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Exploring the Latest in Intellectual Property Law
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Patent Owners Beware: Serial Filings, Rent-Seeking May Be Grounds for Adverse Fee Award

by | Jul 15, 2020 |

The US Court of Appeals for the Federal Circuit vacated and remanded a district court’s denial of attorney’s fees to an accused infringer, finding the district court did not properly consider the Patent Owner’s manner of litigation, including the history of plaintiff’s actions in other jurisdictions and the broader context of its litigation practices. Elec. Commc’n Techs., LLC v. ShoppersChoice.com, LLC, Case No. 19-2087 (Fed. Cir. July 1, 2020) (Wallach, J.).

Following a finding by a Florida district court that a patent asserted by Electronic Communication Technologies (ECT) was ineligible under 35 U.S.C. § 101, ShoppersChoice filed a motion for attorney’s fees, citing ECT’s use of standardized demand letters and repeated infringement actions seeking nuisance-value settlements. ShoppersChoice also informed the district court of a recent award of attorney’s fees against ECT in the Central District of California (the True Grit decision) for conduct relating to the same asserted patent. The district court denied ShoppersChoice’s motion, finding that the case was not exceptional and that ECT’s litigation position was not so obviously weak. ShoppersChoice appealed.

The Federal Circuit reviewed the district court’s denial of attorney’s fees under the abuse of discretion standard, analyzing whether the district court made “a clear error of judgment in weighing relevant factors or in basing its decision on an error of law or on clearly erroneous factual findings” and whether it provided a “concise but clear explanation of its reason[ing].” The Court explained that “a pattern of litigation abuses characterized by the repeated filing of patent infringement actions for the sole purpose of forcing settlements, with no intention of testing the merits of one’s claims, is relevant to a district court’s exceptional case determination under § 285.” The Court found that the district court failed to conduct this analysis and erred by not considering ECT’s manner of litigation and the broader context of ECT’s litigation practices. Addressing the True Grit decision, the Federal Circuit noted that the California district court provided a detailed account of the nuisance value rent-seeking practices of ECT (and other affiliated shell companies), but ultimately found that the court failed to conduct an adequate inquiry into ECT’s litigation conduct.

The Federal Circuit thus vacated the attorney’s fee award and remanded the case, directing the district court to consider both ECT’s manner of litigation and the objective unreasonableness of its claims.

Practice note: While the California District Court’s decision is not binding in the Florida court, the Federal Circuit made clear that a court cannot ignore developments in other jurisdictions in connection with § 285 fee determinations.



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“All Substantial Rights” Test Informative in Obviousness-Type Double Patenting Context

by | Jul 15, 2020 |

The US Court of Appeals for the Federal Circuit endorsed for the first time the “all substantial rights” test to determine whether inventions are commonly owned for purposes of obviousness-type double patenting validity analysis of a later patent. Immunex Corp. v. Sandoz, Inc., Case No. 20-1037 (Fed. Cir. July 1, 2020) (O’Malley, J.) (Reyna, J., dissenting). The Court determined that patents were not commonly owned—and therefore a later patent was not invalid for obviousness-type double patenting—when the patentee retained a secondary right to sue for infringement and the right to “veto” further assignment of the patents by the grantee.

Roche licensed a family of patent applications to Immunex. Under the license agreement, Immunex agreed to pay a running royalty to Roche based on sales of products incorporating the patented technology. Non-party Amgen subsequently acquired Immunex. Amgen, Immunex and Roche entered into an agreement to eliminate the continuing royalties to Roche. The agreement granted to Immunex a paid-up, irrevocable, exclusive license to the US patent family for the patents-in-suit and gave Immunex the sole right to sublicense. It further granted Immunex the exclusive right to prosecute applications in the US patent family. Critically, Roche retained the secondary right to assert the patents if Immunex did not assert them in litigation after being informed of potential infringement, and the right to veto any downstream assignment by Immunex to a third party.

Immunex and Roche later sued Sandoz for infringing a patent included in the license agreement. At trial, Sandoz argued that the patents-in-suit were invalid for obviousness-type double patenting over several patents filed by Immunex.

The judicially created doctrine of obviousness-type double patenting prohibits claims in a second patent that, while not for the same invention, are so similar to the claims of a commonly owned earlier patent that granting both patents exclusive rights would “effectively extend the life of patent protection.” This doctrine rests primarily on two justifications: preventing unjustified extension of the time of the right to exclude, and preventing multiple infringement suits by different assignees. The doctrine applies to all commonly owned patents, including cases in which the obvious variant inventions have different inventors.

Urging a novel theory of common ownership, Sandoz argued that although the patents-in-suit were assigned to Roche, Immunex effectively owned both the Immunex patents and the patents-in-suit. Sandoz asserted that the agreement between Amgen, Immunex and Roche conveyed “all substantial rights” in the patents-in-suit, which was tantamount to an assignment of ownership. Thus, Sandoz argued that the “all substantial rights” test, which previously had only been used to determine who had standing to sue for infringement as a “patentee” under 35 USC § 281, should apply in the context of obviousness-type double patenting.

Immunex argued that the “common ownership” analysis should take into account ownership at the time of invention, such that common-ownership-based obviousness-type double patenting arises only where the relevant inventions were owned by the same entity.

The Federal Circuit agreed with Sandoz, endorsing for the first time the all substantial rights test to [...]

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Federal Circuit Extends Arthrex to Ex Parte Re-Examination Proceedings

by | Jul 15, 2020 |

The US Court of Appeals for the Federal Circuit vacated and remanded a decision issued by the Patent Trial and Appeal Board (PTAB), holding that its decisions in Arthrex and VirnetX also apply to ex parte examinations at the PTAB. In re: Boloro Global Ltd., Case Nos. 19-2349, -2351, -2353 (Fed. Cir. July 7, 2020) (Dyk, J.).

The issue regarding ex parte appeals started to take shape in October 2019—in the context of an inter partes review (IPR) proceeding—when the Federal Circuit held that the appointment of administrative patent judges (APJs) at the PTAB is unconstitutional. Arthrex v. Smith & Nephew (IP Update, Vol. 22, No. 11). APJs are appointed by the secretary of commerce in consultation with the director of the US Patent and Trademark Office (PTO) pursuant to 35 USC § 6(a). In Arthrex, The Federal Circuit determined that APJs are principal officers and are not constitutionally appointed, because as principal officers they must be appointed by the president with the advice and consent of the Senate.

Having concluded that the appointment of APJs violated the Appointments Clause, the Federal Circuit held that “where the final decision was rendered by a panel of APJs who were not constitutionally appointed,” and “where the parties presented an Appointments Clause challenge on appeal,” the decision below “must be vacated and remanded.” The Court further instructed that, on remand, a new panel of APJs must be designated and a new hearing granted. The Court put a bookend on its holding, ruling that where an Appointment Clause challenge was not raised in an opening brief, the challenge was waived. So PTAB decisions that issued before Arthrex, if timely appealed and subject to an Appointment Clause challenge in the opening brief, could be vacated as unconstitutional and remanded for a new panel of APJs.

In May 2020, the Federal Circuit extended its decision in Arthrex to final decisions issued by APJs in inter partes re-examination proceedings (VirnetX v. Cisco Systems). In VirnetX, the Court discerned no differences between the duties of an APJ in an IPR proceeding as compared to an inter partes examination proceeding, because both proceedings involve third-party challenges to an issued patent and in both proceedings APJs exercise significant authority by issuing final decisions that decide the patentability of the challenged claims, and the PTO director does not have an independent way of reviewing those final determinations.

The present case arose in the context of an appeal from an examiner in ex parte prosecution. Boloro argued that APJs in ex parte appeals also exercise significant authority by virtue of the matters on which they are asked to render judgment, and carry out similar functions when they carry out their function of deciding IPRs. Boloro asserted that although ex parte appeals were not specifically addressed in Arthrex, the PTAB also has the power in ex parte appeals to disqualify counsel, to admit people pro hac vice, and to order appellants to additionally brief any matter that the PTAB considers to [...]

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Stick to Your Guns: PTAB Should Rarely Issue New Grounds of Unpatentability

by | Jul 15, 2020 |

The Patent Trial and Appeal Board (PTAB) Precedential Opinion Panel (POP) issued a precedential opinion in an inter partes review (IPR) to resolve two questions:

  • May the PTAB raise a ground of unpatentability not developed by the petitioner?
  • If it does so, must the PTAB provide the parties notice and an opportunity to respond to the new ground of unpatentability?

Hunting Titan, Inc. v. DynaEnergetics Europe GmbH, Case No. IPR2018-00600 (USPTO July 6, 2020) (Boalick, CAPJ) (granting request for POP rehearing). The POP held that while the PTAB may raise new grounds of unpatentability, it should refrain from doing so except in rare instances. If it does raise new grounds of unpatentability, the PTAB must provide the parties notice and an opportunity to respond to the new grounds.

Titan filed a petition requesting IPR of a patent owned by DynaEnergetics directed to a perforating gun assembly for wellbore tools. One of the grounds alleged anticipation by a prior art reference (Schacherer). The PTAB instituted review, and DynaEnergetics timely moved to amend the claims. Opposing the motion to amend, Titan argued that the substitute claims were obvious over various prior art references, including the Schacherer reference. Titan did not argue anticipation as to the substitute claims. In its final written decision, the PTAB held that the amended claims were unpatentable because they were anticipated by Schacherer. DynaEnergetics moved for reconsideration and POP review.

The POP granted review to provide precedential guidance on new grounds of unpatentability. Citing to the recent US Court of Appeals for the Federal Circuit decision in Nike, Inc. v. Adidas AG, the POP determined that the PTAB may raise new grounds of unpatentability in certain cases, but those cases should be exceedingly rare. The POP reasoned that the adversarial nature of an IPR proceeding puts the competing parties in a better position to identify and argue the strongest grounds. The POP rejected the notion that the PTAB should independently examine the patentability of every proposed substitute claim, as if it were a reexamination proceeding, by culling through the prior art to determine if better unpatentability arguments could have been presented. Only in rare cases that are no longer adversarial, such as when a petitioner does not oppose a motion to amend or when a petitioner ceases to participate in an instituted IPR that proceeds to a final judgment, would it be reasonable for the PTAB to consider new grounds of unpatentability. Although the POP did not articulate every exceptional scenario, it suggested that when the record “readily and persuasively” establishes that substitute claims are unpatentable, it would be reasonable for the PTAB to rely on a new ground of unpatentability. Titan’s IPR was not an exceptional case, so the POP reversed the panel’s decision as to the substitute claims.

The POP also explained that the parties must be given notice and an opportunity to respond to any new grounds the PTAB may raise. With respect to substitute claims, notice cannot come from the grounds [...]

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Reliance on Common Sense Permitted in Obviousness Analysis

by | Jul 9, 2020 | ,

The US Court of Appeals for the Federal Circuit affirmed a final written decision from the Patent Trial and Appeal Board (PTAB) finding patent claims directed to aircraft lavatories obvious based on prior art because a skilled artisan would have used common sense to incorporate a missing limitation into the prior art. B/E Aerospace, Inc. v. C&D Zodiac, Inc., Case Nos. 19-1935, -1936 (Fed. Cir. June 26, 2020) (Reyna, J.).

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Lights Out for Light-Up Shoe Patent, Thanks to Non-Limiting Preamble

by | Jul 9, 2020 |

Finding that a patent’s preamble was not limiting and the patent owner’s secondary considerations of non-obviousness were weak, the US Court of Appeals for the Federal Circuit upheld a finding of obviousness by the Patent Trial and Appeal Board (PTAB). Shoes By Firebug LLC v. Stride Rite Children’s Grp., LLC, Case Nos. 19-1622, -1623 (Fed. Cir. June 25, 2020) (Lourie, J.).

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“Seams” Like Activity Giving Rise to Infringement Risk Supports Appellate Jurisdiction

by | Jul 8, 2020 | ,

Adding to its body of jurisprudence on standing to challenge an adverse final written opinion in inter partes review (IPR) proceedings, the US Court of Appeals for the Federal Circuit found a petitioner had constitutional standing to appeal where it showed it engaged in activity that would give rise to a possible infringement suit. Adidas AG v. Nike, Inc., Case Nos. 19-1787; -1788 (Fed. Cir. June 25, 2020) (Newman, J.).

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German Competition Authority Files Amicus Brief in SEP Litigation

by | Jul 1, 2020 |

In 2019, Nokia filed a series of patent infringement complaints against Daimler before several German courts. Nokia alleged that connected cars made by Daimler infringed Nokia’s patents. Nokia considered the relevant patents as essential for certain wireless communication standards. Nokia v. Daimler, Case No. 2 O 34/19 (Mannheim District Court). On 18 June 2020, the litigation took a surprising turn: The German competition authority, the Federal Cartel Office (FCO), filed an amicus curiae brief with the relevant patent infringement courts (FCO docket no. P-66/20). (more…)



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Munchkin Is Luv-n This Win

by | Jun 17, 2020 | ,

Reversing an award of attorney’s fees, the US Court of Appeals for the Federal Circuit found that a district court abused its discretion in making an exceptional-case determination where patent and trademark infringement claims were reasonable. Munchkin, Inc. v. Luv N-Care, LTD., Admar International, Inc., Case No. 19-1454 (Fed. Cir. June 8, 2020) (Chen, J.).

Munchkin sued LNC for trademark infringement, unfair competition, trade dress infringement and patent infringement based on LNC’s no-spill drinking cups. LNC filed a petition for inter partes review (IPR) with the Patent Trial and Appeal Board (PTAB). While the IPR was pending, Munchkin voluntarily dismissed all of its non-patent claims with prejudice. The PTAB subsequently found Munchkin’s patent was unpatentable. After the PTAB’s finding, Munchkin dismissed its patent infringement claim.

LNC filed a motion for attorney’s fees under 35 U.S.C. § 285 and 15 U.S.C. § 1117(a), arguing that the trademark and trade dress infringement claims were substantively weak and that Munchkin should have been aware of the weakness of the patent’s validity. The district court agreed that the case was exceptional and granted LNC’s motion. Munchkin appealed.

The Patent Act and Lanham Act allow courts to award reasonable attorney’s fees to the prevailing party, but only in exceptional cases. The Federal Circuit reviewed the district court’s award for abuse of discretion under the Ninth Circuit standard for attorney’s fees as set forth in Octane Fitness LLC v. ICON Health & Fitness, Inc. (IP Update, Vol. 17, No. 5). The Supreme Court in Octane Fitness held that an exceptional case is “one that stands out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated.”

The Federal Circuit noted that the district court’s exceptional-case determination rested on issues that were not fully litigated before the court. Addressing the patent infringement claim, the Court first found that the district court’s claim construction ruling favored Munchkin, creating a serious hurdle for LNC’s invalidity challenge. However, to find the case exceptional, the district court dismissed its own Markman construction as merely a non-final interim order. The Court found that was not the right question, and instead, the relevant question was whether Munchkin’s validity position was reasonable—not whether there is a possibility of reconsideration of the claim construction.

LNC argued that Munchkin was unreasonable in maintaining its patent infringement lawsuit once the PTAB instituted the IPR because, based on the statistics, it was more likely than not that the patent would be found invalid. The Federal Circuit disagreed, stating clearly that IPR statistics combined with the merits outcome is not enough. What is required is a “fact-dependent, case-by-case” analysis. The Federal Circuit found nothing unreasonable about Munchkin’s patent infringement claim.

Addressing the trademark claims, the Federal Circuit determined that Munchkin cannot be faulted for litigating a claim it was granted permission to pursue. Since the district court allowed Munchkin to amend its complaint, finding no grounds for prejudice, bad faith [...]

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