IP UPDATE
Exploring the Latest in Intellectual Property Law
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Exploring the Latest in Intellectual Property Law
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Status Quo Has Few Defenders at PREVAIL Act Senate Subcommittee Hearing

by and | Nov 16, 2023 | ,

On November 8, 2023, the US Senate Judiciary Subcommittee on Intellectual Property heard testimony from four witnesses on the proposed Promoting and Respecting Economically Vital American Innovation Leadership (PREVAIL) Act. Although the PREVAIL Act includes several provisions regarding transparency and independence, its thrust is its dramatic alteration of Patent Trial & Appeal Board post-grant review (PGR) and inter partes review (IPR) proceedings, including their relationship to co-pending district court litigation, with the goal of incentivizing innovation by reducing costs and making such challenges less likely to be successful.

We previously reported on the provisions of the proposed PREVAIL Act when it was introduced. The biggest changes under consideration include the introduction of a standing requirement, a heightened burden of proof from preponderance-of-the-evidence to clear-and-convincing evidence, a stronger estoppel to thwart costly and unnecessary co-pending actions in court and at the Board, and the separation of the Board’s institution and decision-making functions.

Three witnesses spoke in favor of the PREVAIL Act before the subcommittee, emphasizing that the Board failed to live up to the purposes and intentions of the America Invents Act (AIA). These witnesses were Representative Lamar Smith, a co-sponsor of the AIA; Michelle Armond, co-founder of the law firm Armond Wilson LLP and a practitioner before the Board; and Joseph Kiani, founder of Masimo Industries.

Smith testified that Congress enacted the AIA because it recognized the potential for Board proceedings to be abused, and according to Smith, that is exactly what has happened. Each of the three witnesses testified that well-funded litigants have exploited Board procedures to overwhelm small businesses by forcing them into expensive duplicative proceedings in multiple forums. For example, Kiani posited that the Board posed an existential threat to startups, attributing findings of invalidity against his company’s patents to the AIA’s invalidation-friendly procedures.

Armond explained to the subcommittee how the PREVAIL Act would streamline Board proceedings and harmonize them with district court and International Trade Commission (ITC) litigation. According to Armond, in the wake of the AIA, both the Board and district courts have failed to offer uniform standards for deciding whether to stay a proceeding in their forum pending resolution of a parallel proceeding in the other. The PREVAIL Act would resolve this problem by requiring litigants to select only one forum in which they may raise their invalidity arguments. Armond argued that using the same clear-and-convincing-evidence standard in Board review proceedings and other litigation would harmonize the Board with district courts and the ITC by ensuring that different forums reach the same invalidity decision.

Joseph Matal, former US Patent & Trademark Office interim director and acting solicitor, and current principal of Clear IP, LLC, was the lone dissenting witness at the hearing. According to Matal, the PREVAIL Act’s proposal to require a clear-and-convincing-evidence standard in Board review proceedings is misguided because Board judges possess the requisite agency expertise to second-guess patent examination decisions. Additionally, Board judges often have more time to evaluate the patents and more information than the examiner. According to Matal, [...]

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Unfair Play: Unjust Enrichment for Copying and Using Non-Trade-Secret Spreadsheet

by | Nov 9, 2023 |

The US Court of Appeals for the Second Circuit reversed a district court’s dismissal of an unjust enrichment claim, finding that unjust enrichment claims do not necessarily rise or fall with trade secret misappropriation claims and may be advanced where there is a dispute as to whether a contract’s scope covers the parties’ disagreement. Pauwels v. Deloitte LLP, Case No. 22-21 (2d Cir. Oct. 6, 2023) (Sacks, Robinson, JJ.) (Jacobs, J., dissenting in part).

Andre Pauwels is a contractor who was retained without written agreement by The Bank of New York Mellon and its parent company (collectively, BNYM) to work on investment valuation. In 2014, while working for BNYM, Pauwels developed the “Pauwels Model” for valuation, which was implemented in Excel spreadsheets. Pauwels typically would send BNYM only the outputs from the Pauwels Model. According to Pauwels, the Pauwels Model and spreadsheets were confidential and proprietary, although the spreadsheets were not password-protected, encrypted or labeled confidential, and Pauwels sometimes shared the spreadsheets with BNYM.

In 2016, BNYM engaged Deloitte and related entities (collectively, Deloitte) to take over Pauwels’s duties. Pauwels never authorized BNYM to share the Pauwels Model spreadsheets with Deloitte, and BNYM assured Pauwels that Deloitte was not using those spreadsheets. In April 2018, Pauwels discovered that BNYM had given Deloitte the spreadsheets and that Deloitte had copied the Pauwels Model. BNYM terminated its relationship with Pauwels in May 2018.

In March 2019, Pauwels sued BNYM and Deloitte for trade secret misappropriation, unfair competition and unjust enrichment and further alleged that BNYM committed fraud and negligent misrepresentation. After BNYM and Deloitte moved to dismiss, the district court granted the motion in relevant part. The district court dismissed the unjust enrichment claim as duplicative of the trade secret misappropriation claim, citing the 2009 Second Circuit case Faiveley Transp. Malmo v. Wabtec for the proposition that “where an unfair competition claim, and a misappropriation claim arise from the same factual predicate . . . the two claims generally rise or fall together.” The district court dismissed the remainder of the claims for failure to plausibly allege the existence of trade secrets, that BNYM and Deloitte had “misappropriated” anything, or that Pauwels suffered damages. Pauwels appealed.

The Second Circuit reversed the dismissal of Pauwels’s unjust enrichment claim as to BNYM. Initially, the Court found that Pauwels’s unjust enrichment claim was not duplicative of his trade secret misappropriation claim, distinguishing Faiveley Transp. and explaining that misappropriation is not an element of unjust enrichment claims. The Court rejected BNYM’s argument that Pauwels’s unjust enrichment claim was precluded by the contract between the parties. The Court found that Pauwels could maintain his claim because there was “a bona fide dispute . . . whether the scope of an existing contract covers the disagreement between the parties.” According to Pauwels, he was engaged and paid for his advice and expertise only, meaning that BNYM had no right to benefit from the Pauwels Model spreadsheets by sharing them with Deloitte. According to BNYM, [...]

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No Fifth Chances: Ignoring Court’s Warning Leads to Terminal Sanctions

by | Nov 9, 2023 |

In an appeal from litigation-ending sanctions, the US Court of Appeals for the Fifth Circuit held that misconduct in the face of judicial warnings supports the use of litigation-ending sanctions and that evidence a party forgot about does not count as “new” evidence when remembered for the purpose of a motion for reconsideration. Calsep A/S v. Ashish Dabral, Case No. 22-20440 (5th Cir. Oct. 11, 2023) (Clement, Elrod, Willett, JJ.)

Insights Reservoir Consulting (IRC), a company owned by Ashish Dabral, was hired to make a computer program that assesses oil-well efficiency. To develop that software, Dabral turned to his college friend who worked at Calsep A/S, a software company that designs and sells oil-well assessment software. Dabral hired his friend away from Calsep, and IRC subsequently developed and sold its own oil-well efficiency software.

Surprised at the sudden appearance of a competitor, Calsep investigated and found that IRC had recently hired one of its former employees. Calsep conducted an internal audit and found that its former employee had absconded with trade secrets just before leaving. Calsep sued Dabral and IRC.

In discovery, Calsep requested the complete development history of IRC’s new software. Dabral resisted such disclosure as “overbroad,” but the district court ordered production of the requested materials. Shortly thereafter, the district court further entered an order specifically enjoining the parties from the “destr[uction] of any potentially relevant evidence, including electronically stored information.”

In response to the discovery request, Dabral only produced portions of the development history, and its produced history included sections that were either incomplete or manipulated. In response, Calsep filed another motion to compel. The district court ordered Dabral to “come clean” and comply “voluntarily” before the court resorted to sanctions. Dabral represented that the entire history had been produced and that it was missing only portions deleted before the lawsuit.

The district court held an evidentiary hearing, and Dabral admitted that many of the deletions actually occurred during the lawsuit. The district court levied terminal sanctions based on Dabral’s violation of four separate court orders and serial discovery misconduct. Seven months later, Dabral filed a motion for reconsideration based on new information he found in his storage unit in India. The district court denied the motion. Dabral appealed both the sanctions ruling and the denial of the motion for reconsideration.

The Fifth Circuit first analyzed the sanctions. It limited its analysis to sanctions under Rule 37, which (in the Fifth Circuit) requires four specific findings before terminal sanctions can be levied:

  1. The violation was willful or bad faith.
  2. The client was responsible.
  3. The violation caused substantial prejudice.
  4. A lesser sanction would not have the desired deterrent effect.

The Fifth Circuit held that Dabral’s pattern of conduct supported a finding of bad faith. Dabral admittedly deleted evidence, delayed discovery and ignored several court orders. And when the district court gave him a last chance to “come clean,” he instead deleted more data and made a false representation.

The Fifth Circuit also held that Dabral’s conduct [...]

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Sorry—No Finality, No Injunction, No Appellate Jurisdiction

by | Nov 9, 2023 |

The US Court of Appeals for the Third Circuit dismissed an appeal from the denial of a motion under the Defend Trade Secrets Act (DTSA) for an ex parte seizure order, explaining that such orders are not final, not effectively injunctive and that the DTSA does not independently provide appellate jurisdiction to review such orders. Janssen Prod., L.P. v. eVenus Pharms. Lab’ys Inc., Case No. 22-2426 (3d Cir. Oct. 17, 2023) (Porter, Freeman, Fisher, JJ.)

In 2015, the US Food & Drug Administration (FDA) approved Janssen’s drug Yondelis—a stable, injectable version of the cancer drug trabectedin—for use in certain cancer patients. Janssen asserts that its data, specifications and methods for manufacturing Yondelis are trade secrets. After Janssen received FDA approval for Yondelis, eVenus sought FDA approval for a generic version of Yondelis. Janssen filed a lawsuit against eVenus (under the Hatch-Waxman Act) for patent infringement. During discovery, Janssen obtained documents that allegedly demonstrated that eVenus misappropriated Janssen’s trade secrets. Janssen then filed the current lawsuit against eVenus seeking relief for eVenus’s alleged trade secret misappropriation under the DTSA.

During discovery, Janssen found that eVenus spoliated evidence. In response, Janssen filed a motion for an ex parte seizure under the DTSA, requesting that the district court order the seizure of eVenus’ network servers and stored data, and the laptops and cell phones of certain eVenus employees and ex-employees. The district court denied Janssen’s ex parte seizure motion. Janssen appealed.

The Third Circuit dismissed the appeal, concluding that it lacked jurisdiction over Janssen’s appeal for two reasons.

First, the Third Circuit found that it lacked appellate jurisdiction because the district court’s denial of Janssen’s ex parte seizure motion was not a final judgment and did not meet any of the limited exceptions to the final judgment rule.

One limited exception to appellate jurisdiction under the final judgment rule is review of a lower court’s refusal to order injunctive relief. However, as the Third Circuit explained, an ex parte seizure order under the DTSA is not effectively injunctive and therefore does not fall under the injunction exception. The Court explained that refusal to grant an ex parte seizure order does not satisfy the first two prongs of the Court’s three-part functional injunction test, which require that an order be “directed to a party” and may be enforced by contempt. Regarding the first prong, the Court noted that DTSA seizure orders are not “directed to a party” because the DTSA requires law enforcement officials—and not a party—to execute any ex parte seizure order. Regarding the second prong, no party can be held in contempt for failing to comply with an order that does not direct it to do anything. Therefore, the district court’s order did not effectively deny an injunction.

Second, the Third Circuit analogized DTSA seizure orders with seizure orders under the Lanham Act in terms of statutory construction. As the Court explained, in the Lanham Act, ex parte seizure provisions are part of its “injunctive relief” section. In contradistinction, Congress did not [...]

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PTO Director Requests Input on Patent Trial & Appeal Board Decision Regarding Duty of Candor

by | Nov 9, 2023 |

On May 3, 2023, the Patent Trial & Appeal Board granted a motion for sanctions brought by Spectrum Solutions LLC against Longhorn Vaccines & Diagnostics LLC.[1] The resulting sanctions order canceled five Longhorn patents. The Board found that Longhorn failed to meet its duty of candor by selectively and improperly withholding material results inconsistent with its patentability arguments directed to the canceled claims covering chemical compositions, collection systems and methods for biological specimen collection, including preserving biological samples, killing pathogens and preventing nucleic acid degradation. Now, US Patent & Trademark Office (PTO) Director Katherine Vidal has initiated sua sponte review of the Board’s sanctions order.

In her order issued October 27, 2023, the Director authorized further briefing by both parties, as well as amicus curiae briefs in response to the Board’s decision and analysis for the Director’s review. The Director particularly seeks input on the following issues in the context of situations where relevant factual evidence has been withheld during an America Invents Act proceeding:

  • Which PTO regulations are implicated? Do such regulations include 37 C.F.R. § 1.56?
  • Is it an appropriate sanction for the Board to deem the claims unpatentable in its written decision? Is such a sanction proportionate to the harm caused by the party, taking into account the integrity of the patent system?
  • What other sanctions are appropriate, either in addition to or in place of applying adverse judgment in a final written decision to deem claims unpatentable?

Amicus briefs (of no more than 20 pages) limited to the issues and questions identified above should be submitted to Director_PTABDecision_Review@uspto.gov no later than four weeks after the October 27, 2023, entry date of the order.

For further details, see Order (Paper 133) in each of the listed IPR proceedings.

________________________________________________________________________________

[1] See IPR2021-00847 (US 8,084,443), IPR2021-00850 (US 8,293,467), IPR2021-00854 (US 8,669,20), IPR2021-00857 (US 9,212,399) and IPR2021-00860 (US 9,683,256).



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Statements in Unrelated Application Don’t Narrow Claim Term

by | Nov 9, 2023 |

The US Court of Appeals for the Federal Circuit vacated a stipulated judgment of noninfringement in a patent infringement dispute after construing a disputed claim term, taking a more literal approach than the district court based on the meanings of the individual words of the claim language. Malvern Panalytical Inc. v. TA Instruments-Waters LLC, Case No. 22-1439 (Fed. Cir. Nov. 1, 2023) (Prost, Hughes, Cunningham, JJ.)

The dispute involved a suit brought by Malvern against TA Instruments-Waters and Waters Technologies Corporation (collectively, Waters) alleging infringement of two patents. Both asserted patents disclose microcalorimeters for measuring the amount of energy absorbed or released during a chemical reaction between two compounds and include independent claims directed to “a micro titration calorimetry system” having several elements, including an automatic pipette assembly that is guided into at least two positions via another component—namely, the disputed “pipette guiding mechanism.”

The pre-grant publication of a commonly assigned but unrelated patent was cited during the prosecution of an unrelated Malvern patent because the examiner understood the disclosure of that patent to recite an automated pipette guiding mechanism. The applicant initially tried to rebut the rejections by arguing that the disclosure of that patent recited a “purely passive [pipette] guiding mechanism.” However, after the examiner found the arguments unpersuasive, the applicant simply changed course and argued that the cited reference was not prior art because the publication and unrelated patent had a common assignee.

Malvern then requested supplemental examination of the now asserted patent under 35 U.S.C. § 257. In connection with the supplemental examination, Malvern filed an information disclosure statement (IDS) that included 154 documents, seven of which were office actions from the prosecution of the unrelated patent. Malvern did not describe or characterize the office actions in any way.

Turning back to the litigation, during claim construction proceedings, Malvern argued that “pipette guiding mechanism” should mean a “mechanism that guides the pipette assembly” while Waters argued that it should mean a “mechanism that manually guides the pipette assembly.” The district court concluded that the term “pipette guiding mechanism” was a coined term because Malvern presented no evidence that a “pipette guiding mechanism” was known or readily understandable to a person of ordinary skill in the art. Based on that determination, the district court relied on intrinsic evidence to determine the objective boundaries of the term.

The district court found that the statement made during the prosecution of the unrelated patent was relevant to the claim construction because the asserted and unrelated patents were assigned to Malvern. The district court also considered these statements as having been incorporated into the intrinsic record of the asserted patent because it concluded that Malvern agreed to incorporate the statements when it cited the office actions filed during supplemental examination of the asserted patent. Malvern appealed.

The Federal Circuit explained that it was appropriate to construe the term “pipette guiding mechanism” by looking into the individual meanings of the words “pipette,” “guiding” and “mechanism.” The Court indicated that when the patentee [...]

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Tenth Circuit Contributes Clarity to Contributory Liability in Copyright Infringement

by | Nov 9, 2023 |

Addressing the elements of contributory copyright infringement, the US Court of Appeals for the Tenth Circuit found that a plaintiff had plausibly alleged contributory copyright infringement when he alleged that the defendants had “caused, materially contributed to, or authorized the direct infringement” of his copyrights. Greer v. Moon, et al., Case No. 21-4128 (10th Cir. Oct. 16, 2023) (Bachrach, Moritz, Rossman, JJ.)

Joshua Moon owns and operates the controversial website, Kiwi Farms, “a site ‘built to exploit and showcase those Moon and his users have deemed to be eccentric and weird,’ [m]any of [whom] are physically or mentally disabled.” Russell Greer, who suffers from a form of facial paralysis, was targeted by Kiwi Farms users after Greer sued Taylor Swift in 2016. In 2017, Greer wrote a book to “explain his side of things,” titled “Why I Sued Taylor Swift and How I Became Falsely Known as Frivolous, Litigious and Crazy,” which he published and copyrighted. In 2019, Greer registered his copyright for his song, “I Don’t Get You, Taylor Swift.” Greer alleged that Kiwi Farms users infringed both works by creating and uploading unauthorized audio recordings of the book, posting links to a full copy of the book on the Kiwi Farms platform and uploading his song to the Kiwi Farms website.

Pursuant to the Digital Millennium Copyright Act, Greer sent Moon a takedown notice, identifying the infringing materials and the location of those unauthorized copies. In response, Moon published the takedown notice and Greer’s contact information on Kiwi Farms and responded to Greer via an email in which Moon “derid[ed]” Greer and refused to remove the copyrighted materials. Shortly thereafter, Greer sued Moon and Kiwi Farms for contributory copyright infringement, among other things. The district court granted the defendants’ motion to dismiss for failure to state a claim, and Greer appealed.

The Tenth Circuit explained that there are “three flavors of secondary liability for copyright infringement”:

  1. Vicarious liability, when a secondary infringer has a financial interest in the exploitation of the copyrighted materials and the ability to supervise the direct infringer
  2. The inducement rule, when the secondary infringer distributes a device that is intended to be used for copyright infringement
  3. Contributory liability, when the secondary infringer “causes or materially contributes to” the direct infringer’s activities.

Greer’s claims were based on contributory liability, which occurs when there is direct infringement of a plaintiff’s copyrighted material(s), the defendant had knowledge of the direct infringement and the defendant “intentionally caused, induced, or materially contributed to the direct infringement.”

There was no dispute that Greer’s pro se complaint met the first two prongs of the test. The district court granted the defendants’ motion to dismiss because it found that Greer failed to plausibly plead the third element of contributory infringement: “It is not enough for contributory liability for a defendant to have merely permitted the infringing material to remain on the website, without having induced or encouraged the initial infringement” (internal quotations omitted).

The Tenth Circuit dismissed the district court’s [...]

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Say Goodbye: Argument Not Presented in IPR Petition Is Waived

by | Nov 2, 2023 |

In a split decision, the US Court of Appeals for the Federal Circuit affirmed a Patent Trial & Appeal Board patentability determination, finding that the challenger’s appeal arguments were not raised in its inter partes review (IPR) petitions and were therefore waived. Netflix, Inc. v. DivX, LLC, Case Nos. 22-1203; -1204 (Fed. Cir. Oct. 25, 2023) (Linn, Chen, JJ.) (Dyk, J., dissenting).

DivX owns two patents directed to media streaming technologies. In media streaming, content (such as a movie) is typically stored as separate “streams” suitable for different device capabilities. A playback device must be able to select the appropriate media file from the available streams. To accomplish this selection, the challenged patents discuss a method for automatically generating top-level index files that describe the location and content of container files having streams of media. In particular, an independent claim in each of the patents recites a method comprising “receiving” a request for content, “retrieving” a list of assets associated with the content, “filtering” the list of assets using device capability, “generating . . . a top level index file describing each asset in the filtered list of assets” and “sending the top level index file” to the playback device.

Netflix challenged the two patents in two separate IPR proceedings based on two combinations of prior art references: Pyle and Marusi, and Lewis and Marusi. The Board issued lengthy final written decisions for both petitions, closely analyzing the arguments and evidence presented by Netflix and DivX. The Board determined that Netflix failed to meet its burden of showing that the challenged claims were unpatentable. Netflix appealed.

At the outset, the Federal Circuit noted that “Netflix’s appeal does not challenge any of the Board’s substantive analysis.” It instead makes a purely procedural argument, accusing the Board of “falling down on the job by failing to address several arguments purportedly raised in Netflix’s petitions.” One such argument that the Court identified related to the “filtering” claim element. The Court, the Board and Netflix all agreed that Netflix had advanced an argument that Pyle teaches the filtering element based on Pyle’s selection of a preexisting manifest. Netflix, however, argued on appeal that it also had advanced an argument that Pyle teaches the filtering element based on Pyle’s creation of a new manifest. The Board found that this argument was not presented in Netflix’s petition, and the Federal Circuit agreed. At the Federal Circuit, Netflix identified various block quotes in its petition that purported to support the argument. However, the Court found that “nothing in the quoted language itself signals to a reader that an optimized new manifest equates to ‘filtering the list of assets.’” Furthermore, “the petition made it quite clear Netflix was focused on Pyle’s pre-existing manifest . . . Netflix thus showed it knew how to put forward a clear mapping of Pyle to the filtering limitation, but never connected Pyle’s new manifest to that limitation.”

Judge Dyk dissented. In his opinion, Netflix had not failed to advance the “new manifest” [...]

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Suite! Claim Splitting Privity Focuses on Party Relationship, Not Claim Relationship

by | Nov 2, 2023 |

The US Court of Appeals for the Fifth Circuit revived a hotel group’s federal trade secret suit against two former employees, finding that the district court did not have enough information to conclude that the hotel group improperly split claims between federal and state actions. Armadillo Hotel Group, LLC v. Harris, Case No. 22-50945 (5th Cir. Oct. 20, 2023) (Smith, Southwick, Higginson, JJ.)

Armadillo Hotel Group is a buyer and operator of modular and mobile structures throughout North America. According to Armadillo, it hired Todd Harris and Jason McDaniel to oversee Armadillo’s construction operations and its hotel, food and beverage operations. The relationship deteriorated after a few years, leading to Harris and McDaniel’s resignations.

Harris and McDaniel subsequently sued Armadillo Hotel Group Management (AHG Management) in Texas state court alleging that they entered employment agreements with AHG Management as part of the joint venture, but AHG Management breached these agreements by failing to pay the agreed upon salary, bonuses and profit-sharing interests. The precise relationship between Armadillo and AHG Management is unclear. AHG Management filed counterclaims, agreeing that it hired Harris and McDaniel but arguing that they breached their fiduciary duties by failing to devote their full attention to their responsibilities and diverted business opportunities to their own companies, which allegedly competed with AHG Management.

The parties conducted discovery in state court, after which AHG Management filed an amended counterclaim in state court, removing its claim against Harris and McDaniel for improper expropriation of proprietary and confidential documents. That same day, Armadillo filed a complaint in federal district court against Harris, McDaniel and several new parties, including Southeastern Disaster Relief Services (SDRS), a business affiliated with McDaniel; Battlement Mesa Consulting, LLC (BMC), a business affiliated with Harris; and Grand Majestic Lodge (GML), a competitor of Armadillo. Armadillo’s complaint alleged that Harris and McDaniel misappropriated trade secrets that they shared with SDRS, BMC and GML during and after their employment with Armadillo. The complaint also included claims under the federal Defend Trade Secret Act (DTSA), alleging that the five defendants conspired to misappropriate the trade secrets.

Harris, McDaniel, SDRS and BMC moved to dismiss the federal complaint for impermissible splitting of claims relating to Harris and McDaniel’s employment between the state court proceedings and this new federal lawsuit. The district court granted the motion with prejudice. While acknowledging the “apparent difference between Defendant AHG Management LLC in the state-law action and Plaintiff Armadillo in [the district court] case,” the district court found that the prohibition against claim splitting applied because the same claims were first removed from AHG Management’s counterclaim in the state court proceedings and then asserted by Armadillo in the federal action. The district court also found that the claims arose out of the same nucleus of operative facts—Harris and McDaniel’s employment—and shared a common factual predicate. Armadillo appealed.

The rule against claim splitting prohibits a party or parties in privity from simultaneously prosecuting multiple suits involving the same subject matter against the same defendants. In situations where a [...]

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No Money, Mo’ Problems: Speculative Damages Award Cannot Stand

by | Oct 26, 2023 |

The US Court of Appeals for the Federal Circuit upheld a district court’s claim construction and jury instructions but reversed a premature judgment as a matter of law (JMOL) on obviousness and an imprecise damages award. Cyntec Company, Ltd. v. Chilisin Electronics. Corp., Case No. 22-1873 (Fed. Cir. Oct. 16, 2023) (Moore, Stoll, Cunningham, JJ)

Cyntec sued Chilisin for willful infringement of two patents related to molded chokes, which are component parts in batteries and power supplies. Four events at trial led to this appeal. First, the district court construed the disputed “by means of” term by its plain meaning but also instructed the jury that when a result occurs “by means of” a factor, that factor “has an impact on”—but may not be the “only potential cause” of—the result. Second, Chilisin presented invalidity evidence, arguing that the asserted claims were obvious by one prior art reference in light of another.

Before Chilisin could cross-examine Cyntec’s rebuttal expert, the district court granted Cyntec’s JMOL, finding the patents not obvious. In the third event that led to the appeal, Cyntec presented a market-share lost profits theory of damages based on expert testimony. Chilisin unsuccessfully moved to exclude the testimony as being speculative and unreliable. The jury awarded more than $1.8 million in damages and the district court subsequently granted enhanced damages totaling more than $5.5 million. As for the fourth event, Chilisin unsuccessfully moved for JMOL and a new trial on multiple issues. Chilisin then appealed.

The Federal Circuit reviewed three issues on appeal:

  1. The nonobviousness JMOL
  2. The infringement findings
  3. The damages award.

Starting with nonobviousness, the Federal Circuit reversed the JMOL and remanded. While obviousness is ultimately a legal question, it relies on “numerous underlying factual findings,” including the scope/content/differences of prior art, the skill level of a person of ordinary skill in the art and objective indicia of nonobviousness such as commercial success. The Court found Chilisin had presented enough evidence to allow a jury to find the asserted claims obvious in light of the two prior art references presented. The Federal Circuit also analyzed the district court’s reasoning regarding the prior art and found that its “conclusions are either insufficient to support JMOL or unsupported by the evidence.” Thus, it was improper to withhold a partial fact issue from the jury.

Next, the Federal Circuit analyzed the infringement issue, dividing the analysis into the district court’s claim construction and jury instructions, and the jury’s infringement finding. Chilisin argued that the disputed term “by means of” should signal but-for causation, meaning the factor must cause the result. The Court agreed that this was one possible reading, but because the claim language did not read “by exclusive/primary means” or something similar, the disputed term could also encompass “mere contribution.” The Federal Circuit cited to the specification in support of its claim interpretation and ultimately upheld the district court’s claim construction and the consistent jury instructions. The Court rejected Chilisin’s argument that there was insufficient evidence of infringement, concluding [...]

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