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No More Bites at the Apple: Imminent and Non-Speculative Standing Still Required

by McDermott Will & Emery | Nov 18, 2021 | Patents

The US Court of Appeals for the Federal Circuit reiterated that a patent challenger did not have Article III appellate standing to obtain review of a final Patent Trial & Appeal Board (PTAB) ruling because the underlying district court proceedings had been dismissed with prejudice after the parties reached a settlement and license agreement. Apple Inc. v. Qualcomm Inc., Case Nos. 20-1683; -1763; -1764; -1827 (Fed. Cir. Nov. 10, 2021) (Prost, J.) (Newman, J., dissenting).

This is the second dispute between Apple and Qualcomm to reach the Federal Circuit. In the first appeal (Apple I), the Court found that Apple did not have standing to maintain an appeal from the PTAB because the parties had entered into a settlement agreement.

As in the earlier case, here Qualcomm asserted patent infringement in district court, and Apple filed petitions for inter partes review of the patent claims that Qualcomm asserted Apple had infringed. The PTAB instituted on four petitions. While the inter partes review proceedings were pending, the parties settled the district court litigation, whereby Apple received a license in exchange for royalty payments to Qualcomm. The parties filed a joint motion to dismiss Qualcomm’s district court action with prejudice, which the district court granted. Ultimately, the PTAB found that Apple failed to prove that the challenged claims were unpatentable. Apple appealed.

As in Apple I, Qualcomm moved to dismiss the appeal for lack of standing. Apple responded by arguing that “[a]lthough Apple continues to disagree with [Apple I], in light of that decision and the . . . order denying Apple’s petition for rehearing en banc, Apple believes that the present appeal can be resolved on the briefs without the need for oral argument.” The parties filed a joint motion to vacate oral argument, but the Federal Circuit instead held a consolidated oral argument. Apple reiterated its disagreement with the Court’s ruling in Apple I but admitted that the operative facts in this appeal were “the same.” The Court found that other than the specific difference of the patents in issue themselves, the operative facts were the same and the alleged failure of proof as to certain patent claims (regarding whether the petitioner had established them to be unpatentable) were the same. The Court further found that any specific patent differences were irrelevant since the settlement and license agreements in each case covered the patents in issue in that case.

Apple raised a “nuance” not “specifically addressed” in Apple I, namely that Apple I “did not explain why the threat of liability, if Apple ceases the ongoing payment and the agreement is terminated, is not a sufficient injury to support standing.” The Federal Circuit was not convinced that this nuance merited a different treatment because:

The Court would need to sit en banc to change Apple I, and panels of the Court are bound by stare decisis.
Apple acknowledged that this “nuance” was at the core of its denied en banc petition in Apple I.

Accordingly, [...]

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Federal Circuit Clarifies Venue in Hatch-Waxman Case

by Mike Baldwin | Nov 18, 2021 | Patents

Addressing venue in the context of a Hatch-Waxman case, the US Court of Appeals for the Federal Circuit explained that sending a paragraph IV notice letter to a company in the district is insufficient to establish venue. Celgene Corp. v. Mylan Pharmaceuticals Inc., Case No. 21-1154 (Fed. Cir. Nov. 5, 2021) (Prost, J.) The Court affirmed a district court finding that venue was improper since the defendant had not committed any acts of infringement and did not have a regular and established place of business in the district.

Celgene owns patents related to a multiple-myeloma drug that it markets and sells under the brand name Pomalyst. Mylan Pharmaceuticals Inc. (MPI) submitted abbreviated new drug applications (ANDAs) to the US Food & Drug Administration in order to bring a generic version of Pomalyst to market. Celgene filed suit in New Jersey against MPI and its related companies, Mylan Inc. and Mylan N.V. While Celgene is headquartered in New Jersey, MPI is based in West Virginia, Mylan, Inc. is based in Pennsylvania and Mylan N.V. is based in the Netherlands and Pennsylvania. The district court dismissed the case for improper venue (MPI and Mylan, Inc.) and for failure to state a claim (Mylan N.V.). Celgene appealed.

Citing Valeant v. Mylan, the Federal Circuit reiterated that venue for Hatch-Waxman cases must be predicated on past acts of infringement, and “it is the submission of the ANDA, and only the submission, that constitutes an act of infringement in this context.” Celgene argued that because MPI sent a paragraph IV notice letter from West Virginia to Celgene’s headquarters in New Jersey, acts of infringement occurred in New Jersey. Celgene also argued that since the notice letter was mandatory and the ANDA had to be amended to include proof of delivery, the delivery of the letter was “sufficiently related to the ANDA submission.” The Court disagreed, explaining that venue in Hatch-Waxman cases is focused on the submission of the ANDA itself, including acts involved in the preparation of an ANDA submission. The Court noted these acts must be part of the ANDA submission and that Celgene’s “related to” standard was impermissibly broad. The Court found that since the submission of the ANDA did not take place in New Jersey, venue there was improper.

The Federal Circuit also found that neither MPI nor Mylan, Inc. had a regular and established place of business in New Jersey. Celgene argued both had a regular and established place of business based on places associated with Mylan employees as well as Mylan affiliates. In rejecting these arguments, the Court noted that the employees Celgene pointed to were working remotely from home, and that the employee’s home numbers were contained in business communications. However, the Court noted that there was no indication that the defendants owned, leased or rented the employees’ homes; participated in the selection of the homes; stored inventory there or took any other actions to suggest that they had an intention to maintain a place of [...]

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The Plot Plot Thickens: Trade Secret, Tortious Interference, Fiduciary Duty Claims Survive Motion to Dismiss

by Amol Parikh | Nov 11, 2021 | Trade Secrets

A judge from the US Court of Appeals for the Third Circuit sitting by designation in the US District Court for the District of Delaware denied a motion to dismiss claims of misappropriation of trade secrets, tortious interference and breach of fiduciary duty, finding that the plaintiff plausibly pled facts supporting each claim. Park Lawn Corp. v. PlotBox Inc., Case No. 20-cv-01484-SB (D. Del. Oct. 29, 2021) (Bibas, J., sitting by designation).

Park Lawn and PlotBox are competitors in the cemetery business. In 2018, Park Lawn began developing software to automate various cemetery management tasks to cut costs. Park Lawn also hoped to generate revenue by licensing the software to competitors. Park Lawn’s CEO, however, had been leaking information to PlotBox about the software, its unique features and Park Lawn’s strategy for licensing. The CEO also helped PlotBox in its efforts to recruit Park Lawn’s chief technology officer, who had been overseeing the software project. The CEO acted despite having signed confidentiality, non-compete and non-solicitation agreements. Park Lawn ultimately discovered the CEO’s involvement with PlotBox and fired him. Soon after, the CEO became PlotBox’s chairman. Park Lawn sued PlotBox for stealing its trade secrets, interfering with the CEO’s employment agreements and helping the CEO breach his fiduciary duty to Park Lawn. PlotBox moved to dismiss.

The district court denied the motion. As to the trade secret claims, PlotBox argued that it did not misappropriate any trade secrets since the CEO never actually gave PlotBox any information. The court found that the complaint alleged otherwise. In particular, the court noted the complaint alleged:

The CEO and PlotBox exchanged compromising emails discussing the “status,” “developments in ‘death-tech,’” and the CEO’s interest in becoming PlotBox’s chairman.
The CEO invited PlotBox executives to his home to discuss a “Park Lawn Update” and “Technical Presentation.”

The court found that these allegations plausibly alleged that the CEO could have disclosed a trade secret.

PlotBox argued that even if it did learn something from the CEO, it never knew that the CEO obtained that information through improper means. The district court again disagreed, finding that PlotBox should have known something was amiss since the CEO broke a promise to keep quiet. While the court acknowledged that PlotBox may have never read the CEO’s confidentiality agreement, PlotBox should have reasonably inferred that it was improper for the CEO of a competitor to disclose his company’s innovations.

PlotBox also argued for dismissal because any information it received from the CEO did not count as a trade secret under the Defend Trade Secrets Act. Once again, the district court disagreed, explaining that Park Lawn alleged that the information provided was technical in nature (e.g., unique features of software and strategy of selling it to rivals), Park Lawn took adequate measures to protect the information by only allowing a few employees who signed confidentiality agreements to access the software and the information was valuable because it was secret. The court thus permitted the trade secret claim to proceed.

The [...]

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What a Deal! Car Dealers Retain Control over Their Own Data

by Jodi Benassi | Nov 11, 2021 | Copyrights

The US Court of Appeals for the Ninth Circuit affirmed a district court’s conclusion that there is no conflict between an Arizona statute aimed at strengthening privacy protections for consumers whose data is collected by car dealers and the Copyright Act provision that grants the owner of a copyrighted work the exclusive right “to reproduce the copyrighted work in copies.” CDK Global LLC v. Mark Brnovich, et al., Case No. 20-16469 (9th Cir. Oct. 25, 2021) (Miller, J.)

Car dealers use specialized dealer management software (DMS), which at its core is a database containing information about a dealer’s customers, vehicles, accounting, parts and services. Some of the data includes personal information, such as social security numbers and credit histories. The data is used for a variety of tasks, from financing to inventory management. Dealers also rely on separate software applications for various aspects of their business, such as marketing and customer relations. For those applications to properly function, they must access the data stored in a dealer’s DMS.

CDK is a technology company that licenses DMS to dealers. In the past, CDK allowed dealers to share access to the DMS with third-party companies that would integrate data from the DMS with other software applications. Recently, however, CDK began to prohibit the practice and instead offered its own data integration services to dealers.

In 2019, the Arizona legislature enacted a statute, known as the Dealer Law, to ensure that dealers retain control over their data. There are two provisions of the Dealer Law central to this case. First, the statute prohibits DMS providers from taking any actions (contractual, technical or otherwise) to prohibit a dealer’s ability to protect, store, copy, share or use the data stored in its DMS. Second, the statute requires DMS providers to adopt and make available a standardized framework for the exchange, integration and sharing of data.

CDK sued the attorney general of Arizona for declaratory and injunctive relief, asserting a range of claims. In one of its claims, CDK argued that the Dealer Law is preempted by the Copyright Act, 17 U.S.C. § 101 et seq. CDK asserted that the Dealer Law conflicts with the Copyright Act because the Dealer Law grants dealers and their authorized integrators the right to access CDK’s systems and create unlicensed copies of its DMS, its application programming interfaces (APIs) and its data compilations. CDK argued that in all three respects, the statute conflicts with 17 U.S.C. § 106(1), which grants the owner of a copyrighted work the exclusive right “to reproduce the copyrighted work in copies.” The district court dismissed most of the claims but allowed the copyright preemption claims and a few others to proceed. Following a hearing, the district court denied a preliminary injunction. CDK appealed.

On appeal, the Ninth Circuit found that CDK presented no evidence that the Dealer Law would require the embodiments of CDK’s DMS to persist for a period of more than transitory duration. The Court explained that the reproduction right set forth in [...]

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US Copyright Office Expands Rights to Repair Software-Enabled Devices

by Joshua Revilla | Nov 11, 2021 | Copyrights

The US Copyright Office issued new regulations expanding and strengthening consumers’ rights to repair software-enabled digital devices (such as video game consoles and medical devices) via exemptions to the Digital Millennium Copyright Act.

Under 17 U.S.C. § 1201, it is generally unlawful to “circumvent a technological measure that effectively controls access to” copyrighted works. In response to proposals from several organizations, including the Electronic Frontier Foundation and the iFixit and Repair Association, the Registrar of Copyright (as it has done every three years since 2000) made rulemaking recommendations to the Librarian of Congress; recommendations that have now been adopted as final rules. The new rules create exemptions to make it easier to repair software-enabled devices. In the prior rulemaking sessions, the Register of Copyrights recommended—and the Librarian of Congress adopted—17 groups of exceptions. This session, the Register recommended 14 additional classes of exemptions, all of which have been adopted.

Among the 14 classes of exemptions that were recommended and adopted are the following:

Computer programs that operate the following types of devices, to allow diagnosis, maintenance and repair:
- Motorized land vehicles or marine vessels
- Devices primarily designed for use by consumers
- Medical devices and systems.

This proposed class initially included “modification” in addition to diagnosis, maintenance and repair, but the exemption for modifications was ultimately eliminated. The Register reasoned that including all “modification[s]” would encompass both infringing and noninfringing activities and would implicate the right to prepare derivative works, as well as other issues.

This proposed class, “Computer Programs – Repair,” was initially divided into four general categories: “(1) all software-enabled devices; (2) vehicles and marine vessels; (3) video game consoles; and (4) medical devices and systems.” Not all of the categories made it through, as the Register removed all software-enabled devices from the recommendations. The recommendations stated that this category would have made the class too broad and would have raised the complex question of which types of devices would qualify for permitted repair.

After consideration of all the issues, the Register determined the following three classes had sufficient commonalities to recommend them: Computer programs in devices primarily designed for use by consumers (such as the repairing of optical drives in video games), computer programs in marine vessels and computer programs and data in medical devices and systems. The adopted exemptions expanding the current exemptions for vehicle and device repair and added an exemption for medical devices and systems repair.

The Rules also expand exemptions for consumer-related devices only. In recommending exemptions for device repair, the Register found significant commonalities among uses and users in terms of the diversity of software-enabled devices designed for use by consumers. The Register determined that the narrowed uses of “diagnosis, maintenance, and repair” were supported by the fair use factors, and that the exemption was “not accomplished for the purpose of gaining access to other copyrighted works.” The recommendations also contained a special subset for video games, which narrows the exemption solely to the repair of optical drives. [...]

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Federal Circuit Makes Clear: Prior Failures in the Art May Demonstrate Non-Obviousness

by Katherine Pappas | Nov 11, 2021 | Patents

Addressing the issue of obviousness of a patent directed toward a method of killing antibiotic-resistant bacteria using only visible light with no photosensitizer, the US Court of Appeals for the Federal Circuit reversed the Patent Trial & Appeal Board’s (PTAB) decision, finding no obviousness where the asserted prior art did not disclose a successful method that did not use a photosensitizer. University of Strathclyde v. Clear-Vu Lighting, LLC, Case No. 20-2243 (Fed. Cir. Nov. 4, 2021) (Stoll, J.) The Court held that the PTAB erroneously found a reasonable expectation of success where “[t]he only support for such a finding [was] pure conjecture coupled with hindsight reliance on the teachings in the [asserted] patent.”

Gram-positive bacteria, such as Methicillin-resistant Staphylococcus aureus (MRSA), are known to negatively affect health but effective methods of killing (or inactivating) such bacteria have been elusive. Photoinactivation is a way to kill antibiotic-resistant bacteria, and previous methods involved applying a photosensitizing agent to the infection and then activating the agent using light. Through experimentation, scientists at the University of Strathclyde discovered that application of visible (blue) light of wavelengths in the range of 400 – 420 nm was effective at inactivating bacteria such as MRSA without using a photosensitizing agent. The challenged patent claimed this method of using a photosensitizer for inactivating MRSA and other Gram-positive bacteria.

After Clear-Vu Lighting petitioned for inter partes review, the PTAB found the patent invalid as obvious in view of prior art disclosing methods of photoactivation using visible light. The university appealed.

The Federal Circuit reversed, finding that the prior art did not disclose all claim elements and there was no reasonable expectation of success in reaching the claimed invention by combining the prior art.

The Federal Circuit first addressed the PTAB finding that the prior art disclosed all claim limitations, finding that neither of the asserted prior art references taught or suggested “inactivation” of the bacteria without using a photosensitizer—as required by the claims. The Court noted that it “fail[ed] to see why a skilled artisan would opt to entirely omit a photosensitizer when combining [the] references,” finding it “particularly relevant” that one of the references actually “disclosed such a photosensitizer-free embodiment and was wholly unsuccessful in achieving inactivation.”

The PTAB also found that, based on a prior art teaching that “blue light may” inactivate “other bacterial cells that produce porphyrins,” a skilled artisan would have expected that MRSA could be inactivated by blue light without a photosensitizer due to the presence of porphyrins. In defense of the PTAB’s findings, Clear-Vu argued that support for the reasonable expectation of success could be found in the challenged patent itself. Citing its 2012 decision in Otsuka Pharm. v. Sandoz, the Federal Circuit harshly criticized this position, reiterating that the inventor’s own path to the invention is not the proper lens through which to find obviousness; “that is hindsight.”

The Federal Circuit explained that “not only is there a complete lack of evidence in the record that any bacteria were inactivated after exposure [...]

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Standing Challenge Brews Trouble in Trademark Dispute

by Paul Devinsky | Nov 4, 2021 | Trademarks

Addressing for the first time Article III standing in a trademark case, the US Court of Appeals for the Federal Circuit held that hypothetical future injury is insufficient to establish standing to oppose a trademark application. Brooklyn Brewery Corp. v. Brooklyn Brew Shop, LLC, Case No. 20-2277 (Fed. Cir. Oct. 27, 2021) (Dyk, J.)

Brooklyn Brewery brews and sells craft beers. Brooklyn Brew Shop (BBS) sells beer-making kits and related accessories. Between 2011 and 2016, the Brewery and BBS collaborated on the sale of co-branded beer-making kits. In 2011, BBS obtained a trademark in its name for beer-making kits. In 2014, BBS filed an application to register a mark in its name for several Class 32 goods, including various types of beer and beer-making kits, as well as Class 5 “sanitizing preparations.”

In 2015, the Brewery petitioned for cancellation of BBS’s 2011 trademark registration and filed a notice of opposition to BBS’s 2014 trademark application. The Trademark Trial & Appeal Board (TTAB) denied the petition for cancellation and rejected the opposition. The Brewery appealed.

On appeal, the Federal Circuit first addressed whether the Brewery had standing to appeal the TTAB’s decision. The Court noted that while it “ha[d] not yet had occasion to address Article III standing in a trademark case,” a party appealing a TTAB decision must satisfy both statutory and Article III requirements. The Court held that the Brewery did not have Article III standing to appeal the TTAB’s decision dismissing the opposition with respect to the Class 5 sanitizing preparations because the Brewery did not make or sell sanitizing preparations. The Court found the possibility that the Brewery might someday expand its business to include the sale of sanitizing preparations was not enough to establish the injury-in-fact prong of the Article III standing test. However, the Court found that the Brewery’s past involvement in the sale of co-branded beer-making kits with BBS was sufficient to establish the Brewery’s standing to challenge BBS’s registration and application for Class 32 beer-making kits.

On the merits, the Federal Circuit affirmed the TTAB’s decision with respect to BBS’s 2011 trademark registration. The Court agreed with the TTAB that the Brewery failed to establish inevitable confusion as to the beer-making kits and failed to establish that BBS’s mark was merely descriptive. The Court vacated the TTAB’s decision with respect to the 2014 trademark application, finding that the TTAB erred by not considering whether BBS proved acquired distinctiveness of its application and remanded for further proceedings.

Practice Note: Before seeking review of a TTAB decision in federal court, a party should ensure that it has satisfied the three-part test for Article III standing.

It’s Not Esoteric: Absent Ambiguity, Plain Contractual Language Governs

by Jenny Chen, Ph.D. | Nov 4, 2021 | Patents

Rudimentary principles of contract law stipulate that words in a contract that are plain and free from ambiguity must be understood in their usual and ordinary sense. Applying such principles, the US Court of Appeals for the First Circuit vacated a district court’s damages award of more than $1 million under a patent license agreement, finding that the release clause in a settlement agreement wiped out the licensee’s obligation to pay royalties and sublicense fees for use and sale that occurred before the effective date of release. The General Hospital Corporation; Dana-Farber Cancer Institute, Inc. v. Esoterix Genetic Laboratories, LLC, Laboratory Corporation of America Holdings, Case Nos. 20-2126; -2149 (1st Cir. Oct. 21, 2021) (Selya, J.)

BACKGROUND

The plaintiff hospitals own several diagnostic patents, and Laboratory Corporation of America Holdings (LabCorp) and its subsidiary, Esoterix Genetic Laboratories, are licensee to the patents. Under the master license agreement, the licensee is obligated to pay fees to the hospitals, including royalties and sublicensee incomes.

In 2014, Esoterix settled a lawsuit against QIAGEN in association with a sublicense agreement concerning the diagnostic patents. LabCorp and Esoterix agreed to pay a portion of the settlement amount paid by QIAGEN to the hospitals. The settlement agreement included a broad release clause under which the hospitals released Esoterix from “any and all” obligations, “known or unknown,” that may have arisen out of the patent rights or the license before the effective date (June 27, 2017), including “payment of any past royalties or other fees pursuant to the [license].”

A semi-annual reporting period under the license agreement was due on June 30, 2017. Esoterix took the position that all royalties and sublicense income prior to June 27, 2017, were released, and thus only reported revenue and royalty information for the period of June 28 – 30, 2017. The hospitals sued to recover sublicense fees from QIAGEN to Esoterix. The district court found that Esoterix had not been released from its payment obligation for use and sales occurring before June 27, 2017, on the ground that Esoterix’s payment obligation had not originated until the payment deadline, which fell after the effective date of release. Esoterix appealed.

FIRST CIRCUIT DECISIONS

The First Circuit disagreed with the district court and concluded that the terms of the release agreement and the license agreement did not indicate that Esoterix’s obligation arose when the payments became due and payable (i.e., after the effective date of the release).

Following the Massachusetts law in accordance with the choice-of-law provision in the agreements, the First Circuit applied the principle that the plain meaning of the agreements governs, absent ambiguous provisions. The Court decided that the release agreement released Esoterix’s obligations in connection with the underling license agreement that may have arisen before the effective date. Taking into consideration the royalty and sublicensing fee provisions of the license agreement, the Court further decided that Esoterix’s financial obligation under the license agreement, including royalties and sublicense income, arose upon its sales and receipt of sublicensing income, which originated [...]

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US Lawyers Aiding Scam Trademark Applications May Face Sanctions

by Sarah Bro | Oct 28, 2021 | Trademarks

As reported by the US Patent & Trademark Office (PTO) this past summer, since mid-2020 trademark applications from US and foreign applicants have “surged to unprecedented levels.” In December 2020 alone, the PTO received 92,608 trademark applications, an increase of 172% over December 2019. Not only has this extraordinary volume of applications created a backlog and delay in the procedural review of new US trademark application filings, but the PTO is experiencing a notable increase in what it calls “suspicious submissions ranging from inaccurate to fraudulent.”

These illegitimate trademark filings harm the quality and integrity of the trademark register and have significant legal and financial impact on legitimate brand owners whose applications may be blocked by fraudulent filings for marks that are identical or similar to their real brands. Faced with a legal obligation to defend and enforce their trademarks, legitimate brand owners are forced to dispute such illegitimate filings with letters of protest, by filing oppositions or cancellation actions in the Trademark Trial & Appeal Board, and even by taking action in the federal courts. Such enforcement and defensive actions can clog up these forums and force brand owners to take on costs that would not otherwise be necessary, and which may distract from, or reduce the budget for, real trademark disputes.

The PTO outlined various strategies and tools to review, assess, challenge and combat suspicious and fraudulent filings, including aspects of the Trademark Modernization Act of 2020. In 2019, the PTO also implemented a rule requiring any overseas trademark applicant to file with a US lawyer. The requirement for a US lawyer appears to have resulted in many foreign applicants (primarily from China) making up fake names, addresses and bar credentials for the US lawyers named in their applications. Not all named US lawyers are fake, however, as the PTO’s investigations into certain lawyers lodging a high volume of trademark filings for Chinese-based applicants have revealed that some US-based lawyers may be taking on clients from China without conducting proper diligence as to the veracity of the client’s trademark application information. For example, the PTO’s investigation of some potentially illegitimate filings from applicants in China reveal doctored or disingenuous specimens of use, including e-commerce listings for products that may not actually exist or are no longer “in stock” (and likely never were “in stock”).

In September 2021, the PTO’s investigations into US lawyers with a high volume of filings for Chinese applicants resulted in two sanctions orders. The first was issued against a lawyer found to have filed thousands of applications for overseas parties deemed fraudulent by operating as a US-based agent for a centralized “filing gateway” platform located in India. The sanction order includes a 12-month probationary period and required ethics and trademarks classes. The second sanction against a US-based lawyer specifically noted that the lawyer did not do enough to properly review the applications that they signed on behalf of an applicant based in China. It has [...]

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This Case Is Both Hot and Exceptional—Attorneys’ Fees and Inequitable Conduct

by Paul Devinsky | Oct 28, 2021 | Patents

In a second visit to the US Court of Appeals for the Federal Circuit, after the Court affirmed a finding of unenforceability due to inequitable conduct based on “bad faith” non-disclosure of statutory bar prior sales on the first visit, the Court affirmed a remand award of attorneys’ fees based on a finding of exceptionality under 35 U.S.C. § 285. Energy Heating, LLC v. Heat On-The-Fly, LLC, Case No. 20-2038 (Fed. Cir. Oct. 14, 2021) (Prost, J.)

In its earlier decision, the Federal Circuit remanded the case after reversing a district court’s denial of attorneys’ fees, finding that while the district court correctly found that Heat On-The Fly (HOTF) committed inequitable conduct in failing to disclose to the US Patent & Trademark Office multiple instances of prior use of the claimed method, the district court failed to articulate a basis for denying attorneys’ fees other than that HOTF articulated substantial arguments (experimental use) against the finding of inequitable conduct.

On remand, the district court found the case “exceptional” because it “stands out from others within the meaning of § 285 considering recent case law, the nature and extent of HOTF’s inequitable conduct, and the jury’s findings of bad faith.” HOTF appealed.

HOTF contended that the district court abused its discretion by relying on the jury’s bad-faith finding because that finding “had nothing to do with the strength or weakness of HOTF’s litigation positions.” Citing the 2014 Supreme Court decision in Octane Fitness, the Federal Circuit rebuffed that argument, explaining that “HOTF made representations in bad faith that it held a valid patent [which] was within the district court’s ‘equitable discretion’ to consider as part of the totality of the circumstances of HOTF’s infringement case.”

HOTF also argued that the district court erroneously relied on the jury verdict in finding exceptionality because, since the jury found that HOTF did not commit the tort of deceit, it could not have engaged in inequitable conduct. The Federal Circuit rebuffed this argument as well, noting that inequitable conduct was tried to the district court—not the jury—resulting in a judgment of unenforceability that the Court affirmed in the prior appeal and that the jury’s finding of no state-law “deceit” had no bearing on inequitable conduct.

The Federal Circuit further explained that HOTF’s assertion that under the Court’s 2020 decision in Electronic Communication Technologies v. ShoppersChoice.com, the district court was not required to affirmatively weigh whether HOTF’s purported “lack of litigation misconduct” was incorrect. Rather, “the manner in which [patentee] litigated the case or its broader litigation conduct” is merely “a relevant consideration.” Under Octane, the test for whether a case is “exceptional” under § 285 is whether it is “one that stands out from others with respect to the substantive strength of a party’s litigating position . . . or the unreasonable manner in which the case was litigated.”

Finally, the Federal Circuit noted that the district court correctly explained that “[a] finding of inequitable conduct [...]

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