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Breach of Confidentiality Claim Survives Motion to Dismiss under Anti-SLAPP Law

by Tessa Kroll | Jul 28, 2022 | Trade Secrets

The Court of Appeals of Texas (Fourth District) upheld a trial court’s order denying a motion to dismiss a breach of confidentiality agreement claim pursuant to the Texas Citizens Participation Act (TCPA), which is designed to protect people from strategic lawsuits against public participation (SLAPP). Harper v. Crédito Real Bus. Cap., Case No. 21-0212 (Tex. App. July 20, 2022) (Martinez, Chapa, Watkins, JJ.)

Crédito Real Business Capital (CRBC) leases equipment and provides financing services to companies in the construction industry. CRBC provides its services through two limited liability companies: CR-FED and CR-FED Leasing. Earl Harper previously worked for CRBC as executive vice president and was required to sign a confidentiality agreement with CR-FED stipulating that he would not share its confidential information with third parties.

CRBC advanced money and leased equipment to Ontrack Site Services, a site grading contractor and customer with whom Harper worked. As part of his employment, Harper was provided with confidential information regarding CRBC’s plans and projections for its relationship with Ontrack, including CRBC’s willingness to extend additional financing or leasing services to the contractor. Harper allegedly used this information to help Ontrack negotiate better lease rates and financing terms to CRBC’s detriment. CRBC terminated Harper’s employment. Harper subsequently joined a new company and advised Ontrack to obtain financing from that company instead of CRBC.

CRBC sued Harper for breach of fiduciary duty and breach of contract for misappropriating CRBC’s trade secrets and breaching the confidentiality agreement. Harper filed a motion to dismiss the breach of contract claim pursuant to the TCPA, under which a party can file a motion to dismiss a lawsuit if it “is based on or is in response to a party’s exercise of the right of free speech, right to petition, or right of association.” The trial court denied the motion. Harper appealed, contending the following:

CRBC’s breach of contract claim related to Harper’s exercise of free speech.
CRBC did not establish a prima facie case of its breach of contract claim.
The trial court improperly considered CRBC’s amended petition.

A motion to dismiss pursuant to the TCPA is evaluated under a three-step burden shifting framework:

The movant must first demonstrate that the legal action is based on the movant’s exercise of the right to free speech, the right to petition or the right to association.
The nonmovant must then establish a prima facie case of its claim.
If the nonmovant satisfies its burden, the action must still be dismissed if the movant establishes grounds on which it is entitled to judgment as a matter of law.

The Texas Court of Appeals first addressed whether the trial court was permitted to consider CRBC’s amended petition when it ruled on the motion to dismiss. CRBC’s amended petition merely clarified that “CRBC” was the assumed name for both CR-FED and CR-FED Leasing, rather than just CR-FED. Because the amended petition was filed well before the hearing date and did not include any element of surprise, the Court concluded that [...]

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Court to Counsel: Be Frivolous at Your Own Risk

by Cecilia Choy, Ph.D. | Jul 28, 2022 | Patents

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

by McDermott Will & Emery | Jul 28, 2022 | Patents

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:

“Obtaining” or “providing” a “sample” from the recipient that contains cfDNA
“Genotyping” the transplant donor and/or recipient to develop “polymorphism” or “SNP” “profiles”
“Sequencing” the cfDNA from the sample using “multiplex” or “high-throughput” sequencing, or performing “digital PCR”
“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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No Winners Here: A Case Can Have No Prevailing Party

by Jodi Benassi | Jul 21, 2022 | Trademarks

In a matter of first impression, the US Court of Appeals for the Eleventh Circuit found that there may be no prevailing party for purposes of assessing costs and attorneys’ fees under Federal Rule of Civil Procedure 54(d). Royal Palm Properties, LLC v. Pink Palm Properties, LLC, Case No. 21-10872 (11th Cir. July 7, 2022) (Wilson, Rosenbaum, Covington, JJ.)

Royal Palm Properties sued Pink Palm Properties for trademark infringement. Pink Palm countersued, seeking cancellation of the trademark and a declaratory judgment of noninfringement. Following a three-day trial, the jury found that Pink Palm did not infringe the trademark and that the trademark was not invalid on the grounds asserted by Pink Palm. Pink Palm moved for judgment as a matter of law (JMOL), asking the court to overrule the jury’s determination that the trademark was valid. The district granted Pink Palm’s motion and invalidated the trademark. Pink Palm subsequently moved for costs, which the district court granted because Pink Palm was the prevailing party in light of the order granting JMOL. Royal Palm appealed.

The Eleventh Circuit reversed the district court’s grant of JMOL, reinstating the jury’s verdict and the trademark’s validity. In light of this reversal, the district court, on remand, ruled that Pink Palm was no longer the prevailing party for purposes of costs and was not entitled to an award of attorneys’ fees under the Lanham Act’s exception case doctrine. Pink Palm appealed.

Before addressing whether the district court erred by failing to name Pink Palm as the prevailing party, the Eleventh Circuit addressed the threshold question of whether courts are required to name a prevailing party in every case. The Court noted that while the Supreme Court of the United States has issued multiple opinions providing guidance on how to determine the prevailing party, it has not yet addressed whether there must be a prevailing party under Federal Rule of Civil Procedure 54.

Not finding any precedent in its own circuit, the Eleventh Circuit first looked to Federal Circuit precedent, which has stated that a district court must declare a prevailing party and that “punting is not an option.” The Court next explored holdings by the Eighth, Fifth and Second Circuits. Those courts have found that where the parties each brought unsuccessful claims and outcome did not materially alter the legal relationship between the parties, there is no prevailing party.

The Eleventh Circuit agreed with Eighth, Fifth and Second Circuit precedent and concluded that the text of Rule 54(d) does not allow for multiple prevailing parties, and there is not always a prevailing party in every case. A district court in the Eleventh Circuit may find (at most) one prevailing party, but it is not required to do so in every case. The Court found that both Royal Palm and Pink Palm had rebuffed the other’s claim regarding the trademark, leading to no material alteration in the legal relationship between the parties, and thus there was no prevailing party.

A Work of Art? Ninth Circuit Analyzes Foreign Judgments and Fair Use

by Sarah Bro | Jul 21, 2022 | Copyrights

The US Court of Appeals for the Ninth Circuit analyzed the fair use doctrine of US copyright law in a dispute for recognition of a 2001 French judgment relating to a finding of copyright infringement of certain photographic works featuring the art of Pablo Picasso. The Court’s analysis ultimately resulted in a reversal of the district court’s ruling for the defendants against whom the French judgment was sought. Vincent Sicre de Fontbrune et al; v. Alan Wofsy et al, Case Nos. 19-16913; -17024 (9th Cir. July 13, 2022) (Hurwitz, VanDyke, JJ.; Ericksen, Distr. J.) The Court remanded for further proceedings for an examination of the enforceability of the judgment under California’s Uniform Foreign-Country Money Judgment Recognition Act (California Recognition Act).

In 1979, Yves Sicre de Fontbrune acquired the business capital and intellectual property rights to Cashiers d’Art, a complete published catalog of the works of Pablo Picasso. The catalog was created in 1932 by photographer Christian Zervos and featured almost 16,000 photographs of Picasso’s works. In 1991, Alan Wofsy Fine Arts obtained permission from the estate of Pablo Picasso to publish The Picasso Project, a work illustrating and describing Picasso’s works. The Picasso Project contained reproductions of certain photos from Cashiers d’Art.

Sicre de Fontbrune sued Wofsy in France for copyright infringement after The Picasso Project was offered for sale at a book fair in Paris and French police seized two volumes of the work. A trial court in France first found the photographs to be documentary in nature and ineligible for copyright protection. In 2001, however, the French Court of Appeal determined that the photographs at issue were not mere copies of Picasso’s works but added creative elements through deliberate choices of lighting, lens filters and framing. The Court of Appeal reversed the trial court, found Wofsy “guilty of infringement of copyright” and entered judgment in favor of Sicre de Fontbrune.

A long and complex procedural process followed the Court of Appeal’s ruling, during which appeals and new lawsuits were filed. Wofsy failed to appear on several occasions while also filing a review proceeding in the French courts. Before Wofsy filed the French review proceeding, however, Sicre de Fontbrune brought an action in the Superior Court of California in Alameda County, seeking recognition of the original French judgment. Wofsy removed that action to district court, which dismissed the case with prejudice pursuant to Federal Rule of Civil Procedure 12(b)(6). The Ninth Circuit reversed, finding the French judgment to be not a penalty but a sum of money cognizable under the California Recognition Act.

On remand, the parties submitted cross motions for summary judgment on eight defenses under the California Recognition Act. The district court granted summary judgment for Wofsy on only one of the defenses, finding that the French judgment was “repugnant to public policy.”

On appeal of the international diversity case, the Ninth Circuit explained that the enforceability of foreign judgments is governed by the law of the state in which enforcement is sought, making the California Recognition [...]

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

by Amol Parikh | Jul 21, 2022 | Patents

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.

Clearly, the Disclosure Was an Error

by Vincent Li, PhD | Jul 21, 2022 | Patents

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

by Alexander P. Ott | Jul 21, 2022 | Patents

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.

Tableware Designer Gets Heavenly Results on Its Pearly Plates

by Joshua Revilla | Jul 21, 2022 | Copyrights, Trademarks

The US Court of Appeals for the Fifth Circuit reversed a district court decision, reversing the dismissal of a copyright claim based on lack of standing and finding ownership of the copyright in the claimant based on an assignment of that claim. The Fifth Circuit also found that the plaintiff had a protectible trade dress under the Lanham Act based on secondary meaning. Beatriz Ball, LLC v. Barbagallo Co., LLC, Case No. 21-30029 (5th Cir. July 12, 2022) (Jones, Haynes, Costa, JJ.) (per curiam).

Beatriz Ball, the founder of Beatriz Ball, LLC, alleged that Pampa Bay was marketing and distributing products that infringed on Ms. Ball’s registered copyrights and unregistered trade dress for its “Organic Pearl” line of tableware. Ms. Ball brought suit against Pampa Bay in Louisiana federal court, asserting claims for copyright infringement under the Copyright Act and unfair competition under § 43 of the Lanham Act.

Pampa Bay has marketed and distributed products similar to the Organic Pearl collection but made with cheaper materials since 2016. Ms. Ball alleged that Pampa Bay infringed upon her copyright and its unregistered trade dress because the products are confusingly similar and look and feel like the Organic Pearl trade dress in every way. The district court ruled against Ms. Ball, finding that it had not established that its unregistered trade dress acquired “secondary meaning” as is required for protection of an unregistered trade dress under the Lanham Act. The district court further held that Ms. Ball lacked standing to bring the copyright claims as a result of a lack of legal interest because when “Beatriz Ball Collection” transferred ownership in the copyrights to “Beatriz Ball, LLC,” the language of the assignment did not specifically transfer the right to a cause of action for prior infringements predating the assignment. The assignment clause in issue read:

Assignment. Assignor [Beatriz Ball and Beatriz Ball Collection] hereby irrevocably conveys, transfers, and assigns to Assignee [Beatriz Ball, LLC], and Assignee hereby accepts, all of Assignor’s right, title and interest in and to any and all copyrights, whether registered or not and whether or not applications have been filed with the United States Copyright Office or any other governmental body. This assignment expressly includes any and all rights associated with those copyrights.

The district court found that because the assignment did not specifically transfer the assignor’s right to causes of action for prior infringements, the LLC lacked standing to challenge infringements pre-dating the assignment. The district court therefore never reached the merits of the copyright claim.

On appeal, the Fifth Circuit first reviewed the standing issue to determine if the LLC owned the copyrights at the time of the alleged infringement or if the right to vindicate prior infringements had been effectively assigned to Ms. Ball. Reversing the district court’s ruling, the Court concluded that the LLC had standing to bring the suit as the actual copyright holder. The Court reasoned that § 411(b)(1), which provides that a registration with “inaccurate information” can support an infringement action [...]

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Patent Infringement Verdict Nixed over Judge’s Stock Ownership

by Jodi Benassi | Jul 14, 2022 | Patents

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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