that Cisco willfully infringed the asserted claims of the patents-at-issue and awarded Centripetal damages of more than $755 million, pre-judgment interest of more than $13 million and a running royalty of 10%. Cisco moved for amended findings and judgment under Rule 52(b) or a new trial under Rule 59(a)(2). The court denied both motions. Cisco appealed the district court’s findings and asserted that the judge was required to recuse himself under 28 U.S.C. § 455(b) absent divestiture under § 455(f) (the only exception to the bright line rule that a federal judge is disqualified based on a known financial interest in a party).

On appeal, the Federal Circuit addressed two issues: whether the district court judge was relieved of his duty to recuse under § 455(b)(4) because his wife had divested herself of her interest in Cisco under § 455(f), and, if the requirements of § 455(f) were not satisfied, a determination as to the proper remedy.

The Federal Circuit analyzed whether placement of the stock in a blind trust satisfied the [...]

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PTO Issues Report to Congress on Patent Eligible Subject Matter

On June 24, 2022, the US Patent & Trademark Office (PTO) issued a report to Congress titled “Patent Eligible Subject Matter: Public Views on the Current Jurisprudence in the United States.” The report comes in response to a March 5, 2021, letter from Senators Tillis (R-NC), Coons (D-DE), Hirono (D-HI) and Cotton (R-AR) expressing concern over a lack of consistency and clarity in US patent eligibility laws since the Supreme Court of the United States’ rulings in Alice Corp. v. CLS Bank International and Mayo Collaborative Services Inc. v. Prometheus Laboratories Inc. The PTO solicited public feedback until October 15, 2021, and the report summarizes the PTO’s findings based on the 141 comments it received.

The report found that supporters of the current state of the law on eligibility tended to be companies faced with abusive and costly litigation involving “overbroad” patents, mostly related to software. Those companies noted that the current law allows them to avoid or more efficiently resolve abusive and costly litigation. Some high-tech representatives noted that their investments and innovations have increased under current eligibility jurisprudence. Certain life sciences and patient advocacy organizations also favored the current law, noting its role in enhancing access to medical technologies.

Respondents critical of the current state of the law included many patent practitioners and innovative companies, especially companies involved in life sciences. These respondents stated that current law makes patents less available and rights less predictable and has inhibited investment in new technologies and companies. Several startups and small- and medium-sized enterprises also noted that the current law undermines innovation by decreasing the availability of private risk capital and works to concentrate markets in the hands of a few large, well-resourced entities, thereby decreasing competition. Some commenters stated that they no longer seek patents and instead rely on trade secrets, resulting in reduced public disclosure of technological innovations.

The PTO will continue to solicit feedback from stakeholders, including through listening sessions. The PTO noted that additional feedback and suggestions may be sent to 101@uspto.gov.




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Expert Testimony Excluded Based on Inadmissible Evidence

Circuit Judge Bryson, sitting by designation in the US District Court for the District of Delaware, excluded a plaintiff’s damages expert opinion because the evidence relied upon by the expert was unreliable and therefore inadmissible, but permitted the plaintiff to serve short addendum opinions. IOENGINE, LLC v. PayPal Holdings, Inc., C.A. No. 18-452-WCB (D. Del. June 23, 2022) (Bryson, J.)

IOENGINE asserted two patents against PayPal and Ingenico in Delaware. Less than a month before the first trial, the district court struck essentially all of IOENGINE’s damages report, including testimony regarding a non-party license, two previous jury verdicts on a related patent involving different defendants and different products, and two settlements related to those jury verdicts. The order left IOENGINE with essentially no damages case to present at trial.

Two days after the order issued, IOENGINE requested a conference to discuss the damages issues and the parties engaged in letter briefing. IOENGINE asked the district court to reconsider its decision, arguing that the expert’s testimony was admissible under FRE 703, even if the underlying licenses, verdicts and settlement agreements were not admissible. Alternatively, IOENGINE requested the ability to serve short addendums to its technical and damages reports, or a bifurcation or adjournment of the trial date. PayPal and Ingenico argued that FRE 703 did not make the damages expert’s testimony admissible, and that any addendum or change in trial date would be highly prejudicial.

Judge Bryson ruled that FRE 703 did not permit IOENGINE’s damages expert to testify about otherwise inadmissible evidence. First, the district court looked to the Advisory Committee Notes for FRE 703. The notes explained that FRE 703 applied to situations such as a medical expert relying on hearsay statements by patients and their families and opinions by other medical professionals, because a medical expert would rely on that sort of information in diagnosing and treating a patient. Next, the court turned to a leading Third Circuit case holding that the reliability requirements of FRE 702 are equivalent to the requirements in FRE 703. The Third Circuit further held that the evidence on which an expert relies must meet a threshold requirement of reliability. Finally, the court cited another district court order that applied this standard. The order stated that the court was not judging the credibility of the expert witness, but rather whether the opinion was based on reliable data.

In balancing the parties’ various interests, Judge Bryson allowed IOENGINE to file addendums, but because these issues were of IOENGINE’s own creation, he attempted to find the solution that was most fair to PayPal and Ingenico. The court bifurcated the first trial, allowing the liability portion to go forward but holding the damages trial in abeyance. If IOENGINE prevailed on infringement and validity, a damages trial would be set. The second trial was adjourned until the first trial was resolved. The court gave IOENGINE one week to submit its short addendums (one to two pages for the technical expert and no more than 10 for the [...]

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Split Federal Circuit Reverses Contempt Order, Sanctions Award in Protective Order Dispute

A split panel of the US Court of Appeals for the Federal Circuit reversed a district court’s contempt order and sanctions award, finding that there was a fair ground of doubt regarding whether the defendant’s counsel’s disclosure to a third party under a joint defense agreement constituted a violation of a protective order (PO). Static Media LLC v. Leader Accessories LLC, Case No. 21-2303 (Fed. Cir. June 28, 2022) (Dyk, Taranto, JJ.) (Reyna, J., dissenting).

Static Media sued Leader Accessories for infringement of a design patent relating to a stadium seat. The parties entered into a PO that restricted the disclosure of discovery documents designated as confidential. The PO restricted disclosure of confidential-designated documents to a limited group of people, including “outside independent persons” retained to provide consulting, technical or expert services or to give testimony (i.e., an independent consultant). The PO also required that an independent consultant execute a “written assurance.” The written assurance required that the independent consultant read and agree to be bound by the terms of the PO and prohibited the consultant from copying or using any confidential information except under the terms of the PO.

After the parties agreed to the PO, Static sent a cease-and-desist letter to another company, OJ Commerce, for infringement of the same patent. Counsel for OJ Commerce contacted Leader’s lawyer, and the parties entered into a joint defense group governed by a joint defense agreement. Static subsequently sued OJ Commerce in a different district, after which counsel for Leader shared a copy of the PO and written assurance, which counsel for OJ Commerce signed and returned. Counsel for Leader then shared with OJ Commerce two deposition transcripts containing “a few pages” of confidential-designated information relating to Static’s licensing and royalty agreements.

During settlement negotiations, counsel for OJ Commerce revealed to Static’s counsel (who was not involved in the Leader case and was not a signatory to the PO) that he was “fully aware” of the actual royalties Static had received in the past. Static moved for discovery sanctions and an order holding Leader in contempt for violation of the PO. The magistrate judge ordered Leader to pay Static’s attorneys’ fees and a $1,000 sanction. After the district court judge affirmed, Leader appealed.

Reviewing under an abuse of discretion standard, the Federal Circuit evaluated the legal theories used by the magistrate judge and the district court. The district court concluded that Leader’s counsel should be held in contempt because he was responsible for OJ Commerce’s counsel’s improper use of the confidential information. Separately, the magistrate judge based its finding on the fact that Leader’s counsel “knew or should have known” that OJ Commerce’s counsel would use the information to bolster its defense in its own case. The Federal Circuit disagreed with both of these views, finding that Static failed to prove by clear and convincing evidence that Leader violated the PO. The Court concluded that Leader’s counsel “did exactly what was required to ensure [OJ Commerce’s counsel] would abide by the [...]

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